Buying or selling real estate in Hungary is a private agreement between a seller(s) and a purchaser(s). The process is governed by strict form and content requirements and overlooking them may easily put the entire transaction at risk. Understanding these rules in detail — from formal signatures and escrow arrangements to the special restrictions applying to agricultural land — is the key to ensuring that every property transfer is not only valid on paper, but also secure and enforceable in practice.
The Formal Requirements
In Hungary, the sale and purchase of real estate is subject to strict formal requirements. The contract must always be concluded in writing and countersigned by an attorney or notarized, as this is the only way the new ownership becomes suitable for registration by the respective Land Registry. Each page has to be numbered consecutively and initialed by the parties as well as the attorney, ensuring authenticity and legal certainty. The property must also be identified with complete precision, including the topographical lot number, address, outer area or inner area,and the category of the property (e.g. agricultural land, flat or vineyard). In addition, the parties themselves must also be clearly identified with their full personal details, and the contract must specify both the exact ownership share being transferred and the purchase price. Finally, the seller is required to make an explicit declaration granting consent for the buyer’s ownership to be entered into the Land Registry (in the contract or in a separate declaration), without which the transfer cannot take legal effect. The registration authorisation referred to above will be described in more detail below.
The Title Deed – Reading Between the Lines
The title deed is the central document of any property transaction in Hungary, as it provides authoritative evidence of both ownership and existing encumbrances and other important information. Beyond confirming who the registered owner is, it also reveals mortgages, easements, rights of first refusal, enforcement rights and other burdens that may significantly limit the free and clear transfer of the property. Since the ultimate aim of most transactions is to acquire the property free of any encumbrances, careful examination of the title deed is an indispensable part of the due diligence. If the title deed shows existing encumbrances, the sale and purchase agreement must set out in detail both the procedure and the financial conditions for their removal. In practice, this means expressly stipulating the sums earmarked for discharge and the specific method by which the encumbrances will be released. Under Hungarian legal practice, it is ordinarily the seller who bears the responsibility to arrange for the deletion of all such burdens, thereby ensuring that the buyer acquires clear and unencumbered title upon registration. It is possible that certain amount of the purchase price is transferred by the buyer directly to a bank holding a mortgage over the property, so that the bank can issue the deletion consent. Nevertheless, it is the buyer, who is in touch with the bank coordinating the deletion of the mortgage from the title deed.
Safeguards for the Buyer: Escrow and Registration Authorisation
From the buyer’s perspective, one of the greatest risks in any real estate transaction lies in paying the purchase price without adequate assurance that ownership will, in fact, be transferred free of encumbrances. To mitigate this risk, Hungarian practice relies heavily on escrow arrangements and the careful use of registration consents.
In simpler cases, the parties may choose simultaneous performance: the purchase price is paid in one installment with the attorney filing subsequently (but without delay)- the registration authorisation for the transfer of ownership with the respective Land Registry. This model minimizes exposure, as payment and submission may occur on the same day. However, many transactions are more complex, particularly where encumbrances must be removed or third-party consents obtained before the buyer’s ownership can be registered. The so-called buyer’s right may be registered on the title deed pursuant to a separate registration consent included in the contract. Once the property has been cleared of all encumbrances, all closing conditions are met, and the full purchase price has been paid, the final registration consent for ownership transfer is submitted to the Land Registry, enabling the buyer’s ownership title to be recorded free of burdens. The aforementioned ownership registration authorisations are usually placed in document escrow with the countersigning attorney, and releasing them only when all preconditions, such as the deletion of encumbrances, have been duly satisfied and properly verified to the escrow agent (attorney).
The escrow mechanism offers a balanced safeguard: the seller is reassured that the buyer’s funds are available, while the buyer gains certainty that their money will only be transferred to the seller once clear title of ownership and transfer of possession is guaranteed. Typically, the escrow agreement itself is drawn up as a separate private deed with full probative force, even without the attorney’s countersignature, ensuring that the terms of release are legally binding. In this way, escrow and registration consents together serve as the buyer’s strongest instruments for securing both financial protection and legal certainty throughout the transaction.
Legal Framework of Payment and Liability in Real Estate Sales
In Hungarian real estate contracts, one of the key financial questions is whether the initial payment qualifies as a deposit (in Hungarian: “foglaló”) or merely as an advance. Although the amounts may look the same, their legal effect is different. A deposit has a sanctioning function under the Hungarian Civil Code: if the seller defaults, the buyer may reclaim double, while if the buyer fails, the deposit is forfeited. An advance, on the other hand, is simply credited towards the purchase price and refunded, if the contract does not take effect. To provide both sides with security, it is common practice to handle these sums through the attorney’s escrow account, which is subject to strict statutory rules and ensures that funds are only released once contractual conditions have been met.
Alongside financial arrangements, liability and warranties also play a central role. The general principle is that property is transferred “as seen,” which limits the seller’s responsibility for defects. However, depending on the nature of the property and the bargaining power of the parties, additional assurances may be negotiated.
In Hungarian real estate transactions, legal certainty is built on a combination of strict formal requirements, carefully regulated financial arrangements, and enforceable liability rules. From deposits and escrow accounts to the management of encumbrances, each mechanism is designed to balance the interests of buyer and seller alike. Properly applied, these safeguards ensure that ownership is transferred not only validly, but also securely and predictably.