Real Estate Sale and Purchase: Not Always as Straightforward as It Seems – A Focus on Agricultural Land
The sale and purchase of agricultural land in Hungary is a legal transaction subject to particularly strict and special rules, differing in several respects from the “general” sale and purchase of real estate. The purpose of the applicable legislation is to protect agricultural land, curb speculation, and give preference to local farmers. For that reason, it is of paramount importance that such transactions be supported by appropriate legal background and professional expertise.
What qualifies as agricultural land?
The concept of what qualifies as agricultural land is defined by Act CXXII of 2013 on the Transfer of Agricultural and Forestry Land. Pursuant to this Act, land used for agricultural and forestry purposes means:
“any parcel of land, irrespective of its location (whether inside or outside the inner area of a settlement), which is registered in the real estate register under the cultivation categories of arable land, vineyard, orchard, garden, meadow, pasture (grassland), reed bed, forest or afforested area, and also any parcel of land registered as land withdrawn from cultivation if the legal nature of forest, according to the National Forestry Database, is recorded in the real estate register.”
In certain cases, so-called zártkert properties may also fall within this category if they have not been withdrawn from cultivation. As a general rule, therefore, zártkert properties are subject to the scope of the Act. At the same time, from time to time the legislator provides an opportunity for such land to be withdrawn from cultivation, thereby excluding the property in question from the scope of the land transfer regime. The practice in this regard is not always predictable; however, where such an option is available, it is worth considering, as it may significantly simplify land registry procedures in the event of a subsequent change of ownership.
Right of pre-emption
One of the most important specific features of the sale and purchase of agricultural land is the institution of the right of pre-emption. Even the conclusion of the sale and purchase agreement itself is complex: the agreement must comply with the strict provisions of the land transfer legislation, it must be executed on security paper, and, above a certain size threshold, the acquisition also requires appropriate professional qualifications.
Thereafter, the exercise of the right of pre-emption comes to the forefront. The law determines the order of priority among persons entitled to pre-emption; accordingly, where a person entitled to pre-emption ranks ahead of the buyer designated in the contract, that person is entitled to step into the buyer’s place and conclude the sale and purchase on identical terms and conditions.
How can I become aware of my right of pre-emption?
In the case of the sale and purchase of agricultural land, the competent municipal clerk posts the contract on the municipality’s notice board and, where available, also publishes it on the municipality’s website. It is through this publication that persons entitled to pre-emption may become aware that the given property is being sold. The right of pre-emption may be exercised within 30 days from the date of posting.
If there is no entitled person who ranks ahead of the buyer designated in the underlying contract, the procedure moves to the next stage: the land registry authority examines the posting, following which an opinion must be obtained from the agricultural chamber. The chamber reviews and comments on the contract primarily from the perspective of land policy considerations.
Thereafter—provided that the procedure has been conducted lawfully and all necessary approvals are available—the contract is endorsed, on the basis of which the registration of title may be requested in the real estate register.
Duration and significance of the procedure
It is therefore clear that the sale and purchase of agricultural land is a complex and time-consuming process, which may take as long as 8 to 9 months, particularly where issues arise in connection with the exercise of pre-emption rights or the granting of administrative approval.
Such transactions also frequently involve special factual situations. For example, it is not uncommon for a relative living abroad to inherit a property that falls under the land transfer rules. These cases are particularly interesting from the perspective of succession law as well, for example where the inheritance is to be disclaimed, or where the inherited land exceeds the maximum acquirable land size and the heir does not possess the required qualifications.
For that very reason, it is essential that the parties understand from the outset that this is not a “usual” real estate transaction—and it cannot be treated as such even where the purchase price is paid in a single lump sum. Proper preliminary advice and professional legal assistance are indispensable in order to ensure that the procedure is conducted smoothly and securely.
