For a foreign investor who wants to purchase real estate in Budapest there are two ways to proceed:
- The buyer can apply for a permit as a private person, which means submitting an application to the local authorities to acquire the properties(s). The costs associated with the procedure is approximately € 250
- Foreign buyers can establish a local Hungarian company, usually a limited liability company. This is preferable if the purchaser wishes to acquire multiple properties.
Acquisition of Real Estate by a Business Venture
The advantage of buying property through a company is that all expenses relating to the apartment can be written off (e.g.) travel, accommodation, legal & agency fees, purchase (stamp) duty, renovation costs, furniture, utilities, and all associated services, including the interest on loans. Under this approach, the company can be sold along with the property, which makes it attractive for future buyers, as no purchase stamp duty needs to be paid. The only disadvantage is that the company shall require an accountant and need to submit annual reports.
Establishing a company in Hungary is a routine procedure, which can be arranged within a day. The basic procedure is as follows:
- The company's Articles of Association needs to be signed in front of a lawyer*.
- The lawyer will also need the name of the new company, its seat, the personal data of the owner(s) and designation of a delivery agent for official documents. The founding capital of a limited liability Company is HUF 3m. or Euro 12, 000 - this amount can be applied to the purchase of the property.
- After the Articles of Association are prepared, specimens of signature need to be signed in front of a public notary, then a bank account must be opened.
- Then all the documents, forms, authorizations and invoices must go to an accountant who will take care of all the administration and prepare the required reports.
Acquisition of Real Estate by Private Individuals
To buy a property in Hungary is straightforward and will require the following:
- Appointing a Hungarian legal representative and paying in the initial deposit of Euro 1000 to 2000/property
- Going to a notary public and certifying the buyer's identity to initiate the permit approval process. If the permit is refused (which is a remote possibility) establishing a company is the next suggested option. The issue with the public notary can be done at any Hungarian embassy or consulate but opening hours vary and the price abroad for this service is much higher than doing it locally. The cost associated with the procedure is approximately € 250.
- Signing the purchase-sale agreement can be taken care of in your home country if time is an issue whereby the agreement is signed by yourself, notarised at the Embassy and then mailed / DHL'd to your local legal representative.
You can also have your purchase sale agreement signed in Hungary or you can appoint a proxy. In this case you either sign the Power of Attorney in front of your legal representative while you are in Hungary, or in your home country in a Hungarian consulate.
From January 2006 the Municipal Authority would accept the passport legalization only by a notary public or the Hungarian consulates (like earlier), so the legalization by law firms would not be sufficient. Clients who are coming to Hungary shall visit a notary public / clients who are not coming to Hungary shall also legalize the copy of their passport at the consulate.
It is also important to mention that according to Hungarian legislation the developer of a new property has a warranty obligation for 3 years.
Major differences between buying as a private individual and buying as a company