HUNGARY Law and Practice Contributed by: Attila Ungár and Júlia Várkonyi, Lakatos, Köves & Partners
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
Hungarian Public Notaries) in order to be effec - tive against third parties. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders Lending (and taking security for loans) is a regu - lated activity if conducted in “businesslike man - ner” . Lenders holding a licence elsewhere in the EEA can passport such licence into Hungary. As the financial regulatory authority, the Hungarian National Bank holds a public register of finan - cial institutions licensed in – or passported into – Hungary. No general restrictions apply for granting secu - rity over real estate to foreign entities, nor are there any specific restrictions on debt repay - ment to foreign lenders. However, limitations and restrictions can apply in: • charges over certain types of land (eg, agri - cultural 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 pay - able in connection with the notarisation and reg - istration of security documents. Fees and taxes are also payable in connection with enforcement procedures. 3.5 Legal Requirements Before an Entity Can Give Valid Security The legal requirement to provide valid security must be considered on a case-by-case basis.
The acquisition of commercial real estate is financed with both debt and equity. Typical debt financing instruments are bank loans. Portfolios are often financed with syndicated loans or bond issues. Intercompany loans are often provided for equity financing purposes. Usually, intercom - pany 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 the property (prohibi - tion on alienation and encumbrance is also usually 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 agreements, lease agreements, insurance); • full security over bank accounts (usually a bank account charge combined with a secu - rity deposit); • a charge over assets (over specific assets or all unregistered assets of the property holding company); and • guarantees by sponsors. Securities and encumbrances should be regis - tered with the appropriate Hungarian registers (eg, land register, company register or security interest register maintained by the Chamber of
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