HUNGARY Law and Practice Contributed by: Attila Ungár and Júlia Várkonyi, Lakatos, Köves & Partners
Effecting Lawful and Proper Transfer of Title regarding the use of title and W&I insurance. 2.6 Important Areas of Law for Investors The most important areas of law for investors are property law, construction law, local zon - ing laws, tax laws and environmental laws. For restrictions on foreign investors, please see 2.11 Legal Restrictions on Foreign Investors . 2.7 Soil Pollution or Environmental Contamination In accordance with the “polluter pays” principle, the person causing the environmental damage is liable for such damage. However, the current owner of the property may also be considered responsible for the environmental damage, alongside the person who actually causes the pollution. The owner may excuse itself by nam - ing the person (eg, previous owner, tenant) who actually caused the pollution, but this is difficult to prove. In order to avoid difficulties of proof, appropri - ate warranties are necessary, under which the seller declares that, to its knowledge, there are no toxic materials or environmentally hazardous substances, explosives or similar materials on or under the surface of the property. The buyer of the property typically seeks to exclude its liability for pollution that occurred prior to the acquisi - tion. 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law Local building regulations, including zoning plans, are publicly available from the ordinances of local municipalities. Potential purchasers are expected to check such databases to ensure compatibility with their development plans.
The law allows investors to enter into a town set - tlement agreement with municipalities, in which the latter can even undertake to change the local building regulation to fit the needs of the project. Such agreements are considered private law/ commercial matters and cannot predetermine public law matters such as the approval of build - ing permits, which must comply with construc - tion norms in all cases. 2.9 Condemnation, Expropriation or Compulsory Purchase Ownership of real estate may be acquired by the state or the local municipality – or by a third party – if it acts in the public interest for the pur - poses specified by law in exceptional circum - stances for public use, against immediate, full and unconditional compensation. 2.10 Taxes Applicable to a Transaction Transfer Tax Generally, the sale and purchase of real estate is subject to transfer tax, payable by the purchaser. The general tax rate is 4% on up to HUF1 billion of the market value of the real estate and 2% on the excess. However, the total payable transfer tax is capped at HUF200 million per real estate. Similarly, transfer tax should be payable by the purchaser of shares in a real estate holding com - pany if said purchaser’s ownership ratio reaches 75% of the company’s total shares. This thresh - old includes the shares of related parties and close relatives. The amount of transfer tax should be calculated separately in relation to each real estate asset held by the company. A “real estate holding company” is a company whose total assets in the balance sheet are made up of 75% or more of Hungarian real estate or an entity that owns more than a 75% participation, directly or indirectly, in a company fulfilling such condition.
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