Understand the Adásvételi Szerződés

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When it comes to buying real estate in Hungary, making sure you fully grasp the property sales contract is essential.

Indeed, not fully understanding the document you will sign can lead to financial losses, including the forfeiture of deposits, payment of penalties, unexpected costs, legal expenses, and potential poor investment decisions.

We've heard countless stories of people making costly mistakes when signing their property agreement in Hungary. We want to help you avoid the same experience.

We'll give here a very brief overview regarding the property sales contract in Hungary ; if you want a full checklist, please check our property pack for Hungary.

What is the Adásvételi Szerződés in Hungary?

In Hungary, the property purchase agreement, known locally as "Adásvételi Szerződés," is a crucial document in real estate transactions.

This agreement is a legally binding contract between the buyer and seller, outlining the terms and conditions of the property sale.

The agreement typically includes details like the property's description, purchase price, payment terms, and any other conditions agreed upon by both parties. It's essential for protecting the interests of both the buyer and seller.

For the buyer, it serves as a guarantee that the property will be transferred to their name after fulfilling the payment obligations.

For the seller, it ensures that they receive the agreed-upon payment for their property.

Regarding international buyers or non-residents, there are no specific regulations in the property purchase agreement itself.

However, non-residents may need to obtain permission from the competent administrative authority before purchasing certain types of real estate, particularly agricultural land.

You usually sign the property purchase agreement during the later stages of the property buying process, typically after you've found a property you're interested in and have negotiated the terms with the seller.

A deposit is often required as part of the agreement. This deposit, usually a percentage of the purchase price, serves as a sign of good faith and commitment to the transaction. The exact amount can vary, but it's commonly around 10% of the purchase price.

The process in Hungary may differ from other countries in aspects like the requirement for administrative permission for non-residents and specific regulations regarding the purchase of agricultural land.

Also, the legal requirements for the content and form of the agreement might vary, emphasizing the importance of understanding and adhering to local laws and customs in real estate transactions.

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What should be included in the property purchase agreement in Hungary?

In Hungary, the property purchase agreement, or "Adásvételi Szerződés," must adhere to specific requirements outlined in the Hungarian Civil Code (Polgári Törvénykönyv).

This agreement is a key legal document in any real estate transaction, and it's vital to ensure that it contains all necessary elements to be legally binding and effective.

Here are the mandatory clauses in the agreement typically include:

Here are additional clauses that are commonly included cover aspects like:

- Terms defining penalties if either party fails to fulfill their obligations.

- Circumstances under which the agreement can be terminated.

- Methods for resolving any disputes that might arise from the transaction.

Conditions or contingencies can also be part of the agreement.

These might include:

- The purchase might be contingent on the buyer securing a mortgage.

- Allowing the buyer to have the property inspected and possibly renegotiate or withdraw based on the findings.

- The buyer's obligation to purchase may depend on them selling their current home.

In Hungary, for the property purchase agreement to be fully enforceable, it must be authenticated. This is typically done by a notary (közjegyző).

The notary's role is to ensure the agreement complies with Hungarian law and that all parties understand their obligations.

Real estate agents in Hungary play a significant role in the buying and selling process, but they are not directly involved in the legal aspects of the agreement. Their primary role is to facilitate the transaction by helping to find properties, negotiate terms, and provide guidance on the process.

However, they do not have the legal authority to authenticate the agreement; this is the notary's responsibility.

What's the signing process like?

In Hungary, the signing process of the property purchase agreement, or "Adásvételi Szerződés," in a real estate transaction involves several specific steps and requirements.

Firstly, the agreement is bilateral, meaning it requires the signatures of both the buyer and the seller.

It's quite common for either party to consist of multiple people, like a couple buying a home together or a property being sold by multiple heirs. In such cases, all individuals involved must sign the agreement.

Both parties need to provide certain documents and information for the agreement.

The seller typically needs to present proof of ownership, such as a title deed, and any relevant details about the property (e.g., size, location, any encumbrances).

The buyer, on the other hand, should provide personal identification and, if applicable, proof of financing or mortgage approval.

Regarding the signing process, here's a general timeline:

There isn't a fixed deadline for signing the property purchase agreement in general; it's usually determined by the agreement terms set by the parties involved.

However, once signed, the agreement is binding unless specific contingencies allow for cancellation.

The duration during which the contract is valid is also determined by the terms within it. Most agreements include a closing date by which all conditions must be met and the sale completed.

After signing, the agreement must be registered with local Hungarian authorities, specifically the land registry office, to legally transfer ownership. This registration is crucial as it makes the change in ownership public and legally binding.

Amendments to the contract after signing are typically not allowed unless both parties agree to the changes. Such amendments would also need to be in writing and signed by both parties, often requiring additional notarization.

The typical timeframe for completing all necessary paperwork and approvals after signing can vary.

It usually takes several weeks to a few months, depending on the complexity of the transaction, the efficiency of the local authorities, and whether there are any issues or disputes that arise.

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How is the payment handled when signing a property purchase contract in Hungary?

In Hungary, the financial aspects of a property purchase agreement are crucial for both the buyer and the seller to understand.

When you sign the sales agreement, you typically need to pay a down payment.

The amount of this down payment can vary, but it's commonly around 10% to 20% of the property's purchase price. This percentage isn't fixed by law and can be negotiated between the buyer and the seller.

There are usually upfront fees or costs associated with signing the sales agreement.

These can include legal fees, notary fees, and possibly real estate agent fees, depending on your arrangement. These fees vary based on the property's value, the complexity of the transaction, and the professionals involved.

The payment is typically made to an escrow account rather than directly to the seller. This account is managed by a neutral third party, like a notary or attorney, ensuring that the funds are secure until the transaction's terms are met.

The payment's due date depends on the agreement terms.

Usually, the down payment is due at the time of signing the agreement, with the remainder of the purchase price paid at a later date, typically upon completion of the property transfer.

Regarding tax implications, there is a property transfer tax in Hungary, which is generally the buyer's responsibility. This tax is based on the property's value and must be considered in your overall budget.

You can negotiate the down payment amount with the seller.

However, the seller's willingness to negotiate will depend on factors like market conditions and their own financial requirements.

If the sale falls through, the fate of the down payment depends on the agreement's terms.

Generally, if the buyer backs out without a legally valid reason (like a failed inspection or financing contingency), the down payment may be forfeited. If the sale falls through due to a contingency outlined in the agreement, the down payment is typically refundable.

Using a mortgage loan for the down payment is generally not possible, as the down payment is meant to be an upfront demonstration of your financial commitment. It usually needs to come from your personal funds.

The role of an attorney or real estate agent in handling the payment process varies. They may help facilitate the transaction, ensure proper documentation, and manage the escrow account, but they don't directly handle the funds.

You should definitely request a receipt or confirmation of payment when you make the down payment. This serves as proof of your compliance with the agreement's terms.

For tax implications, the seller may be subject to capital gains tax depending on the sale's circumstances.

As the buyer, your primary tax concern is the property transfer tax.

It's important for both parties to consider these taxes when negotiating the sale price and finalizing the agreement.

What are the potentials risks and pitfalls?

You might be interested in reading our article about the common risks and pitfalls surrounding a property transaction in Hungary.

Understanding the risks and pitfalls associated with a property purchase agreement in Hungary is essential for both buyers and sellers.

Withdrawal from the agreement is possible, but the conditions under which either the buyer or seller can withdraw are typically stipulated in the agreement itself.

There isn't a universally mandated "cooling-off" period in Hungarian real estate law. If such a period is to be included, it must be specifically negotiated and written into the contract. The inclusion of weekends or holidays in this period would also depend on the agreement's terms.

The need for a valid motive for withdrawal depends on the contract's stipulations.

If a buyer wishes to back out due to an inability to secure financing, this would generally need to be addressed as a contingency within the agreement

If such a contingency is not included, and the buyer still fails to secure financing, they might lose their deposit or face other penalties as agreed upon in the contract.

If one party fails to fulfill their obligations outlined in the contract, the consequences depend on the agreement's terms. Penalties can range from the forfeiture of the deposit to legal action for breach of contract.

In cases where the buyer has already made a payment but the seller fails to comply, the buyer may seek legal remedies to either enforce the contract or recover their money.

Comparing this process to real estate transactions in other countries, the specifics can vary significantly. For example, in some jurisdictions, there are legally mandated cooling-off periods, more stringent disclosure requirements, or different approaches to handling deposits and breaches of contract.

Here are the potential risks and pitfalls in Hungary include:

- Misrepresentation of the property's condition or legal status.

- Failure to identify and agree upon contingencies in the contract.

- Inadequate understanding of the financial implications, including taxes and fees.

Disputes during real estate transactions, while not extremely common, can arise. They are typically resolved through negotiation between the parties or, if necessary, through legal proceedings. The nature of these disputes can range from disagreements over property boundaries to issues with the property's condition discovered post-signing.

The process for resolving disputes usually involves first trying to reach a mutually agreeable solution. If this fails, parties may need to resort to mediation, arbitration, or, as a last resort, litigation.

If defects or issues with the property are discovered after signing but before the final transfer of ownership, the buyer may have recourse depending on the contract's terms and the nature of the defects.

In some cases, this might involve renegotiating the sale terms, or the buyer could potentially withdraw from the agreement, especially if the seller misrepresented the property's condition.

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.