HUNGARY Law and Practice Contributed by: Attila Ungár and Júlia Várkonyi, Lakatos, Köves & Partners
months to one or two years, whereas judicial enforcement may take one to three years or more. Out-of-court sales by the security holder may take between six and 12 months. The ranking of mortgages over real estate depends on the time of registration (principle of priority). Additional steps to give priority to a lender’s mortgage are not required. The sale of certain property (eg, listed buildings) may be subject to pre-emption rights, including on enforcement. A special regime was introduced in Hungary as a response to the COVID-19 pandemic, before being reintroduced as a response to the war in Ukraine. Under this regime, certain restrictions were imposed on a lender’s ability to foreclose or realise on collateral in real estate lending, includ - ing the following. • If the lender is considered a “foreign inves - tor” (see 2.11 Legal Restrictions on Foreign Investors ) at the time of a potential future enforcement scenario involving the sale/ acquisition of property-holding entities considered “strategic” within the meaning of applicable Hungarian FDI regulations, the sale/acquisition is required to be notified and acknowledged by the competent minister. • Generally, private real estate may not be repossessed between 15 November and 30 April. 3.7 Subordinating Existing Debt to Newly Created Debt Generally, existing debt can be subordinated to newly created debt by way of an agreement between the relevant creditors and the obligor. In the case of secured debts, the relevant security register must reflect the subordination, which
usually requires the co-operation of the lenders and the obligors. 3.8 Lenders’ Liability Under Environmental Laws Generally, the polluter is liable for contamina - tion. If the polluter cannot be identified, there is a residual liability for the owner of the real estate. Secured creditors holding or enforcing security over real estate cannot be held liable under envi - ronmental laws solely owing to their position as beneficiary of the security. In the unlikely event that the secured creditor caused the pollution or acquires the real estate itself in the course of enforcement proceedings, said creditor may incur liability. 3.9 Effects of a Borrower Becoming Insolvent The creditor and liquidator of an insolvent com - pany can challenge transactions concluded dur - ing “suspect periods” leading to the insolvency on the basis that they are: • fraudulent transactions concluded fewer than five years before the start of insolvency proceedings; • transactions at an undervalue concluded fewer than three years before the start of insolvency proceedings; • transactions preferential to a specific creditor (or group of creditors) concluded fewer than 90 days before the start of insolvency pro - ceedings; or • transactions benefiting a creditor concluded fewer than three years before the start of insolvency proceedings where that credi - tor has failed to adequately account for any surplus of proceeds received from collateral provided to that creditor.
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