Updated: 23/08/2022
If you found the real estate you plan to buy you may already know even before checking the title deed that the real estate is registered as a communal property. The legal nature of the communal property is that it is registered under one plot number in the land registry and each owner has her own share. The use communal property is also divided between the owners. It is recommended for the owners to conclude an agreement for use in writing to decide which area is used by the given owner because the Hungarian Civil Code only states that every owner is entitled to use the communal property.
Another specialty of the communal property is that if one owner intends to sell his share the rest of the owners have pre-emption right to buy the share subject to sell. This means that if you prefer to buy communal property, you are obliged to disclose your offer to the rest of the owners and ask them to declare that whether they intend to exercise their pre-emption right. If they say no or fail to exercise their pre-emption right until the given deadline it should be deemed as they do not prefer to buy. It is important that the notice of pre-emptioners has to be demonstrated to the land registry as well, therefore they should sign an acknowledgement of receipt if such notice was delivered in person or you should keep the copy of the receipt of delivery if such notice was sent as a registered letter.
In practice the fastest and safest way is that the pre-emptioners undersign a waiver on pre-emption right prepared and countersigned by a lawyer before or simultaneously with concluding your sale & purchase agreement, in which they expressly state that in the light of your offer they do not intend to exercise the pre-emption right. By this method all risks can be managed deriving from document safety, using postal services and future claims, also waiting for delivery by post, return of receipt and the deadline to elapse can be avoided. Moreover the waivers on pre-emption right can be submitted to the land registry along with your sale & purchase agreement, which may be a precondition for getting a loan from the bank if you finance your buy with the help of it.
In contrast to the separate registration of condominium flats the parking lots are registered as communal properties in the land registry as well as the above mentioned properties. Furthermore, it is likely that there are much more owners on the parking lot’s title deed than on other communal properties. Depending on the number of parking lots there can be several hundred registered owners.
Noticing several hundred owners to find out whether they want to exercise their pre-emption right or even the undersigning procedure of the waivers can be extremely difficult or would cause a significant delay – not mentioning the burden of legal and attorney fees – because it is complicated and costly to notice several hundred owners regarding pre-emption rights. Although the law didn’t regulate this problem for a long time, in practice there were several solutions. There was the possibility to refer to extreme difficulty or significant delay in land registry submissions, which gave the buyers the ability to by-pass pre-emption rights. Taking into consideration that it went against the pre-emption right regulations of the Hungarian Civil Code, later the land registry practice tightened as it required to notice all owners with pre-emption rights and the above reference wasn’t enough. Although this tight practice didn’t solve the problem of extreme difficulty and significant delay, therefore a third option won which was noticing the owners by a “public notice” on the condominium’s billboard or website. This way –with the additional declaration of the condominium’s representative – noticing a big number of owners one-by-one can be avoided.
The notice should contain the parking lot to be bought, the purchase price, the timing and method of payment(s), and the deadline until which the owners can exercise their pre-emption rights
If one of the owners wishes to exercise her pre-emption right, it means that she is the one who can buy the real estate instead of you on the same price and with the same conditions. Legally this situation cannot be avoided, although you can prepare for it. You can avoid paying the purchase price to the seller until it is not certain that the owners will not exercise their pre-emption rights. This risk can be managed by transferring the purchase price to the attorney’s escrow account. If an owner would exercise her pre-emption right you can avoid lengthy court proceedings claiming back the purchase price from the seller in case she would refuse or be unable to pay you back.
In 2022 the law regulated the notice of owners regarding pre-emption right by incorporating the above practice into the law. No new element were added.
It also regulated that the parking lots can also be registered as separate properties from now on. So it gave the opportunity to the condominiums to alter ownership matters of parking lots eliminating pre-emption rights. However, it requires the condominium to alter their deed of foundation which have to be countersigned by a lawyer.
According to the Act on Condominiums the modification of the deed of foundation requires approval of all owners. That way the separate registration of the parking lots neither looks easy, nor looks unattainable. Until the law doesn’t provide an exception from the approval of all owners (i.e. the modification of the deed of foundation regarding the separate registration of the parking lots is also valid with a simple majority of the owners), this opportunity remains a valid solution only for condominiums with a small number of owners.
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