Экзамен зачет учебный год 2023 / Hungary

Real Property Law

Dr. Tamás Fekete

Notary Candidate

(Budapest)

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Introduction

1.1. In Hungary the beginning of the development of modern civil law is closely related to the legal development of the Hapsburg Empire (later the Austro-Hungarian Monarchy). The short period of independence achieved in the revolution and war of freedom of 1848-49 gave a new impetus to bourgeois transformation as well, but after the suppression of the revolution the laws could not be implemented. Having been accepted in 1811 and considered a state-of-the- art code in its era, the Austrian General Civil Code (ABGB) was promulgated in Hungary in 1853. It is owing to this code that the feudal legal system was completely eliminated and a new, state-of-the-art legal regulation was introduced. It was a few years later that the General Land Register necessary for safe trading of real property was created, which followed the German-Austrian model in that it covered every property and that its entries had constitutive effect.

The codification of the Hungarian Civil Code (hereinafter: Ptk.) did not happen until 1959, but that date did not favour the consolidation of legal institutions under civil law, either. The Socialist legal system is based on the dominance of state ownership. Privately owned real estate was restricted by law; one natural person was not allowed to have more than one apartment and one holiday home. The major means of production were owned by the state or cooperatives. For lack of a free market, mortgage did not play a significant role, either.

Still in effect these days, Ptk. had to undergo many changes so that it could get rid of the Socialist legacy and comply with the requirements of a modern day market economy. The Constitution specifies the principle bases for the changes.

Section 9 paragraph (1) The economy of Hungary is a market economy, in which public and private property shall receive equal consideration and protection under the law.

(2) The Republic of Hungary recognizes and supports the right to enterprise and the freedom of competition in the economy.

Section 10 paragraph (1) Property of the State of Hungary is considered national wealth.

(2) Fields of ownership and economic activity deemed to be the sole domain of the State shall be defined by law.

Section 11 Enterprises and economic organizations owned by the State shall conduct business in such manner and with such responsibilities as defined by law.

Section 12 paragraph (1) The State shall support co-operatives based on voluntary association and shall recognize the autonomy of such co-operatives.

(2) The State shall respect the property of local governments.

Section paragraph (1) The Republic of Hungary guarantees the right to property.

(2) Expropriation shall only be permitted in exceptional cases, when such action is in the public interest, and only in such cases and in the manner stipulated by law, with provision of full, unconditional and immediate compensation.

In addition to the Constitution and Ptk., the other important sources of property law include (but are not limited to) the following:

Act LV of 1994 on Arable Land

Act CXLI of 1997 on Property Registry

Act LXXVIII of 1993 on Certain rules on the lease of apartments and rooms and the alienation thereof

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Act CXXXIII of 2003, the Law on condominiums

1997/253 Government Decree on the national requirements of community planning and construction requirements

1.2.1Several persons may only acquire title to one article through the legal institution of common property. Feudal rights shall not exist in Hungarian law.

1.2.2Superficies solo cedit

The building is one of the most important components of land sections. Since the building shall be considered a component, it obviously will have the same fate as the land section. As a main rule (aedificium solo cedit), the title to the land is connected to the title to the building, it is uniform, i.e. the owner of the building and the owner of the land are the same [Ptk. Section 97 paragraph (1)]. The exceptions to the main rule are contained in paragraph (2).

From this it follows that in the case of started construction the only cases when the building may be given to the title of a person who is not the owner of the land are those based on agreement between the parties, provisions of the law and in certain cases, court ruling.

This contract shall be made out in writing under the law. Obviously, the written contract shall be concluded between the owner of the land section on the one hand and the encroachment builder on the other hand. Oral agreement between the parties shall be void [Ptk. Section 217. paragraph (1)].

The title to the building and the land section shall not be separated, unless by the contract mentioned above, and in the case of construction. Therefore no agreement shall be validly concluded under which the owner of a developed property sells the land and the building separately.

Having been valid since 1 January 2000, Act CXLI of 1997 (hereinafter: Inytv.) also formulates the main rule that any buildings and structures on the land shall be kept in registry together with the land section. In addition to the land section, buildings, cellars, underground garages and other structures shall be considered stand-alone properties if they are not owned, or are only partially owned by the owner of the land section.

In summary, the main rule that the owner of the building and the owner of the land section are the same persons also applies in the Hungarian legal system. Any exception to this main rule shall be prescribed by law. That way, the title to the building and the land section may be different, if authorized by law, the agreement of parties or a court ruling. However, it is very important that the building should be qualified as stand-alone property and should be suitable to be recorded in the real estate registry as such. Other provisions of the law also apply the main rule, for example, when they stipulate that the land owner has the title to the building, the title to the building may not be transferred or encumbered, unless together with the title to the land (Ptk. Section 113). Another provision that points towards the union of land and building is the pre-emption right, ensured by law, of the land owner for the building and that of the owner of the building for the land [Ptk. Section 97 paragraph (3)].

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Encroachment means the case when an unauthorized party builds on the land of another party, or when someone expands a building owned by another party, attaches to it or remodels it – assuming in both cases that the parties did not agree otherwise.

Those authorized in an agreement concluded with the owner of the land shall be entitled to build on the land of another party [Ptk. Section 97 paragraph (2)]. In this case obviously, the rules of encroachment shall not be applicable. The legal consequences of encroachment are:

1.Application of the provisions contained in Section 97 paragraph (1) of Ptk (the land owner acquires the title to the building, in exchange for paying compensation for enrichment.

2.The land owner may request that the encroachment builder should buy the land (or part of the land if it can be split up).

The essence of the regulation is that the land owner has the right of choice regarding the legal consequences.

A. If the value of the building materially exceeds the value of the land and the encroachment builder acted in good faith:

1.a bona fide encroachment builder may acquire the title of the land (or part of the land).

2.The land owner may also request that the encroachment builder should only acquire the title to the building [Ptk. Section 137 paragraph (2), Ptk. Section 155].

That way, the title to the land and the title to the building may be separated, if:

- it is requested by the land owner (and not the encroachment builder) pursuant to Section 137 paragraph (2) of Ptk.,

- there was originally an agreement to that effect between the builder and the land owner at the beginning,

- the encroachment builder has requested so, and in the lawsuit the land owner has approved (Opinion no. PK 7.).

In the lawsuit, the approval of the land owner may replace the written agreement pursuant to Section 97 paragraph (2) of Ptk. If the encroachment builder acquires the title to the land, he shall refund the fair market value thereof.

1.3 Rights applying to the property

Inytv. Section 16. The following rights associated with the property and the beneficiaries of the same may be recorded in the real estate registry:

a)owner’s right or in the case of properties owned by the state, the organization exercising the owner’s rights of the state and the property management right,

b)permanent utilization right of members of housing cooperatives,

c)land utilization right based on agreement and court ruling,

d)right of enjoyment and right of utilization,

e)appurtenant easement,

f)right of utilization ensuring the placement of permanent land survey signs, land qualification sample spaces, electric equipment, furthermore, right of way for cables, water drainage and mineral easement, easement and utilization rights of public interest, based on statutes,

g)pre-emption and repurchase rights and option to purchase,

h)right of support and right of annuity,

i)mortgage (independent lien),

j)enforcement right.

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The law on real estate registry lists which rights may be indicated in a registry of real estate. Regarding classification, it should be noted that in addition to classic ownership title, utilization, easement and security rights, there are special Hungarian legal institutions as well. (see 1.3.6)

The contract of the parties must be aimed at the establishment, termination or amendment of one of the above mentioned rights. They may not establish a new legal construction. However, the legal regulation is dispositive, thus the parties may conclude a separate agreement deviating from the legal regulation, unless the law indicates otherwise. Therefore, the parties are bound regarding the selection of the legal title and the related material requisites, but regarding the details the principle of freedom of contract shall apply.

1.3.3. Utilization rights

Right of enjoyment is an especially important item of utilization rights.

Ptk. Section 157. (1) On account of his right of enjoyment, the beneficiary may keep an article owned by another party in his possession, he may use it and collect its benefits.

The right of enjoyment is tied to person, the beneficiary may not transfer it between living persons or in the case of death. The right of enjoyment is non-transferable. The object of enjoyment is usually movable or real property. It may be established or is created by inheritance on rights generating benefits and on interest-bearing claims as well. The enjoyment may cover the entire article or only a part thereof.

Several persons may have right of enjoyment on the same article. These persons may exercise enjoyment parallel at the same time, or in sequence, one after the other. The entitlement of the beneficiary to possession also includes the right of property protection. This right is the same as the right of the owner.

The right of enjoyment is limited and shall not extend beyond the life of the beneficiary.

158. § (1) Based on a contract, enjoyment is established by the transfer of the article, enjoyment applying to real property is established upon recording in the real estate registry.

(2) If the enjoyment is created on the real property by virtue of statute, court or official measure, the right of enjoyment shall be recorded in the real estate registry, if that is not carried out, enjoyment shall only be enforceable against persons who have obtained the article in bad faith or have not given any consideration for the article.

The law provides for one case when enjoyment is established by virtue of statutes, this is the widow’s right regulated in Section 615 of Ptk.

The widow obtains the right of enjoyment at the time of the commencement of the inheritance (the death of the testator), both in the case of inheritance by law and testamentary inheritance, therefore in this case the establishment of enjoyment is not conditional upon the recording of the right in the real estate registry. In this case, the recording has declarative effect, if it is not carried out, enjoyment will be enforceable against persons who have obtained the article in bad faith or without consideration.

The right of utilization

Section 165 paragraph (1) of Ptk.: By virtue of the right of utilization, the beneficiary may use the article and collect its benefits to an extent not exceeding the necessities of himself and

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his family members living in the same household. Exercise of the right of utilization is nontransferable.

Easement

Section 166 paragraph (1) Based on appurtenant easement, the current owner of a property may use the property of another party to a limited extent, or may require the owner of the property encumbered by the easement to refrain from an otherwise existing conduct.

(2) Appurtenant easement may be established for the purpose of crossing, water supply and drainage, the construction of cellars, placement of cable poles, support of a building or other purposes favourable for the beneficiary.

Easement may be established under the law:

Section 167 If a plot of land is not accessible by appropriate public road, the neighbours shall be required to tolerate that the beneficiary cross their land.

It may be established by agreement (contract). In these cases easement shall be recorded in the real estate registry.

But easement may also be obtained by adverse possession, i.e. if there is no agreement and entry in the registry, easement may be established by permanent exercise of right.

Establishment of right of utilization for public interest

Ptk. Section 171. paragraph (1) If justified by public interest, easement or other right of utilization may be established on real property by resolution of agencies of state administration, for organizations authorized in separate statute. Indemnification shall be payable for the establishment of right of utilization.

In this case rights of utilization are established by the resolution of an agency of state administration. The existence of public interest shall be verified ex officio. In order to accomplish the objective specified in the resolution, in the framework defined by the general rules of exercise of law, the beneficiary may use the property, possess a specified part, perform transformation, prescribe measures. The right shall be exercised leniently, to the justified extent, in cooperation with the owner.

Act I of 1992 (on cooperatives) regulates the right of apartment utilization of members of cooperatives.

Section 92 paragraph (1) For the purposes of this law, housing cooperatives are: cooperatives constructing or maintaining apartments, pensioner’s homes, holiday homes, passenger car storage facilities and store rooms (hereinafter together: housing cooperative).

(2) The housing cooperative is a communal organization performing activity of public interest.

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At present there are some 300,000 cooperative apartments in Hungary. This constitutes about 7.5% of all apartments. From 2006 apartment cooperatives will probably be subject to a separate law. A housing cooperative is different from a condominium inasmuch as it has separate assets and it is a legal entity. Parts of shared usage and sometimes the apartments themselves are the property of the cooperative. In such cases members have right of utilization, which shall be recorded in the real estate registry.

The fundamental function of the housing cooperative is to operate the houses under its control. It may also perform enterprising activities (for example, it may construct new apartments), but in these cases it has to re-invest the profit into its core activity.

In the Charter Document the owners may specify the measure of contribution to operations. In contrast with condominiums, here the members have more freedom, they are not bound by their ownership ratios. If a member has a debt overdue by six months or more, the cooperative may have mortgage recorded on the apartment of the member. Regarding the right of utilization, members of the cooperative have pre-emption right for apartments owned by the cooperative.

I have presented tenure in land above.

1.3.4 Security rights

For the time being, Ptk. regulates mortgage law not within the scope of property law, rather in the field of contract law, among so-called contingencies aimed to secure obligations.

There are several kinds of mortgage in Hungarian law. Property mortgage may be contingent or independent. Limited security lien shall also be recorded in the real estate registry. Chattel mortgage and mortgage on the property of legal entities shall be recorded in the registry of the Chamber of Notaries. The Hungarian law also contains mortgage on rights and claims.

In addition to agreement between parties, there is another kind of lien that is established by virtue of law: (for example, lessor, contractor, depository, to the extent of unpaid charges)

1.3.5. The provisions of Ptk. presented here describe pre-emption and repurchase rights and option to purchase.

Section 373 paragraph (1) If the owner grants pre-emption right regarding a specified article by written agreement and wants to sell that article, before agreement conclusion he shall communicate any proposals received to the beneficiary of the pre-emption right. The owner shall not be bound by this obligation if the fulfilment thereof would incur extraordinary difficulties or significant delay, owing to the whereabouts of the owner or other circumstances.

(2)If the beneficiary of the pre-emption right accepts the contents of the proposals in his statement made to the owner, the agreement shall be concluded between them. If the beneficiary makes no such statement within the deadline generally specified for the acceptance of the contract offer, the owner may sell the article as per the offer or with more favourable conditions.

(3)If the pre-emption right has been recorded in the real estate registry, it shall be valid to every party who acquires any right on the property after the recording.

(4)Unless otherwise provided by law, transfer of the right of pre-emption shall be void, however, a business enterprise may designate a person entitled to exercise that right.

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(5)Unless otherwise provided by law, the right of pre-emption shall not be transferred to

heirs.

(6)The provisions applying to pre-emption right shall also be applied to pre-emption rights based on law. Pre-emption right based on law shall precede contractual pre-emption right.

Section 374 paragraph (1) The right of repurchase of the sold article shall be put in writing, simultaneously with the conclusion of the sale and purchase contract. Repurchase shall occur by the statement of the seller to the buyer.

(2)An agreement on the right of repurchase shall not contain a term longer than five years, any agreement to the contrary shall be void.

(3)The repurchase right shall be equal to the original purchase price, however, the original buyer may require, in addition to the repurchase price, the sum by which the value of the article had increased through his useful expenditures until the date of repurchase, while the buyer in the repurchase transaction may deduct the depreciation caused the wear and tear of the article in the meantime.

(4)The original buyer shall be responsible for the failure or impairment of the repurchase right, however, if the article is destroyed for reasons for which he cannot be held liable, the repurchase right shall cease.

Section 375 paragraph (1) If the owner grants a purchase right (option) to another party, the beneficiary may purchase the article by a unilateral statement. Agreements on purchase right shall be incorporated in writing, indicating the article and the purchase price.

(2)Purchase right specified for an indefinite term shall cease after six months; any agreement to the contrary shall be void.

(3)Unless otherwise provided by law, a court may relieve the owner from his obligation under purchase right if the owner is able to prove that after granting the purchase right, such changes have taken place in his circumstances that he can no longer be expected to fulfil that obligation.

1.3.6Other rights

The Ptk. provides for right of support and right of annuity:

586.§ (1) Under a support agreement, one party shall support the other party appropriately. As an obligor, a legal entity may also conclude a support agreement.

(2) Support agreements shall be concluded in writing.

(3) The obligation of support shall also cover care, arrangement of healing, care in sickness and arrangement of funeral.

(4) The agreement shall remain valid until the beneficiary has died; the obligation of support shall, according to the rules of liability for the debts of the testator – be transferred to the extent that the support provided until the time of the death of the obligor does not cover the consideration.

587.§ (1) If the beneficiary transfers the real property in his possession as an exchange for the support, the right of support may be recorded in the real estate registry.

(2) If the right of support has been recorded in the real estate registry, in the case of failure to fulfil the obligation of support, the beneficiary may seek satisfaction from the property, subject to the rules of enforcement.

(3) If the obligor to the obligation of support alienates the property, the new owner shall tolerate the satisfaction.

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(2)The establishment of condominium property requires the agreement of the co-owners incorporated into the charter document and the recording of condominium ownership into the real estate registry.

(3)At the request of any co-owner, a court may also mandate the transformation of the common property into condominium property. In this case the charter document shall be replaced by the court ruling.

(4)The rules applying to common property shall be applicable to condominium property, with the deviations specified in separate law.

The resolutions of the member’s meeting shall be binding on the future owners as well. Only the rights and facts listed in the law may be recorded in the real estate registry, therefore the rules on the use of shared rooms may not. Still, the charter document must be submitted to the Land Office and to the common representative of the condominium, thus the buyer may get information about the rules on the use of the apartment.

When the shared costs are determined, in respect of permanent costs the ownership ratios shall be the basis of allocation. In the case of extraordinary expenses (renewal) the member’s meeting may also decide on a different method of cost sharing.

The member’s meeting may prohibit the utilization of separately owned apartments for purposes other than apartment. The member©s meeting shall pass its resolutions according to the total ownership ratio – including the affirmative vote of at least two-third of directly impacted neighbouring co-owners – by at least a simple majority of votes.

The member©s meeting may exclude pets on the grounds that they disturb the peace of the tenants or the regular exercise of rights by the tenants. The local governments may also pass resolutions to that effect. If often happens that keeping two dogs requires permission. There is usually no problem with cats or with small animals and plants.

If the resolution of the member’s meeting violates the provisions of the charter document or the rules of organization and operation, or results in the material violation of the rightful interests of the minority, any co-owner may file a complaint to court and ask that the resolution should be invalidated within sixty days from the date when it was adopted. Failure to meet the deadline shall result in loss of right.

The complaint shall not impede the implementation of the resolution, however, in justified cases the court may suspend implementation.

Forms of legal relationship applying to apartments include cooperative and common property that have been explained above. Ptk. defines common property:

Section 139 paragraph (1) Several persons may have a title to the same article, in specified ratios.

(2) In case of doubt, the ownership ratios of the co-owners shall be equal.

Section 140 paragraph (1) Each of the co-owners shall be entitled to having and using the article; however, none of the co-owners may exercise this right to the injury of the rights and legitimate interests of the others regarding the article.

(2) Regarding the issue of possession, utilization, exploitation and expenses not exceeding the scope of ordinary management, unless the law provides otherwise, the co-owners shall pass resolutions by simple majority; each co-owner shall have votes in the proportion of his ownership ratio.

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