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Lawyers may also act as real estate brokers pursuant to Section 64/C (5) of Act LXXVIII of 1993 (hereinafter: Housing Act) and Act LXXVIII of 2017 on the Activities of Lawyers (hereinafter: Lawyers Act).

For those interested in this topic, please read the interview with Dr. György Zalavári, attorney-at-law, on the ingatlan.com Knowledge Base.

In order to act as a real estate agent, lawyers do not need a special qualification, which is mandatory for other real estate agents, due to their legal qualifications and experience in real estate, but they must meet the other conditions set out in the Government Decree 499/2017 (XII. 29.) on the conditions for the commercial conduct of real estate agency activities and the detailed rules of registration, and they must also be registered by the real estate business supervisory authority.

They can also act as estate agents without the above-mentioned OKJ qualification. According to the legislation, this is a so-called additional activity which lawyers may perform in addition to their traditional duties as lawyers.

A lawyer wishing to practise as a real estate agent on a complementary basis must not only meet the statutory requirements for practising as a lawyer, but also the requirements laid down in the legislation governing the activity of real estate agent.

A specific requirement for lawyers is that they may only act as a classic lawyer and as a real estate agent for the same client in the same transaction at the same time if the client gives his express written consent. In such cases, the drafting and countersigning of the sale and purchase contract may be carried out by another member of the law firm instead of the lawyer acting as real estate agent.

If you want to sell a property, you should contact a lawyer who is also a real estate agent and who is entitled to act as an intermediary for you in the sale of your property, in addition to his or her traditional role as a lawyer.

The author of the article is Dr György Zalavári, lawyer and managing partner of Ecovis Zalavári Legal Hungary.

Gambling enthusiasts and the potential accumulation of winnings from week to week is what keeps a large proportion of the country's population excited about the numbers drawn in the weekly Five Lottery draw. They are more hopeful that if they hit a winning combination, their lives could be fundamentally changed. The very first draw of the Five Lottery was on 7 March 1957 and at the time of writing, the largest prize so far was recorded as 6,523,768,955 forints.

But what are the rules for this popular game?

The legal background to the Five Lottery is provided by Act XXXIV of 1991 on the organisation of games of chance. The authority responsible for the supervision of gambling is the Authority for the Supervision of Regulated Activities (hereinafter "the Authority"), which also supervises the operation of the Five Lottery, and only the state games organiser is authorised to organise this game.

The Five Lottery is also governed by the Promoter's Five Lottery Rules of Participation.
According to the law, a lottery is a game of numbers organised at the same time intervals and authorised by the Authority under the name "lottery", in which a predetermined number of numbers in a given set of numbers entitles the player to a prize.

In a numbers lottery, the organiser is required by law to award a predetermined prize to the holder of a ticket purchased for a predetermined purchase price if one or more numbers in the ticket number sequence match the number drawn in the public draw.

Are there any legal proceedings related to lotteries?

The history of court decisions includes more than one decision where the lottery was the subject of litigation. These cases typically involve several people playing the lottery together and then one of the players, to the exclusion of the others, alone collecting the winnings from the lucky winning ticket. This is fine when the others might realise that there is a benefit to playing the lottery together and it has not been shared by the other player who cashed the ticket, if they cannot agree among themselves, their case does not end up in a court case. In one such case, the Curia ruled that joint lottery winnings are subject to the parties' either oral agreement and the civil law rules on community property. The result in that case was that the partner who had concealed the prize had to share the lottery winnings with the others on a pro rata basis.

What is the prize pool?

In the context of the lottery, the law also stipulates that the prize pool is the product of the number of tickets purchased and their price, of which at least 40% must be used for prizes. In the five numbers lottery, you have to choose 5 out of 90 numbers and you win if you get as many of the 5 winning numbers as possible in the weekly draw. You need to hit at least 2 numbers to win something, and you need to hit 5 numbers to win the jackpot.

How to play the Five of a Kind lottery?

The Five of a Kind lottery can be played with your own numbers and random numbers, on paper or digitally. Bets can be placed on numbers from one to five weeks in advance. If no-one hits the five numbers drawn in a given week, the prize pool for the five winning tickets is added to the following week's winnings, significantly increasing the amount that can be won and typically the amount of money that can be won that week. This weekly accumulation can last up to a year if no one hits all the numbers week after week. If there are no five-hitters for a year, the jackpot is distributed among the other winners according to the participation rules. But it's not just the full-match prize pool that accumulates from week to week, because the same happens if there are no two, three or four-match tickets with the prize pools created for them.

How do I get the prize?

If a player has a full lottery ticket, his/her grand prize will be paid by the game operator only after verification and identification by bank transfer, no cash payment is possible. The organiser will deduct personal income tax from the winnings before payment, so there is no obligation to declare and pay tax.

The author of the article is Dr György Zalavári, lawyer and managing partner of Ecovis Zalavári Legal Hungary.

 When a new business is born, one of the central questions is what name the owners should give to their new company, especially if they want to use it to advertise their business, even to create a new brand. But when it comes to the use of a company name, there are rules that limit the imagination of members and shareholders. 

Act No V of 2006 on company registration, court proceedings and winding-up (Ctv.) lays down the rules and provisions that set the framework for the choice of company name. A company name must consist of two, typically three, elements. The two obligatory elements are the keyword, which is the first element in the company name, and the unique element, which can be a creative fancy name to help identify the company and distinguish it from other companies with the same or similar activities (e.g. Wolters Kluwer). The keyword can be a Hungarian or foreign language term, an abbreviation or even an acronym. It is also an important rule that it should be defined in Latin letters and Arabic numerals. 

Another mandatory element of the company name is the name of the chosen company form (e.g. limited liability company, limited partnership). The abbreviated version of these in the short name is a kft., bt. or zrt. In addition to these, a third term indicating the activity (e.g. service or trade) may also be included in the company name. In the company name, the term referring to the activity and the chosen company form may only consist of Hungarian words, in accordance with the rules of Hungarian spelling. In the company name, abbreviations are only possible in the case of a keyword or when defining the company form. 

This rule provides guidance to companies on whether a multi-word keyword in an abbreviated name can consist only of initials (e.g. Men In Red Korlátolt Felelősségű Társaság and M.I.R. Kft.). The answer to this question is no, as a rule, the prefix cannot be abbreviated in the short company name, it must appear in the same way as the full company name. The abbreviated name of the company consists only of the motto and the designation of the form of the company (e.g. Men In Red Ltd.). 

The company name must be clearly distinguishable from the name of any other company registered in the country. The company name must not give the impression that it is misleading as to the company's field of activity and the form of the company chosen, and must also be clearly distinguishable from the official and colloquial names of public authorities and administrations. 

A court decision has also pointed out that where the name of a company refers to a particular activity, it must not give the impression that it is engaged in an economic activity which it does not, or could not, in fact carry out, because the company name cannot be misleading in that context either. Thus, it cannot be a "tax authority limited company." or "limited liability limited partnership". Nor may the name of the company include the name of a person who played a leading role in the establishment, development or maintenance of authoritarian political regimes in the 20th century, or the name of a term or organisation directly associated with an authoritarian political regime in the 20th century. 

The company name may also include the name of the owner or members of the company. In its decision on the use of a family surname as a company name, the Curia also ruled that the identity of a surname and a company name does not mean that the natural person concerned can automatically be identified with the company. It also allows the name of the company to be defined in a term, even if used as a surname by others, which is not used as a proper name by the owners or the managers. 

If the company is established for non-profit purposes and carries out non-profit activities, the non-profit character of the company must be indicated in the company name before the indication of the legal form (e.g. XY Nonprofit Ltd.), and in the case of public benefit status, this organisational capacity may be indicated in the company name (e.g. XY Public Benefit Ltd.). 

The terms "state" or "national" may appear in the company name only if the state directly or indirectly holds a majority stake in the company, or if the company is permanently state-owned, or if a government decision authorises it to do so in connection with the performance of a public task of major importance. 

The name of an eminent historical figure (e.g. Petőfi) may be used in the name of a company with the permission of the Centre for the Study of Humanities (in Hungarian: Bölcsészettudományi Kutatóközpont), and a name in which another party has a legal interest (e.g. the use of an already registered trade mark or a unique identifier, trade or other name) may be used only with the consent of the rightholder. Interestingly, the opinion of the Centre for the Study of Humanities is not required if it is clear from the company documents that the name of a member of the company is included in the company name. Thus, if the owner of the company is called Lajos Kossuth, he or she is able to set up Lajos Kossuth Ltd. without any further authorisation. 

If two new companies apply to register the same name with the same name, the court will approve the application of the one that filed the application for company registration first or the one that used the name reservation. 

The author of the article is Dr György Zalavári, partner lawyer. Ecovis Zalavári Legal Hungary.

Photo by Jon Tyson on Unsplash . Thanks!

In many cases, our clients come to us claiming that they have been the subject of an unexpected enforcement action arising from a long forgotten relationship dating back many years, and often they no longer remember why, to whom or for how much they were owed. In such cases, it is necessary to examine retrospectively whether the claim can still be enforced against them. 

If the claim or the right to enforce it has become time-barred, this is good news for the client, because in this case the enforcement proceedings against him can be terminated. In such cases, the historical background should be examined and assessed in the chronological order of the events in the legal relationship and the actions of the parties. 

The general rules on limitation periods are set out in the Civil Code (CC). Here, it is also necessary to consider whether the legal relationship on which the limitation period is based is to be examined under the current Civil Code or the earlier "old" Civil Code, in force until 25 February 2013, because the rules on limitation differ in the two cases. 

Under the current Civil Code, claims are subject to a limitation period of five years, subject to statutory exceptions. The limitation period is shorter for claims arising, for example, from parking, utilities, internet, mobile and fixed telephone services. But we can also set a shorter limitation period in writing in an individual contract, with the proviso that limitation cannot be completely excluded. The limitation period starts to run when the claim becomes due. If a time-barred claim cannot be enforced in court proceedings, but the debtor must expressly invoke this, because if he does not make a declaration to this effect, a time-barred claim will also be judged by the court and recovered by the bailiff, because the limitation period cannot be taken into account ex officio in court or administrative proceedings. If the time-barred claim is nevertheless paid by the debtor, it can no longer be recovered on the grounds that it is time-barred. 

Dr. György Zalavári LL.M  lawyer and managing partner of Ecovis Zalavári Legal Hungary , also points out that the limitation period is interrupted if the debt is acknowledged by the debtor, if the parties reach an agreement; or if the creditor initiates court proceedings and a judgment is obtained. 

In such cases, the limitation period starts again. If the debtor submits a claim to the bailiff under Article 41 of Act LIII of 1994 on Judicial Enforcement (Act LIII of 1994 on Judicial Enforcement) that the claim subject to enforcement is already time-barred under the provisions of the Civil Code or other applicable law, the bailiff is obliged to send this request to the applicant for enforcement. The debtor has 15 days to make a statement on the merits in response to the debtor's presentation. If he acknowledges that the claim is time-barred within this period, he will have to repay any sums already received during the enforcement and will also bear the costs of enforcement. If he has then admitted the debtor's claim to be true and has paid the sums due and determined by the bailiff, the enforcement proceedings will be terminated, and the debtor will be exempted from further enforcement actions. 

However, if the claimant for enforcement does not admit the limitation plea and the bailiff is unable to terminate the proceedings, the debtor must prove his claims on limitation in court in a suit for termination of enforcement in order to terminate the case. However, it should also be noted that the limitation period for a claim or enforcement right is interrupted by any enforcement action. 

Thus, if, from time to time during the procedure, the bailiff takes some verifiable action, the limitation period is restarted at each procedural step and can last for years, almost without time limit. 

If you need to investigate the statute of limitations for a claim, contact Dr. György Zalavári LL.M  lawyer and managing partner of Ecovis Zalavári Legal Hungary.

Photo by Jon Tyson on Unsplash. Thanks!

Please find the blog article about the Hungarian White Card for digital nomads on the link below:

https://www.ecovis.com/global/hungary-white-card-for-digital-nomads/

Photo by David L. Espina Rincon on Unsplash  

The Housing and Real Estate Market Advisory Board (LITT), established in 2019 at the initiative of the National Bank of Hungary (MNB), published its forecasts and recommendations on the residential and commercial real estate market in January 2020. Their study identifies four key objectives for the direction of development. 

The first is to increase the number of newly built dwellings, the second is to ensure affordable housing for all through the development of a business rental sector, the third is to reduce the administrative burden on the commercial property market and to stimulate more effectively the construction industry and the domestic production of building materials. In this blog article, we look at ideas for the re-regulation of tenancies for housing.

LITT also pointed out that the market price of Hungarian apartments has risen significantly in recent years, partly due to Hungarian and foreign buyers buying these properties for investment rather than for housing. In contrast, the number of new dwellings has not increased sufficiently. The rise in residential property prices has also brought with it a rise in rents, making it significantly more difficult for many individuals who do not own their own property to secure their housing. Therefore, LITT considers it very important to increase the number of rental homes in the country and to promote the regularisation and promotion of tenancy.

This could be done by providing a reduced VAT rate for long-term rentals, which could boost business renting. The possibility of tax relief for tenants below a certain income or for employers who support letting was also highlighted. A sensitive issue in tenancies is the system of security deposit transfers, which could be ensured by setting up a "Good Tenant List" or by establishing a public guarantee scheme.

In our view, the security of tenancies can be strengthened not only by re-regulating the financial aspect and introducing discounts, but also by ensuring that properties are in an acceptable technical condition for human habitation in all respects and that they are monitored. Examples from abroad show in many places that state regulation and control are present at a much higher level in the rental market, forcing landlords to act properly towards tenants when concluding contracts and checking the technological suitability of properties.

It would be useful and provide greater security for tenants if they could obtain an independent person's certificate on the technical adequacy of the property and the reliable and safe functioning of the utilities and systems in the property before the tenancy starts, similar to the energy performance certificate check.

It would also be worthwhile to re-examine the legal regulation of tenancies and to adapt the provisions on typical problems that can be identified in current practice in the course of disputes in a way that is acceptable to the parties.

A new approach to the regulation of tenancies, from a legal, technical and financial point of view, could provide a more secure solution for housing for a large section of society.

Dr. György Zalavári LL.M.
Ecovis Zalavári Legal Hungary
Lawyer | Mediator | Corporate Law and Data Protection Specialist
gyorgy.zalavari@ecovis.hu

The provisions of the Civil Code concerning the right of construction entered into force in 2023, the most important provisions of which are analysed by Dr. György Zalavári, attorney-at-law, in this article.

Under a building right contract, the right holder may establish, construct or have constructed or use a building on or under the surface of real estate owned by another. A building right cannot be created by oral contract or by inducement. The grantee is granted the right to possession, use, and to receive the benefits of the building and its component parts erected on the land of another.

The consideration for the building right (the building rent) is due to the owner of the property. It can be a lump sum or a fee paid on a continuous basis or even a fee calculated on the basis of the turnover of the activity in the building, which must in any case be specified by the parties in the contract.

The building right may be transferable and subject to succession. The successor is also subject to the provisions of the contract establishing the building right. The transfer or encumbrance of the building right shall not affect the ownership of the immovable property. Claims arising from the building right or from the transfer or encumbrance thereof shall be governed mutatis mutandis by the rules governing claims arising from the ownership or from the transfer or encumbrance thereof.

The building right may also be subject to a pledge on the basis of a pledge agreement, which must also be registered in the Land Register. Restrictions on the exercise of the right in the contract establishing the building right against third parties shall be effective only if they are made known to any person from the entry in the Land Register or from the deed on which it is based. The building right shall be subject only to those rights and obligations which preceded the entry of the building right in the ranking list. Subsequent charges on the property do not affect the building right.

The building right may be held by several holders simultaneously and jointly. In the case of multiple holders, the rules of civil law on common ownership apply to the exercise of the building right and the performance of obligations. However, a building right may be created on a property jointly owned by several owners only if it is jointly owned by all the co-owners.

The building right may be established for a limited period of time, up to a maximum of fifty years.

The building right must be registered in the land register in favour of the holder. A building right may also be established by the owner of the property for his own benefit by means of a unilateral declaration. A building right may only be established on a part of a real estate subject to a land use right in favour of the holder of the land use right and at the same time as the cancellation of the land use right.

The consumer is excluded by law from the possibility to establish a building right, the consumer may not establish a building right on the immovable property owned by him and such a right may be acquired by the consumer only by inheritance. Thus, a natural person (individual) who is a consumer acting outside the scope of his profession, self-employment or business activity cannot establish a building right; this is only possible for enterprises, institutions and other legal persons. 

If the right holder renounces the building right in writing and it is deleted from the land register, the right ceases. 

The building right also expires after the expiry of the fixed term or after fifty years. The building right may also be terminated by the court in a lawsuit if the owner of the property proves that the holder of the building right has seriously infringed the rules governing the exercise of the rights or has seriously breached the obligations incumbent on him.

Dr. György Zalavári LL.M.
Ecovis Zalavári Legal Hungary
Lawyer | Mediator | Corporate Law and Data Protection Specialist
gyorgy.zalavari@ecovis.hu

"My client approached me nearly two years ago about acquiring ownership of a property in Hungary by way of eminent domain, having used it for more than 15 years without disturbance and in good faith. The acquisition of the property by that title was finally established by the court. However, the property was subject to a usufructuary right, which was acquired by the holder sometime in the 1970s.

The beneficial owner was, according to the information available, a very elderly man whose last known address was on another continent nearly 50 years ago. While the right of ownership can be obtained by legal action against the former owner in the case of dispossession, it is not possible to obtain a court judgment to cancel the beneficial ownership of the property against the holder on this ground. 

This has led to the legal situation where our client has become the sole owner of a property subject to a usufruct right to which the right holder has never actually used the property and was already living in another country, many thousands of kilometres away, when that right was created half a century ago. Thus, the property was unmarketable for my client with this encumbrance, he could not sell it, because who would buy a house on which an unknown person had a beneficial interest. 

In the Land Registry, this usufruct can only be cancelled by a declaration of renunciation by the beneficiary or by the original death certificate attesting to the deceased's death. Unfortunately, there is no legal procedure for cancelling, by any presumption, the right of a person who is unreachable to the owner, who lives far away, who, according to the available data, is in his eighties and who has not been effectively connected with the use of the property for a long time.

In order to find a solution to the case, I first tried to contact the beneficial owner at the foreign address I had found in the land registry and in the documents of the probate proceedings of the last century. I was unsuccessful, however, because the person concerned had long been unavailable at that address. Fortunately, the beneficiary did not have a common surname in that country, so I tried to find his contact details through databases, directories and social networking sites available on the Internet. In doing so, I called a number of people with similar names by phone and via the Internet.

This process was long in itself, and in the meantime my client, losing a little hope, was also trying to find the person in the distant country through diplomatic channels, in parallel with the involvement of the ministries. Unfortunately, these formal procedures were also unsuccessful. The breakthrough in this case came when luck smiled on me and I managed to leave a message on the answering machine of one of the person's children in the country concerned, who listened to it and called me back.

He said that the person he was looking for was his mother, who unfortunately passed away years ago. He also indicated that he did not have the original document required, but provided all the missing personal information to enable me to proceed with the authorities outside to obtain the death certificate. I attempted to do this remotely. It should be stressed that this was during the time of the covid epidemic and the associated curfew restrictions around the world. Despite repeated attempts, I was unsuccessful with the foreign authorities, and finally, after several procedural inquiries, I was informed that the death certificate would only be issued to the relatives of the deceased. As a result, I spent many months negotiating with the claimant's now well-adult child to obtain his willingness to assist in obtaining his mother's official original death certificate, given the restrictions and the stumbling block in the authorities there.

It has to be said that I needed not only luck, but also the goodwill of the relative I found to finally obtain the original death certificate, which was essential for the cancellation of the beneficial title.

Of course, my client was forced to keep financing all the costs of the official procedures outside the country in order to be able to help us with the deceased child.

But perseverance finally paid off and after nearly 3 years of work, the original, long-awaited document arrived at our law office one day by express mail. Then, armed with the necessary document, the cancellation of the usufruct could be quickly done in the national land registry.

This was one of the interesting and unique professional successes of my law practice.

However, the story above also shows that it is easy for many of us to find ourselves in a legal situation involving real estate where it is extremely difficult, or sometimes almost impossible, to find an easy, self-evident, quick legal solution. It could easily have happened in the above case that I could not find any information about the deceased, and in that case I would not have been able to achieve the desired goal."

 If you have a similar problem with an unavailable beneficiary, widow's right holder or other encumbrances on real estate regarding the cancellation of the land register, please contact our lawyer Dr. György Zalavári, who will try to find a solution for your case.

Dr. György Zalavári LL.M.
Ecovis Zalavári Legal Hungary
Lawyer | Mediator | Corporate Law and Data Protection Specialist
gyorgy.zalavari@ecovis.hu

Copyright must be taken seriously. People who download illegal copies of design software from dubious sources on the internet, rather than buying it from the rightful owner or a distributor, often do not realise the serious consequences they could face. It does not seem realistic to them that anyone would notice when they download software illegally stripped of its IT protection features onto their work or home computer. Very expensive design software is typically only installed on a computer to speed up a task and then forgotten about.

According to the experience of Dr György Zalavári, the author of this article, it is a great surprise when the author of the software, an employee of the company selling the software or a legal representative of the company, unexpectedly contacts them by e-mail and indicates that the software has sent information to their system that it has been used without authorisation.

This data usually contains information that can be used to identify the domain, IP address or MAC identifier that identifies the user, the specific computer, the Internet connection or even the company to which the person is linked by some legal relationship.

It is particularly unpleasant if the letter is not addressed to the employee but directly to the manager of his employer, who is typically unaware that someone has used illegally installed software in his company. Under copyright law, unauthorised use of software is an infringement of copyright and carries a number of consequences.

However, in addition to damages and civil claims, these consequences include the possibility of criminal offences. The rightholder may decide to initiate one or both types of proceedings in relation to the infringing activity.

In particular, the application of the software owner may come as a serious surprise to the management because these letters usually contain a very high claim for damages, far exceeding the market value of the software, which is not available at a low price, as it also includes additional damages.

It is important for all managers who may be concerned about the unauthorised use of design software to be aware that the companies that produce the software have a special system for continuously tracking down unauthorised users on the basis of the signals sent by the software to the development centre via the built-in automatic mechanisms.

The primary objective of software creators is not typically to bring as many prosecutions and damages actions as possible before the courts and other authorities, but rather to legalise these illegal uses and to establish a commercial relationship with all those who have tried to use their software in any way, and to sell them software that is now legal to use in a somewhat forced settlement of the illegal use.

This not only generates revenue for them from software sales, but is also a desirable way to increase the number of additional users. When faced with such a situation, it is essential for the company manager to order an internal investigation and to find out who has actually installed illegally downloaded software, on which computer and for what purpose.  It is also advisable to request any available IT identification data from the rightful claimant, in the hope that it may reveal that the computer or Internet connection in question does not actually belong to the company.

In such a case, we strongly recommend that you initiate discussions with the owner of the software and try to obtain as much information as possible about the case. A complete refusal to negotiate and a lack of communication may lead to the software vendor initiating liability proceedings.

Another issue is the determination of the employee's liability for damages under employment law. If you find yourself in such a situation, we recommend you contact our experts.

Dr. György Zalavári LL.M.
Ecovis Zalavári Legal Hungary
Lawyer | Mediator | Corporate Law and Data Protection Specialist
gyorgy.zalavari@ecovis.hu

 In real estate transactions, the parties to the contract must agree on the payment schedule for the purchase price. This means that the seller and the buyer must agree on the instalments and the dates on which the buyer must pay the purchase price. They must also specify whether each instalment will be paid in cash or by bank transfer. It is not inconceivable that payment may be made by offsetting the outstanding receivables without any actual cash flow.

In addition to defining the amount of the instalments, the time limit and the form in which the buyer is obliged to pay them, the seller and the buyer must also define the legal title to each instalment.

The  differences between the two types of legal instruments determined in the title can have a significant impact on the legal options available for the performance of a contract. The most common legal titles worth mentioning are down payment and prepayment. 

The simplest task in the explanation is to define the prepayment, because it is nothing more than an instalment of the purchase price, which is not subject to any additional rules compared with the rules on the purchase price. The prepayment and the purchase price instalment therefore mean the same thing. 

However, the rules of the law about the down payment are more detailed and may be more complex. A down payment is a sum of money paid to the seller when it is paid as confirmation of the buyer's obligations under the contract of sale. This amount is normally included in the purchase price and forms part of it, i.e. it is a deduction from the purchase price.

The old rule, which is no longer applicable, is that the deposit must be paid at the time of signing the contract. This is no longer the case. It may be paid as the third or fourth instalment and as an amount to cover the purchase price. Logic dictates that the down payment should be paid by the obliging party in the shortest period following the conclusion of the contract. Only then can the legal consequences of the deposit be applied in the event of a breach of contract If the party responsible for the breach or default forfeits the down payment, if he has given it, he forfeits it, and if he has received it, he must repay twice the amount received 

The most common cases for the loss of a down payment: 

The most common case of a breach of contract on the buyer's side leading to the loss of the down payment is when the buyer fails to pay the purchase price. 

In particular, the question often arises in the context of purchase price payments planned with the use of credit : will the buyer lose the deposit if he is unable to pay the purchase price because the bank has not accepted his application for credit and he is unable to meet his obligation to pay the purchase price due to the lack of bank financing?

The answer to this question is that it is up to the buyer to decide from which financial sources he wishes to finance the purchase price. The loss of access to finance is normally a default by the buyer, i.e. the buyer loses the deposit. 

However If the selling party is cooperative and sufficiently generous, the parties may derogate from this in the contract. It is also clear that neither party is liable for this default. The amount of the down payment will be returned to the buyer at the termination of the contract.

However, a more straightforward way to obtain bank financing is to ask for a preliminary credit assessment from several banks. You can do this before you choose the property you want to buy. 

You will not only find out how much money you have available to buy a home, but you will also be able to compete with cash buyers with this information - that you are creditworthy for the amount you have in hand. 

On the other side of the coin, the reason for a contract to fail can be a lack of information provided tot he buyer about the essential characteristics of the property or even a failure to take possession. 

A common occurrence is the seller's failure to inform the buyer that the property is being built or the construction has been carried out without the appropriate building permit or a permit for use. These can also lead to the buyer being able to withdraw on the grounds of breach of contract by the seller and to the seller being subject to the consequences of a down payment. 

It is also possible that a sale and purchase agreement may be impossible to conclude because of a cause for which neither party is responsible. An example might be if an earthquake causes the property which is the subject of the sale to collapse. The transfer of the property is therefore unfeasible in this case. Thus, the seller cannot be held liable. If the contract is terminated, the buyer will only be refunded the down payment when the contract is settled in this situation. 

If the contract is not performed for reasons for which neither party is responsible or both parties are responsible, the down payment is returned. 

The amount of the down payment is typically 10 percent of the purchase price, but this is not fixed anywhere in law. This may vary depending on the size of the purchase price. It can be 5 or even 30 percent of the agreed purchase price. However, the important to note that if the amount of a down payment set at an excessively high rate, known as an excessive deposit, may be reduced by the court on application by the party liable, i.e. the contracting party who is obliged to pay the deposit. Such a case If the court orders the down payment, it to be paid only in a lower amount. In the case of a down payment paid, only the lower amount is subject to any legal consequences.

The down payment can be seen as a significant sanction in the event that a transaction does not take place due to the fault of one of the parties. 

However, this does not mean that the defaulting party should only have to pay this amount for the damages suffered by the other party. The amount of the down payment reduces the amount of any damages or compensation, but the additional damages or compensation that can be claimed from the at-fault party remain. It may be fixed, that the loss or double payment of the down payment does not relieve you from other consequences of the breach of contract, which may still be enforced against the at-fault party. 

The payment for a waiver (or regret) (in Hungarian „bánatpénz”) means something else The payment for a waiver It is a common mistake when the parties thinks that with the payment or loss of the down payment any party is entitled to rescind from the contract any time. It is a false presumption. Without a proper reason none of the parties can withdraw unilaterally from the agreement. The only chance to terminate without a reason if the contract contains a  payment for a waiver clause which provide an opportunity to rescind unilaterally in case the affected party pays the payment of waiver (or payment of regret).

 If you plan to purchase a real estate in Hungary, contact Dr György Zalavári, lawyer and partner of Ecovis Zalavári Legal Hungary. 

Dr. György Zalavári LL.M.
Ecovis Zalavári Legal Hungary
Lawyer | Mediator | Corporate Law and Data Protection Specialist
gyorgy.zalavari@ecovis.hu

Hungary, with its rich history, vibrant culture, and strategic location in Central Europe, has become an increasingly attractive destination for real estate investors. Whether you are looking for a cozy apartment in Budapest, a picturesque countryside home, or a commercial property, the Hungarian real estate market offers diverse opportunities. This guide will walk you through the essential steps and considerations for purchasing real estate in Hungary.

Understanding the Market 

Before diving into the buying process, it's crucial to understand the Hungarian real estate market. Budapest, the capital, is the most popular area for property investment due to its economic significance and cultural appeal. Other regions, such as the Balaton Lake area and cities like Debrecen and Szeged, also offer promising investment opportunities. 

Legal Regulations for Foreign Ownership 

Foreigners can purchase real estate in Hungary, but there are some restrictions. Non-EU citizens need to obtain a permit from the local government office, which usually takes a few weeks. EU citizens face fewer restrictions and can buy property under similar conditions as Hungarian citizens. You can also buy property via a Hungarian company. Purchasing arable land for a foreigner citizen is strictly limited in several cases and a complicated procedure is required. 

Property Ownership

Hungary recognizes various forms of property ownership, including exclusive, common ownership and condominiums as a mixed type. Exclusive ownership is the most common and provides the buyer with complete ownership of the property and the land it stands on. 

Finding a Property

Several online listings and property portals provide advertisements for real estates in Hungary. Websites like ingatlan.com, otpotthon.hu, realtorlawyers.hu and realestatehungary.hu are popular and provide extensive listings of residential and commercial properties. 

Legal Due Diligence, Technical Property Inspection

Before making an offer, it’s essential to inspect the property thoroughly. Ensure that the property has a clear title and is free from any encumbrances. This step typically involves checking the Land Registry and obtaining a certificate of ownership. It is crucial to engage a real estate lawyer who can check the legal background of the real property and ensure all legal aspects are covered, and represent you in the complete procedure. Make sure to choose an lawyer who is fluent in your in English. Also consider hiring a professional surveyor and architect to assess the property's condition and identify any potential issues. 

Financing the Purchase

Both Hungarian and international banks offer mortgages to foreign buyers. The terms and conditions vary, so it's advisable to compare different offers. Non-residents may face stricter lending criteria and higher interest rates. 

Currency Considerations

Since Hungary uses the Hungarian Forint (HUF), currency exchange rates can impact the purchase cost. It’s wise to monitor exchange rates and consider using a foreign exchange service to lock in favourable rates. 

The Buying Process Once you find a suitable property, you can make an offer. If the seller accepts, a preliminary agreement is signed, and a deposit (usually 10% of the purchase price) is paid when you signed at least a preliminary contract. 

Be careful with the realtors!

  Be aware of signing any documents offered by realtors, they are not entitled to formulate legal documents. Numerous legal cases generated by their false, incorrect or invalid documentation prepared without legal education and right to practice law. Also, realtors’ agreement are often very tricky in Hungary, they often use conditions advantages just for themself and the state attorney office challenges continuously such invalid, abusive realtor engagement agreements in the representation of the public. The big realtor networks are not exceptions, their franchise members are usual defendants in such litigations. 

Instead, contact your lawyer as a first step, they are legally educated and allowed to elaborate legal documents, and it is advised to check with them the realtor’s contract. 

Signing the Contract

The final purchase contract is drafted and countersigned by a lawyer. This contract outlines all terms of the sale, including the purchase price, payment schedule, and transfer date. 

Registration

After signing the contract, the property must be registered with the Land Registry with the assistance of a lawyer. This step officially transfers ownership to the buyer and typically takes a few weeks. 

Costs and Taxes

In addition to the property price, buyers should budget for additional costs, including: - Legal fees: 1-2% of the purchase price - Registration fees: Approximately HUF 6,600 (from the end of July 2024 it is HUF 10,600) - Real estate agent fees: 2-5% of the purchase price  

Duties, taxes

The basic transactional duty associated with real property purchase is 4% of the market value.  The tax authority may alter from the purchase price if it considers it less that the real market value. There may also be other local taxes and fees. 

Renovations and Maintenance If the property requires renovations, hiring local contractors and obtaining necessary permits will be essential. Regular maintenance is also crucial to preserve the property's value. 

Property Management

For investors who do not plan to reside in Hungary, hiring a property management company can be beneficial. These companies handle tenant issues, maintenance, and ensure the property is well-kept. 

Conclusion

Buying real estate in Hungary can be a rewarding investment, offering opportunities in a diverse and growing market. By understanding the local market, navigating the legal landscape, and conducting thorough due diligence, you can make a successful and informed purchase. Whether you're seeking a permanent residence, a vacation home, or an investment property, Hungary's real estate market has something to offer. 

If you plan to purchase a real estate in Hungary, contact Dr György Zalavári, lawyerand partner of Ecovis Zalavári Legal  Hungary. 

Dr. György Zalavári LL.M.
Ecovis Zalavári Legal Hungary
 Lawyer | Mediator | Corporate Law and Data Protection Specialist
gyorgy.zalavari@ecovis.hu

Much debate has focused on the legal classification of the "purchase security" used by Hungarian real estate agents and whether it is legal for real estate agents to handle money in this way. In the following I will try to answer these questions.

Since the Hungarian legal system does not regulate this type of "purchase security", it is necessary to examine its characteristics and to identify the known legal relationships on the basis of these characteristics.

How does a purchase security work?

One typical practice is that, when a potential buyer wishes to make an offer to buy a property, the real estate agent will in many cases inform the buyer that the offer can only be made to the seller if the buyer, in order to prove the seriousness of his intention, hands over a certain amount of money, typically hundreds of thousands or even millions of forints, in cash. 

There is then no agreement between the seller and the buyer as to the purchase security and the real estate agent is not an agent of the property owner in the context of the handling of the money. The manner in which the purchase security is to be disposed of is not usually set out in a written contract, but is accompanied by the explanation that its fate depends on the buyer ultimately purchasing the property.

If the seller accepts the buyer's offer, the real estate agent will hand it over to the seller at the time of the contract and the parties agree that it forms part of the purchase price. In some cases, the estate agent returns it to the buyer at the time of the sale and the buyer pays it to the seller. If the seller rejects the purchase offer, the estate agent returns this amount to the buyer.

The interesting case is if the buyer withdraws after the seller has accepted the purchase offer, the buyer's deposit is not returned by the estate agent,

it is either retained as a commission (which is incomprehensible because there is no agency or other legal relationship between the buyer and the real estate agent, so the real estate agent cannot be entitled to any amount from the buyer),

possibly a part of it to the seller (this is also incomprehensible because there is no agreement between the buyer and the seller which determines the amount of the purchase security or gives the seller the right to receive it, especially as this amount is not a deposit or a contingency). This amount is certainly not a deposit or a contingency, as there is no agreement between the seller and the buyer to pay it.

A purchase security is a sum of money held by the real estate agent without a valid contract to this effect, and paid or taken over by one or other party, subject to the failure or fulfilment of certain conditions, which are not usually set out in writing. It may also be recorded that he carries out this activity regularly in the course of his business, with a view to obtaining a profit or income, and that it is therefore commercial conduct on his part.

On the basis of these criteria, we cannot identify any legal title in the legal relationships that have been established which would enable the buyer to retain it or the amount to be transferred from the buyer to the property agent or retained by the property owner by virtue of any title whatsoever.

If we are considering whether the amount might have to be repaid to the buyer or transferred to the seller, we can apply the rules of the escrow agreement governed by Act V of 2013 on the Civil Code (Civil Code Act) to the assessment of the purchase security.

The Civil Code. 6:360 of the Civil Code, the depositary is obliged to keep the movable property specified in the contract and to return it upon termination of the contract, and to pay a fee to the depositor. Ptk. 6:364 (2) of the Civil Code, there is also a deposit whereby the depositor is obliged to release the deposited object to a third person specified in the contract upon the occurrence of the conditions specified in the contract or upon termination of the contract.

The commentary to the Civil Code points out that further detailed rules on the deposit of money are laid down in other specific legislation.

Pursuant to Article 2 (1) (c) of Act CCXXXVII of 2013 on Credit Institutions and Financial Undertakings (Act on Credit Institutions and Financial Undertakings), the Act does not apply to the management of cash deposits if its business is regulated by law.

Since there is no statutory provision for the commercial management of funds by real estate brokers (as opposed to notaries, courts and lawyers), the Hpt. applies to them, i.e. it is on the basis of this Act that it can be assessed whether real estate brokers are entitled to manage funds on a commercial basis.

Pursuant to Article 3(1)(l) of the Hpt, the commercial provision of deposit services in forint, foreign currency or foreign exchange is a financial service.

Pursuant to Article 6(1)(79) of the Hpt, a deposit service is defined as the deposit and management of funds on behalf of a client in a separate deposit account, with or without interest, under conditions laid down by law.

A cash deposit service is a special case of a civil law (movable) deposit regulated by the Civil Code, where a financial institution deposits and manages funds on behalf of a client in a separate deposit account, with or without interest, in accordance with the terms and conditions laid down by law and the deposit contract concluded for this purpose.

The management of the escrow account is also necessary to qualify as a deposit service under the Hpt.

We have to analyse the report on the commercial nature of the activity, as this is the basis for the qualification of the activity as a financial service subject to authorisation pursuant to Article 3(1) of the Hpt.

Pursuant to Article 6(1)(116) of the Hpt, the following elements must be examined in relation to the commercial character of the activity:

-for consideration, for the purpose of acquiring property,

-for the purpose of concluding transactions not specifically defined in advance,

-it is carried out on a regular basis.

Commerciality is when the service is provided for a fee or other economic benefit. In my view, commerciality can also be established if the activity is carried out in order to increase the efficiency, profitability, level of income and return on the main activity carried out in a commercial manner. In the above case, if the real estate agents are entitled to a share of the "commission on the purchase", this condition is fulfilled.

Pursuant to Article 7(2) of the Hpt, only financial institutions may provide financial services, unless otherwise provided by law.

It should be stressed that in cases of regulated commercial deposit of funds (by notaries, courts and lawyers), the legislation contains a number of provisions which provide for the depositing of funds and protect the financial interests of the depositor. Thus, regulated trusts are subject to liability insurance, chamber supervision, a deposit insurance fund and a compulsory registration process for state asset liability, ensuring that the depositor is covered for the payment of the deposit in case of error, mistake or possible misuse of the funds. However, these guarantees are absent in cases of non-statutory management of the funds.

An analysis of the above legislation indicates, in my opinion, that real estate agents are not authorised to handle funds on a commercial basis in the absence of a specific legal authorisation. In view of this, I interpret the legal provisions to mean that real estate agents may not, in the course of their business, accept deposits of money known as "purchase security" or manage such deposits.