Based on our experience and feedback from our clients, Hungary’s real estate law has already provided a very favorable legal environment for secure real estate investments. In the integrated land registration system, introduced in 1971, based on a cadastral map, real estate transactions are administered by one single decentralized organization comprising 20 regional and 119 district land offices.
It operates under the control of the competent ministry. The land registry offices are responsible for land surveying, map database maintenance, and data provision, as well as for maintaining the land register, processing registration applications, and dealing with land protection, land certification, and land use matters relating to agricultural lands. Land registration has been operating as an electronic system since 1997, based on a digital base map finished in 2007 and containing all real estate in Hungary. Decisions taken in land registry procedures are subject to judicial appeal, within the competence of Hungary’s ordinary court system. The title-based integrated land registration system established in Hungary was the first in Europe and is widely recognized by professionals and investors as well. The data of the title sheets can be obtained even electronically by anyone at a low cost in a few minutes either on paper or an authenticated electronic format.
The rules of the land registration procedure have been extensively changed – most recently in 1997. The upcoming amendment on October 1, 2024, is no less relevant and will bring significant changes for both the legal profession and those involved in real estate transactions. We believe that the new procedural rules will make real estate investments even more attractive to both domestic and foreign investors.
The most important element of the current amendment is the full digitalization of land registration procedures. The paper-based procedure, which creates a significant administrative and logistical burden, will be replaced by a more efficient and faster electronic procedure based on electronic documents from beginning to end. Nowadays, in more complex legal transactions, it can be a significant cost and take significant time to obtain all required paper-based documents, applications need to be submitted personally (with a few exceptions), and a further disadvantage is that the archives can only be inspected physically at the land registry office where the documents are kept.
Beyond reducing administrative costs, the electronic procedure will also significantly speed up registrations, simplify the administration, and allow for quick and convenient inspection of the archives, increasing Hungary’s competitiveness in the field of real estate investment.
In the new procedure, registration consent (as a basis of registration) must be issued as an electronic document. Similar to the power of attorney, it will have to be created in an electronic form and will have to be signed before the attorney, legal counsel, or notary with a qualified electronic signature. One will not be prevented from signing contracts on paper, but these will need to be converted into an electronic document by the legal representative, while the registration consent will still be granted only with an electronic signature. From October 2024, all documents for land registration purposes will require the verifying signature of an attorney or legal counsel.
As a further feature, the land registry will communicate via a direct link with other electronic registries, such as the personal data and address databases and the trade registry. This will allow, for example, for changes in the registered data (e.g., the registered office of a mortgagee) to be automatically updated without any additional cost or procedure.
One of the greatest features is the instant display of applications on the title sheet, which may be submitted even during weekends or on public holidays. The order of applications is then easily identified. Additionally, it has a feature for so-called “automatic decision-making,” which, in the simplest of cases, will result in the registration of a title or a mortgage within 24 hours.
The new procedural rules will not concern the essence of the substantive law, but it is worth mentioning that title retention will be recodified considering the experiences and practice of the last decades, providing more comfort in similar transactions.
Finally, there will be several welcomed changes in terms of professional regulations. Only those attorneys and counsels who have attended and passed training courses organized by the Hungarian Bar Association and have a higher level of liability insurance will be qualified to act in real estate registry proceedings. After many years of preparation, the introduction of the electronic real estate registration procedure seems to become a reality this year, and even though we see some uncertainties relating to the practical implementation, we are convinced that the investors will appreciate it as much as the legal profession.
By Levente Kalman, Partner, Szabo Kelemen & Partners Andersen Attorneys
This article was originally published in Issue 11.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
