HUNGARY Law and Practice Contributed by: Attila Ungár and Júlia Várkonyi, Lakatos, Köves & Partners
Only natural persons may acquire agricultural land; the acquisition of such land by foreigners (who are not citizens of the EU or the EEA) is excluded. The Hungarian foreign direct investment (FDI) regime focuses on the origin of the investor and the activities of the Hungarian target companies. Foreign investors are investors that are registered outside the EU, the EEA or Switzerland, or that are controlled by an entity registered in a country outside the EU, the EEA or Switzerland. The Hungarian FDI regime is drafted in a way that covers as many transactions as it reasonably can. The applicable FDI laws are vague and often confusing, which makes it difficult in certain situations to decide whether a transaction is subject to the mandatory screening. A new rule was introduced in January 2024, entitling the Hungarian State to exercise pre-emption rights in transactions involving solar power plants. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate The acquisition of commercial real estate is financed with both debt and equity. Typical debt financ - ing instruments are bank loans. Portfolios are often financed with syndicated loans or bond issues. Inter - company loans are often provided for equity financing purposes. Usually, intercompany loans are expected to be subordinated to external creditors. 3.2 Typical Security Created by Commercial Investors The typical security package for commercial real estate consists of: • a registered charge over real property or (particu - larly in cases of green investments) over building right created in respect of a real property (prohibi - tion on alienation and encumbrance is also usu - ally registered and, depending on their approach to enforcement, lenders often also request a call option right in respect of the property);
• a charge over ownership rights in the property holding company (prohibition on alienation and encumbrance is also usually registered); • a charge or security assignment of significant receivables (eg, claims under acquisition agree - ments, lease agreements, insurance); • full security over bank accounts (usually a bank account charge combined with a security deposit); • a charge over assets (over specific assets or all unregistered assets of the property holding com - pany); and • guarantees by sponsors. Securities and encumbrances should be registered with the appropriate Hungarian registers (eg, land register, company register or security interest regis - ter maintained by the Chamber of Hungarian Public Notaries) in order to be effective against third parties. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders Lending (and taking security for loans) is a regulated activity if conducted in a “businesslike manner”. Lend - ers holding a licence elsewhere in the EEA can pass - port such licence into Hungary. As the financial regu - latory authority, the Hungarian National Bank holds a public register of financial institutions licensed in – or passported into – Hungary. No general restrictions apply for granting security over real estate to foreign entities, nor are there any spe - cific restrictions on debt repayment to foreign lenders. However, limitations and restrictions can apply in: • charges over certain types of land (eg, agricultural land and forests); or • mortgages over “indispensable” assets owned by companies that are considered to be “strategic” under applicable Hungarian FDI regulations (in which case, notification to and acknowledgement by the competent minister might be required). 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Notarial fees and registration charges are payable in connection with the notarisation and registration of security documents. Fees and taxes are also payable in connection with enforcement procedures.
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