Buying a New Apartment in Hungary? Legal Guide For Foreigners!

Take Your Time: Why Careful Planning and Loan Pre-Approval Matter

In Hungary's fast-paced market for new apartments, sellers or agents often push buyers to make quick decisions. This can be through:

• Creating a sense of urgency by highlighting high interest or fast sales, which can make buyers feel they need to act immediately or risk losing the property.
• Suggesting that the property is in high demand with statements like, “There’s a lot of interest,” or “Units are selling fast,” even when this might not entirely reflect reality.

While it can be tempting to jump in—especially if the apartment’s layout, location, or view feels perfect—remember that buying property is a significant financial commitment. Making a decision under pressure can lead to mistakes or missed opportunities to secure better terms.

To proceed confidently and make informed choices, consider:

Loan Pre-Approval

If you’re planning to finance the purchase with a loan, getting pre-approval from your bank can make a huge difference. Loan pre-approval offers several advantages:

• Sets a clear budget: Pre-approval determines the loan amount you qualify for, ensuring you don’t overextend your budget or commit to something unaffordable.
• Establishes your lending terms: Knowing the exact interest rate, repayment period, and conditions upfront helps you understand the long-term costs involved in the purchase.
• Prevents complications in the contracting phase: With pre-approval, you avoid surprises, such as the bank setting stricter terms, limiting the amount you can borrow, or rejecting your loan application at the last minute.

Financial Planning and Risk Assessment

A thorough planning phase can protect you from unnecessary risks. Important steps include:

• Setting a maximum budget: Consider all related costs, including closing fees, property taxes, insurance, and potential maintenance, to ensure that you stay within financial comfort.
• Accounting for unexpected expenses: Building delays, price adjustments, or required renovations can increase costs, so it’s wise to keep a financial buffer.
• Evaluating risk factors: From market volatility to potential interest rate hikes, be aware of factors that could affect your financial stability over time.

Negotiating "Preliminary Contracts" and Fixed Terms

When purchasing newly built apartments, developers or sellers often present standardized preliminary contracts that seem fixed and non-negotiable. However, in many cases, buyers have the option to negotiate certain aspects of these agreements, especially if the seller is motivated to close the deal. Here’s how to approach it:

Identify Negotiable Terms

Key areas often open for negotiation include:

• Payment Schedule: Requesting an extended payment timeline can ease financial strain, allowing you to better align payments with cash flow or loan disbursements.
• Deadlines and Delivery Dates: You may negotiate stricter penalties for delays or request greater flexibility on handover dates to ensure you’re protected if construction timelines slip.
• Warranty and Guarantee Terms: Often, warranties can be extended or clarified to cover additional aspects, ensuring you’re protected against construction defects for a reasonable period after handover.

Evaluate the Seller’s Flexibility

Sellers are typically more willing to negotiate under certain conditions, such as:

• Extended Time on Market: If the property has been listed for a while, the seller may be more willing to adjust terms to secure a sale.
• Slow Sales Pace: A developer facing sluggish sales or financial pressures may prioritize closing the sale over maintaining strict contract terms.

Leverage Legal Support

Engaging a real estate lawyer familiar with newly-built property sale and purchase contracts can be invaluable. An experienced real estate lawyer can:

• Identify Opportunities for Negotiation: By reviewing contract terms, a lawyer can pinpoint clauses that might put you at a disadvantage and suggest amendments that better protect your interests.
• Assist in Renegotiations: With a lawyer’s guidance, you’re better positioned to counter standard terms and secure a fairer contract that mitigates your long-term financial and legal risks.

Warranty and Guarantee Protections

Newly built properties typically come with warranties covering defects or issues that arise after the property is handed over. However, understanding and enforcing these rights can require diligence:

Types of Warranty Coverage

Warranties often cover structural or system-related defects. 

Typical terms include:

• General Warranty Period: Covers issues identified at handover and may last between 1-3 years, addressing defects like plumbing, electrical issues, and visible construction flaws.
• Extended Warranty for Structural Elements: Certain parts of the property, such as the foundation or roofing, may come with a longer warranty period (often up to five years).

Proactive Steps for Enforcing Warranties

To maximize warranty benefits, follow these steps:

• Document Defects at Handover: Conduct a thorough inspection and record any issues during handover to ensure they are addressed within the warranty period.
• Schedule Regular Checks: Set reminders to check for emerging issues during the warranty period, as some defects may only become apparent with use.
• Notify the Developer in Writing: Promptly report defects in writing to create a clear record that can be used in case of disputes.

Seeking Remedies if Issues Arise

If the developer fails to address issues within the warranty period:

• Contact Consumer Protection Authorities: If the developer is unresponsive, filing a complaint with consumer protection can prompt corrective action.
• Consider Legal Action: In cases of significant defects or developer inaction, consulting a lawyer about pursuing legal remedies can protect your investment.

By understanding these protections and staying proactive, you ensure the property’s quality and enjoy greater peace of mind in your new home.

Investigating the Developer’s Track Record

Before committing to a purchase, researching the developer’s financial stability and track record is essential. If the developer encounters financial issues after signing but before completion, you may risk losing your deposit or face a drawn-out recovery process.

Check the developer's company records and recent financial statements, and examine whether management has been involved in bankruptcies before. Consulting an accountant for this analysis can help you verify the company’s stability. A developer with a solid financial background offers a greater assurance of a successful project.

Buying a Garage: Securing Pre-emption Rights

In newly built complexes, parking spaces are often sold separately, with earlier buyers sometimes holding pre-emption rights. This means they may have priority to purchase available spaces, potentially at favorable rates. To avoid surprises, ensure your contract specifies the designated parking space and that the seller guarantees its availability to you.

What is the Process of Buying a Newly Built Apartment in Hungary?

Buying a newly built apartment in Hungary involves several critical steps that ensure the transaction is secure and legally binding. Here’s a more detailed breakdown:

1. Selecting a Property: Choose an apartment based on location, size, budget, and developer reputation. Often, newly built apartments are sold off-plan.
2. Due Diligence: A lawyer should check ownership, encumbrances, and building permits to ensure the property is legally sound.
3. Preliminary Contract: Sign a preliminary contract (előszerződés), detailing the terms, purchase price, and payment schedule, and pay a deposit (usually 10-20% of the price).
4. Finalizing the Sale Contract: This definitive agreement includes payment schedules and transfer of ownership terms. A legal representative should ensure it aligns with Hungarian real estate law.
5. Property Acquisition Permit (If Needed): Non-EU citizens might need this permit to purchase property in Hungary. It’s typically granted unless there are security concerns.
6. Property Registration: After signing, submit documents to the Land Registry (Földhivatal) to officially register the property in your name.
7. Paying Property Taxes: Usually 4% of the purchase price.

Conclusion

Buying a newly built apartment in Hungary offers the opportunity to enjoy a modern, comfortable home, but it’s essential to approach the process with thorough preparation. From carefully reviewing preliminary contracts and securing a bank-approved loan to negotiating terms that align with your needs, each step contributes to a smoother and safer investment.

Taking the time to investigate the developer’s background, ensuring contract terms meet bank requirements, and proactively safeguarding your warranty rights can protect you from unforeseen risks and costs. Engaging your own legal advisor ensures that your interests remain a priority and that the contract reflects fair, balanced terms.

With proper planning and professional support, you can make confident decisions, minimize risks, and fully enjoy the rewards of owning a new home in Hungary. Need any help? Contact us!