Hungary is becoming more and more popular amongst foreign investors as they understand the potentials of purchasing property in Hungary. Experts think that the market is developing dynamically and properties in Hungary continue to gain value.
Without knowing how the legal process goes and what are the most important factors to consider, property purchase may feel intimidating. Here are some of the key points to take into account.
The process of purchasing a property is slightly different depending on the fact if the buyer is an EU citizen (or citizen of the European Economy Area) or a third country citizen. If the buyer is not a citizen of an EU member state (or citizen of the European Economy Area), a permission issued by the Budapest Government Office is required for the property acquisition. The fee of the application is 50.000, -HUF and it takes 45 days until the decision is made. Acquisition of property for third country citizens is allowed as long as the purchase does not harm any public interest or the local municpality’s interest. However, the acquisition of agricultural lands in Hungary is highly restricted, only Hungarian private individuals can acquire the ownership of an agricultural land.
In Hungary sale and purchase contracts must be concluded with the assistance of a lawyer or a public notary, otherwise the contract will not have the due legal effect and the Land Registry will not register the ownership of the buyer. It is usually the buyer who assigns any pays the countersigning lawyer, unless the property is newly built – in this case it is usually the property developer who gives the assignment to the lawyer. Whichever party makes the assignment, the lawyer has to represent and pay attention to the interest of both parties in the transaction. The countersigning lawyer also reprensts the parties in front of the Land Registry and the Tax Office.
Properties in Hungary are registered in a centrally organized land register, that is open to the public. As the Land Registry is public, it is not possible to keep the identity of the owner any properties hidden. When drafting a sales contract the most important step is downloading the property’s title deed form the system of the Land Registry in order to identify the property, its owners and main characteristics and to make sure that it is free from encumbrances, claims and actions. Title deed is the official document which contains the details of the property including the exact address, lot number, size, list of the owners, their ownership share and the encumbrances.
The lawyer prepares the sale and purchase contract draft based on the agreement of the buyer and the seller regarding the conditions of the payment of purchase price, the transfer of the possession and any further circumstance considered relevant by the parties.
Acquisition of property is subject to property tax. The property tax is 4% of the market value. There are certain exemptions of the property tax like buying/selling between direct relatives, buying/selling between spouses, selling another residential property in the past 3 years or to be sold in the following year etc.