Information on buying and selling a home in Hungary

General Data on Real Estate Sale and Purchase Agreements

Content requirements:

For being able to conclude an agreement the parties should agree on the following: who (Purchaser) is buying what (real estate) from whom (Seller) and for how much (purchase price).

Who – Buyer

The Buyer makes a written purchase offer, secured by earnest money in the presence of a real estate agent. Purchase offer is a unilateral declaration creating a binding offer from the Bidder (buyer), which means that he/she cannot unilaterally rescind his/her purchase offer without legal consequences. The purchase offer shall include the essential conditions such as the purchase price and payment conditions, deadlines, etc.

From whom – Seller

The Seller is the owner of the real estate having the title to and possession of the real estate, which rights shall be certified by the data of the title deed and the simultaneous proof of his/her identity.

In case of condominiums the declaration of the condominium may contain important restrictions.

Various restrictions may be indicated on the title deed, such as usufruct, court execution procedure, mortgage connected to a loan, restraint on alienation and encumbrance, lawsuit note, easements etc.

In case of multiple sellers or a seller wishing to sell an undivided share it should be clarified whether it is about undivided joint ownership, whether there is an agreement on the division in kind and if yes, whether it has been filed with the Land Registry.

It is the Seller’s obligation to have the real estate’s energy quality certificate. The Seller should provide the Buyer with it prior to the conclusion of the Deed of Sale furthermore the Seller shall bear the costs of such certificate.

Remark: it is expedient that the Seller makes a statement regarding that there are not any other owners or any other third persons beyond those registered in the Land Registry who have any rights under the title of matrimonial property or any other title whatsoever regarding the real estate.

The Deed of Sale enters into force with the acceptance of the offer (see the clause hereinabove).

Seller and Buyer collectively – Parties

The following documents are required for the conclusion of a Deed of Sale: valid identity card, residence card and tax card or, in case of a corporation, certificate of incorporation and specimen of signature, in case of foreign persons e.g. passport. It is expedient to draw the attention of the Parties to the expiry of such documents.

What – Real Estate

The Land Registry registers all relevant data relating to the real estate..

The ownership portion and topographical lot number of the real estate constituting the object of the sale shall be exactly indicated.

The Seller shall inform the Buyer of any lawsuits, encumbrances, other rights and circumstances beyond the Land Registry concerning the real estate.

For how much – Purchase Price

The purchase price is the consideration for which the title to the real estate is transferred, under the title of sale and purchase, on the basis of an onerous agreement.

If there are multiple sellers (or there is a seller having usufruct or another entitled person) it is expedient to clear what portion of the purchase price each seller will receive, possibly differing from the ownership portion and whether they wish separate payment.

It is advisable to inform the Buyer that if he/she wishes to pay the full purchase price or a part of it from a loan, he/she shall indicate the creditor bank. Individual banks provide similar requirements on the whole in connection with the sale and purchase agreement and the process of the payment of the purchase price, which, however, may differ from each other considering the details.

Formal requirements – Proceeding of the attorney-at-law:

A document suited for registration of the real estate sale and purchase is required for the registration by the Land Registry, which is practicably a sale and purchase agreement, prepared and countersigned by the attorney-at-law. By preparing the document, the attorney-at-law assumes full responsibility for that the document is of high professional standard, while by countersigning it, for that it corresponds to the will of the Parties and it complies with the relevant legal regulations furthermore, he/she undertakes full responsibility for verifying the identities of the Parties. His/her responsibility covers the representation of the Parties and the Land Registry proceeding, but it does not cover representation before the Tax Authority .

The acting attorney-at-law should have mandatory liability insurance.

The attorney-at-law preparing the Deed of Sale shall represent both Parties. Any of the Parties may deviate from this provision and separately authorise an own attorney-at-law. However, in the absence of such stipulation the attorney-at-law shall represent both Parties and takes the interests of both Parties into account during the course of his/her proceeding.

The attorney-at-law is obliged to perform client screening in the event of contributing in a real estate sale and purchase. This means that the attorney-at-law is obliged to identify the client (Seller and Purchaser), their attorneys and persons entitled to acting, furthermore the representatives, as well as to carry out the document control of their identities (copy of personal documents).

In the event of a real estate sale and purchase it is required to use the personal identification number. In the case of a Hungarian citizen it is not allowed to conclude any agreements in the absence of valid documents certifying personal identity and personal identification number (residence card).

Stamp duty – Taxation

Stamp duty-transfer tax

By convention, the Buyer shall pay the stamp duty (duty on onerous transfer of property), however, the Parties may deviate from this in their agreement.

Rate (flat):

• 4% up to HUF 1 billion, above that 2% for the part exceeding that of the sales value, but no more than HUF 200.000.000

Stamp duty reduction:

Newly constructed home – free of stamp duty

In the event of a newly built flat the sale is free of stamp duty up to the value of HUF 15 million. Between HUF 15 and 30 million stamp duty shall be paid regarding the amount exceeding HUF 15 million. In case of a sales value exceeding HUF 30,000,000 no stamp duty reduction may be applied.

The Purchaser has sold a flat – he/she certifies the sale of another flat of own property

If a Purchaser being a private individual has sold or sells another flat within one year prior to or following the purchase, the difference between the two sales values will constitute the basis for duty imposement. In this case the value of usufruct shall not be deducted. Attention! Only a flat and only one flat may be taken into account upon the current sale, and only in the case of a private person.

It is expedient to certify the sale by a sale and purchase agreement.

Taxation - personal income tax - Seller

The purchase price is considered as income for the Seller, thus he/she as a private individual shall pay personal income tax (15%). The same shall apply to the person waiving usufruct or any other rights for a consideration.

IN CASE OF A NON-RESIDENTIAL REAL ESTATE:

(4) The income deriving from the transfer of a real estate shall be the amount calculated according to the provisions of Clauses (1) and (2), if the transfer takes place in the year of acquisition or within the subsequent five years (for the purposes of this §: “calculated amount”). After that, the income shall be fixed in such a way that the calculated amount shall be decreased

a) by 10 percent of the calculated amount, if the transfer takes place in the sixth year,

b) by 20 percent of the calculated amount, if the transfer takes place in the seventh year,

c) by 30 percent of the calculated amount, if the transfer takes place in the eighth year,

d) by 40 percent of the calculated amount, if the transfer takes place in the ninth year,

e) by 50 percent of the calculated amount, if the transfer takes place in the tenth year,

f) by 60 percent of the calculated amount, if the transfer takes place in the eleventh year,

g) by 70 percent of the calculated amount, if the transfer takes place in the twelfth year,

h) by 80 percent of the calculated amount, if the transfer takes place in the thirteenth year,

i) by 90 percent of the calculated amount, if the transfer takes place in the fourteenth year,

j) by 100 percent of the calculated amount, if the transfer takes place in the fifteenth year.

reckoning the year following the acquisition as first year.

In case of HOMEs (any residential area real estate: flat or house) this means:

1. 100 percent in the year of acquisition and in the following year,

2. 90 percent in the second year following the acquisition,

3. 60 percent in the third year following the acquisition,

4. 30 percent in the fourth year following the acquisition,

5. 0 percent in the fifth year and further years following the acquisition.

No tax shall be paid in case of a sale taking place in the 5^th year following the acquisition of the flat (or later).