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Buying land: enhanced interest of the State = complex transactions

Updated: 08/08/2022

Regulations on buying land has a special place in the overall regulations of buying real estate in Hungary. Beside the general rules of buying real estate there is a designated Act on buying land which also governs land transactions. The extra regulative attention is necessary because this way the State can protect Hungarian land and the Hungarian farmers.

The general risks of buying real estate also arise when buying land. However, the technical risk of buildings is not a factor. Still it is important that the quality and the expediency of the land should be appropriate. Buy of land can fail also after signing the sale & purchase agreement. This is one of the main risks arising from the extra rules imposed by the State.

Who can buy land in Hungary?

The Land Transactions Act allows the acquisition of Hungarian land only to certain persons and organizations. Besides these person’s and organization’s transactions are also restricted in other ways. As for private individuals, only Hungarian and European Union citizens can acquire Hungarian land. It means that third country citizens are prohibited to buy Hungarian land. The Land Transactions Act also imposes quantitative restrictions: if the Hungarian and European Union citizen does not qualify as a farmer she can only buy 1 acre of land. This can only be exceeded if a close relative sells or donates land to the Hungarian or European Union citizen who already owns 1 acre. As for farmers the quantitative restriction is 300 acres.

The question which frequently arises is that are these restrictions are in force if I donate the land instead of selling it? The answer is a firm yes, moreover, the Land Transactions Act restricts the donation of Hungarian Land. You can only donate Hungarian land to a close relative, the church, local governments or the State.

Extra rules for the land sale & purchase agreement

In the agreement you have to make declarations and undertakings which ensures the State that you comply and always complied to the Land Transactions Act and you didn’t try to avoid its regulations and that you will take care of the land to preserve its productivity. Therefore, you have to make the following declarations: you will not transfer the use of your land to anyone else, you will use the land to produce and within 5 years dated from your acquisition you will not use the land for other purposes. The latter regulation has a few exceptions, for example you can build a house on the land. You also have to comply with the rule that you are not allowed to have outstanding debt of land usage fee towards the State. You cannot acquire the land if it was established that you made a deal which aim was to evade the above acquisition restrictions within 5 years.

One copy of the land sale & purchase agreement has to be signed on the green safety paper with the countersignature of a lawyer. The State protects the land also through making the safety document mandatory.

How other buyers can take your buy away from you after signing the land sale & purchase agreement?

The Land Transactions Act gives pre-emption rights to a wide range of persons (for example farmers). After concluding the land sale & purchase agreement these persons should be notified about the opportunity to buy and should be allowed the to exercise their pre-emption right. It would be unfeasible for the State to notify each entitled person separately and it would be an impractical burden for the sellers and the buyers to notify them because of the significant number of these individuals. They are notified by public notification of the local government. They are allowed to exercise their pre-emption rights within 60 days dated from the release of public notification. This means that these pre-emptioners can take your buy on the same price with same the conditions as stipulated in the land sale & purchase agreement.

Based on the above it is recommended to transfer deposit, advance money or even entire purchase price to the attorney’s escrow account after signing the land sale & purchase agreement, because if it is paid to the seller instead, it can occur that after a pre-emptioner takes your buy away the seller refuses to pay the purchase price back which can lead to a lengthy court proceeding.

Submission to the land registry – registration of your ownership

The end of the process is the submission of the approved land sale & purchase agreement to the land registry which has to be carried out in compliance with the common real estate registry procedures. You have to consider that acquisition of land can exceed 6 months on average.

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