Limitations to Foreigners

1. Are there in your national system any limitations to foreigner citizens or foreign companies/companies controlled by foreign citizens regarding the acquisition of immovable properties? If yes:

1.1. Which legal regulations regulate in your country the prohibitions or limitations for foreigners’ acquisitions in case of transfer of property? Please specify the legal regulation and/or the range of the regulation that contains the prohibition.

Subsection (1) of the Section 40 of the Act CXLI of 1997 on Real Estate Registration: main procedural regulations;

• FVM Decree 109/1999. (XII. 29.) on the implementation of the Act CXLI of 1997 on Real Estate Registration: detailed regulations about land registration proceeding;
• Section 44 of the Act CL of 2016 on General Public Administration Procedures: general procedural regulations;
• Section 1/A of the Act LXXVIII of 1993 on the Lease and Alienation of Apartments and Premises: regulation about permission to transfer of property (non-agricultural/forestry lands)
• Government Decree 251/2014 (X. 2.) on the Acquisition by Foreigners of Real Estate Other Than Agricultural and Forestry Land: detailed regulations about permission to transfer of property (non-agricultural/forestry lands);
• Subsection (1) of the Section 9 of the Act CXXII of 2013 on Transactions in Agricultural and Forestry Land: prohibition regulation on rural/agricultural/forestry lands;

1.2. What do these limitations consist of?

I. According to the Subsection (2) of the Section 1/A of the Act LXXVIII of 1993 on the lease and alienation of apartments and premises: A foreign legal entity or a foreign natural person may acquire the property with the permission of the capital and county government office where the concrete property is located.

II. According to the Subsection (1) of the Section 9 of the Act CXXII of 2013 on Transactions in Agricultural and Forestry Land: Ownership of land may not be acquired by: a) third-country natural persons; b) foreign states, including their provinces, local authorities, and the bodies thereof; c) legal persons, except as provided for in this Act. The “third-country natural person” shall mean any person who is not an EU national.

Approval of the agricultural administration body:

a) Approval of the contract of sale by the competent authority. Check and/or examine the contract of sale initially for compliance with conditions for validity and entry into effect, based solely on their content and formal requirements;
b) Approval by the competent authority of contracts for the transfer of ownership right by ways other than sale, and for the acquisition of ownership rights by means other than transfer, and acquisitions by way of exercising the option to buy. E.g.: in the case of an exchange, adverse possession etc.
c) Contracts on the transfer of ownership rights for which the approval of the competent authority is not required. E.g.: Approval by the agricultural administration body is not required for the transfer of ownership of land by way of a gift, for transactions of ownership between close relatives.

1.3. Do these limitations apply to any foreign citizen, regardless their nationality, or only to non-EU Members national citizens?

Basically the limitations apply to non-EU Members national citizens. All foreign natural persons and legal entities need a permit to acquire land or real estate. See below for exceptions.

Exceptions to the general rule of the Act LXXVIII of 1993:

(1) EU Members’ national citizens, legal entities, entities without legal personality,
(2) European Free Trade Association (EFTA) nations: Iceland, Liechtenstein, and Norway (national citizens, legal entities, entities without legal personality)
(3) Switzerland’s national citizen,
(4) Dual citizenship: if one of the person’s citizenships is Hungarian or an EU member state, and the acquisition of ownership of real estate by Hungarian citizens living abroad,
(5) Inheritance,
(6) Acquisition of ownership of real estate of persons with refugee status and beneficiaries of subsidiary protection.

Exceptions to the general rule of the Act CXXII of 2013 on Transactions in Agricultural and Forestry Land: unless otherwise provided for in this Act, ownership of land may be acquired by domestic natural persons and EU nationals. The “domestic natural person” shall mean Hungarian nationals; The “EU national” shall mean a national of any Member State of the European Union, a person holding a citizenship in a Member State that is a party to the Agreement on the European Economic Area, and the nationals of other States enjoying similar treatment under international agreement, excluding domestic natural persons.

1.4. Do these limitations have?

• A defensive/protective purpose
• An economic purpose
• «Both economic and defensive/protective purposes»
• Other purposes (please specify)

2. To which kind of land registry unit do these limitations apply? (Example: only land plots, only rural areas, only foreign borders, dwellings and homes, other buildings?

As a general rule, both apartments and other premises, as well as agricultural lands (in terminology of Hungary’s law), have limitations to foreigner citizens or foreign companies. There are several exceptions to the general rule. As it was seen in Answer 1.2 and Answer 1.3.  Stricter rules and special conditions (see in Answer 3. Agricultural lands) apply to land plots and rural areas (or agricultural lands).

3. To which kind of transfers or burdens do these limitations apply? (Example: to every transfer, non-free transfers, differently in case of inheritance than in case of purchase, mortgages in favor of foreigners….)

Apartments and premises: only the transfers of ownership

The sales contract is subject to the permission of the Capital or County Government Office. Sales contract means any contract under which the seller undertakes to transfer the ownership of a thing to the buyer, and the buyer undertakes to pay the price thereof, and to take possession of the thing. The registration of the mortgage in the Land Register is free of Government Office’s permission.

Agricultural Lands: only the transfers of ownership

Ownership acquisition rights shall exist on condition that the acquiring party undertakes in the contract for the transfer of ownership not to permit third-party use of the land, and to use the land himself, and in that context to fulfill the obligation of land use, and agrees not to use the land for other purposes for a period of five years from the time of acquisition, and having no outstanding fee or other debt owed in connection with land use. The ownership acquisition requires that the buyer has a “farmer” qualification. Size limitation of lands owned and all lands kept in possession: Land acquisition limit: 300 hectares; land possession limit: 1,200 hectares. The land possession limit in the case of operators of animal farms and producers of seeds for varieties of agricultural and horticultural plant species shall be 1,800 hectares (preferential land possession limit).

4. Apart from the previous limitation to acquisition of property by foreigners, are there any other measures at your country relevant for this topic? (Example: pre-emption rights in case of purchase un favor of a foreigner, social or residential measures bases on nationality and non in residential permits….)

No.

5. To what extent the land registrars’ controls in a deed of transfer the prohibitions imposed to foreigners to acquire land and buildings in your country?

Comment: The land registry as authority only examines the existence of the permission required for land/property acquisition. The authorization procedures are the responsibility of other authorities.

5.1. Do you only check if the transfer administrative authorization requirement is met, or do you also confirm that the authorization is valid? For example, do you consider property type, like rural or forestry classification, which might limit foreign transfers? Or do you verify the percentage of foreign land ownership in a specific area, especially if there are restrictions on the number of buyers or land size?

According to the Subsection (2) of the Section 1/A of the Act LXXVIII of 1993 on the lease and alienation of apartments and premises: A foreign legal entity or a foreign natural person may acquire the property with the permission of the capital and county government office where the concrete property is located. Exceptions to this general rule: EU Members’ national citizens, legal entities, entities without legal personality. If the permission is required for the property transfer, the land registrars only check transfer administrative authorization requirement (the existence of the permission and its content include the buyer’s personal data and land register reference number).

5.2. What would happen if an authorization were needed, and it does not come with the title submitted for registration?

If the permission is not submitted, during the land registration proceeding, the land registrars take an interim measure (official call). That means, if the application is not in compliance with the requirements (missing the authorization) provided for by law, the competent authority (land registrars) shall advise the applicant on one occasion to remedy the deficiencies within the prescribed time limit, indicating also the legal consequences of non-compliance. The proceedings shall be terminated if the missing information on account of which the change cannot be registered is not provided within the time frame specified.

5.3. What would happen in case a deed of inheritance in favor of a foreigner transfers property over land or buildings subject to limitations for foreigners’ acquisitions in your country?

Neither Act of LXXVIII of 1993 on the lease and alienation of apartments and premises, nor Act CXXII of 2013 on Transactions in Agricultural and Forestry Land does not apply to deed of inheritance. In cases of inheritance, a permission is not required and there is not limitations.

5.4. If the states have preemption right in case of transfer, would you reject the registration if no notification to the state to enhanced it right is done?

The Hungarian laws don’t make difference between the preemption rights of the state, and other entitled (for example preemption rights of co-owner). If somebody has preemption right and the land register office does not find his/her statement among the submitted documents, than the authority takes an interim measure. (See remedying deficiencies Answer 5.2). If the document is available in case and/or it is proven that the state does not exercise its preemption right, then the registration cannot be rejected.

6. Do you expect any legal modifications on this issue?

Essentially none. Technical modifications only.