HUNGARY Law and Practice Contributed by: Attila Ungár and Júlia Várkonyi, Lakatos, Köves & Partners
Engineering, procurement and construction management (EPCM) agreements are also com - mon, whereby the project manager is responsi - ble for the co-ordination of the entire construc - tion project (often including the design), although the main responsibilities remain with the con - struction contractor or other (sub)contractors. 7.3 Management of Construction Risk Limitation of liability clauses, contractual warran - ties, various forms of insurance, liquidated dam - ages and parent company or bank guarantees covering performance and maintenance periods are commonly used to manage construction risks. In addition to any contractual warranties/ guarantees, statutory minimum warranty/guar - antee periods apply to different types of built-in materials/superstructures. 7.4 Management of Schedule-Related Risk The tools most commonly used to manage schedule-related risk are: • delay penalties (or liquidated damages); and • withholding certain amounts (from the con - tract price based on achieving project mile - stones by the deadline). These are typically supplemented with a provi - sion that the owner is entitled to claim damages exceeding the amount of the penalty. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance Parent company guarantees and bank guar - antees are commonly used to guarantee con - tractors’ performance. It is also typical for the contractor to replace the withheld contract price with an equivalent amount of bank guarantee.
A construction trustee regime is applicable above certain construction value thresholds, which aims to ensure due payment within all levels of the construction chain (ie, the owner shall advance the contract price for the respec - tive phases to the trustee, to be released upon certification of due performance). Another form of security can be a performance warranty, based on which a particular percent (usually 5% or 10%) is withheld from the amount of every contractor’s invoice. Such amounts shall be released only if certain requirements are fulfilled by the contractor (eg, the issuance of all required permits). 7.6 Liens or Encumbrances in the Event of Non-payment Contractors have a statutory lien up to the amount of the outstanding contract price and costs over the assets of the owner that are pos - sessed by the contractor within the scope of the construction agreement. The contractor is not entitled to encumber the property – rather, only the tangible assets of the owner. The lien is removed automatically if the contractor’s claims are settled. 7.7 Requirements Before Use or Inhabitation A structure may only be occupied if the com - petent authority has issued a final and binding occupancy permit verifying that such structure is suitable for safe and intended use and has been built in line with the building permit.
8. Tax 8.1 VAT and Sales Tax
Generally, the sale and purchase of real estate is VAT exempt. The seller can opt to apply VAT to
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