SALE AND PURCHASE, DONATION CONTRACTS
COMPLEX LEGAL SERVICES IN GYŐR AND TATA FROM DRAFTING THE CONTRACT TILL THE REGISTRATION AT THE LAND REGISTRY AND TAX AUTHORITY
Do you want to enter a sale and purchase or donation contract?
Do you simply need some advice on a sale and purchase case?
Do you need a real estate lawyer in Hungary?
full-range legal services for real estate cases
drafting of sale and purchase or donation contracts
land registry administration
We understand that buying or selling your home may be the most important transaction of your life. Therefore, it is essential to have a real estate attorney throughout the entire closing process who will guide you through each step along the way, protecting your interests, and advising you on issues from liens and property taxes to financing.
Whether you need assistance with a lease agreement, a purchase or sale closing, or positioning a commercial or rental property in your portfolio, we will strengthen your position in any commercial real estate transaction.
SCHEDULE OF A SALE AND PURCHASE CONTRACT
- Drafting the necessary documents on the ground of the information given by the client former per e-mail or at a personal meeting.
- Undersigning the contract and all other necessary documents.
- The lawyer sends the documents to the land registry. If an authorization is needed for the sale or purchase (e.g., the buyer or seller is a minor), the documents can only be sent after having it.
- The land registry sends one copy of the documentation to the tax authority for ascertaining the property acquisition duty.
- The land registry sends its decision in 30 days (7 days by urgency request).
NECESSARY DATA FOR THE PREPARATION OF A REAL ESTATE SALE AND PURCHASE CONTRACT BY OUR LAW FIRM
- Data of the parties
– name, address, place and date of birth, mother’s name, tax number
– data of legal representative of minor
- Data of the real estate
– topographical lot number, exact address
– true copy of the title deed (we arrange it if necessary – topographical lot number needed)
– incidental agenda for deleting the existing mortgages of the real estate (if necessary)
- Other data of the contract
– exact sum of the purchase price (self-financing, loan, deposit, etc.)
– schedule of the payment of the purchase price (one or more details)
– maintained ownership, time of the registration of the ownership
– creation of mortgage, usufruct, etc. (necessary data of beneficiary)
– transfer of possession
- Loan (if necessary)
– exact sum of loan
– name and address of the bank
– date of application and estimated payment date
– details and schedule of loan payment by the bank
– bank account number of the purchaser and seller
– other necessary elements of the contract demanded by the bank
THE RULES OF DEPOSIT WHEN BUYING A PROPERTY
Don’t operate with agreements written on “pieces of paper”!
The happy moment of house hunting is when, after a long search, you finally find your ideal property and there’s only one thing on your mind: making sure someone doesn’t take it away from you. In this case, the seller naturally wants to be sure (preferably financially) that the buyer is serious. This is the purpose of the deposit.
The difference between a deposit and a down payment
It is important to know what the amount paid to seize the dwelling should be classified as (a deposit or a down payment), as the different designations are subject to completely different legal interpretations. According to the Civil Code, the person responsible for the failure of performance forfeits the deposit (buyer) and is obliged to reimburse twice the deposit received (seller). If the contract is terminated for reasons for which neither party is responsible or both parties are responsible, the deposit is returned. The down payment is simply returned in one sum in the event of the contract being terminated and is therefore not punitive.
What kind of paperwork should we write when booking a home?
It is also important that the deposit is not simply handed over with a receipt or other paper, but that a more detailed document is drawn up. It is important to specify exactly what the purpose of the deposit is and under what conditions. It is therefore advisable to draw up a so-called preliminary sale and purchase agreement, in which the parameters of the property, the purchase price, the main outlines of the transaction and the period for which the final sale and purchase agreement will be concluded are specified. In this case, both parties are aware of the parameters of the agreement, so there can be no dispute later as to whose fault the transaction might not go through and whether the deposit will be returned or not.
It is a common mistake for some sellers to want to have the buyer sign various “registration agreements” or other fancy documents, often in a way that is completely one-sided and protects the seller. Such a document should only be signed if you have had it checked with a lawyer you trust.
A preliminary contract can be signed in front of two witnesses, but since the final contract of sale requires the signature of a lawyer, it is advisable to consult a lawyer at the beginning of the transaction and have him or her draw up the exact wording. In this case, the lawyer will produce a deed that is clear and, optimally, will exclude the possibility of any subsequent disputes. If, however, the deed is not countersigned by a lawyer, it is advisable to have witnesses on the deed, as this is more important for the evidential value of the deed than if it is signed by the parties without witnesses.
Remember: it is always better to have a good contract in place to settle a legal situation clearly beforehand than to face a long legal dispute afterwards.
IS IT RISKY TO BUY A MORTGAGED PROPERTY?
People looking for a home are usually looking for a property free of burdens, but these are increasingly rare. Unfortunately, sometimes sellers are forced to sell the real estate because they have no or difficult access to their mortgage repayments, making it worth their while to buy a smaller or cheaper one. The owner usually does not have the money to pay off the debt before the sale, so the burden is then shifted to the prospective buyer. What are the risks involved?
The first step is to request a recent title deed of the property, to see exactly what the property is encumbered with and to clarify the exact amount of the outstanding debt. If a credit institution is listed as the creditor, the bank will, on request, provide an official certificate stating the amount and where it must be paid to issue a cancellation order to clear the title deeds of the property. The most important thing in such a case is that the buyer pays the debt directly to the bank and not to the seller, as this way you can be sure that it will be used for the relief. It is also essential that the buyer does not pay the seller, even a deposit, until the debt has been discharged. So first clear the debt from the property, and then the seller can receive the remaining amount of the purchase price.
It is also possible that enforcement proceedings may have already been initiated against the owner, which can also be alarming for the buyer. However, there is no need to look for another property immediately, as this situation can easily be resolved. The bailiff should be contacted, who will also be able to write down the amount of the payment required to terminate the enforcement and remove the enforcement from the title deeds. Auctions are usually not held, as it is in everyone’s interest to pay the debt as quickly and easily as possible.
However, it is important to note that the situation is completely different in the case of a registered usufruct or widow’s right. In such cases, the person listed in the title deed usually has the right to use and occupy the property until his or her death, i.e., he or she has the right to live there or sublet the property, but the owner does not. If such a property is to be purchased, it is important to note that the discharge requires the consent of the beneficial owner, so if he or she does not relinquish his or her beneficial interest, it will remain even if the title is purchased. However, as owner we will not be able to use the property.
We can see, therefore, that neither a charge nor a foreclosure should be an obstacle to a purchase. However, it is important to conclude a sales contract in which each of the above steps is described in detail. And without a contract, never pay a cent to anyone!
PURCHASE OF AN AGRICULTURAL LAND
When buying land, there are special requirements to be considered compared to the general sale and purchase of real estates (e.g., a house). It is essential that these rules also apply in the case of allotments if it has not been withdrawn earlier. It is therefore advisable to check carefully what the property in question qualifies as before buying. Our law firm can also help you with this.
It is important to note that when acquiring agricultural land, certain quantitative limits apply to avoid the concentration of large land holdings in a single hand.
A non-resident natural person and a national of an EU Member State who is not a farmer may acquire ownership of land if the area of land he/she owns, including the area of land he/she wishes to acquire, does not exceed 1 hectare.
TERMINATION OF UNDIVIDED COMMON OWNERSHIP OF AGRICULTURAL LAND
The legislator has introduced a new law aimed at creating competitively sized estates to prevent the fragmentation of land ownership. The abolition of undivided common ownership means that the property is acquired by a single owner. This is known as annexation.
The law contains provisions on the size of the areas that must be created because of the division. In principle, the division of undivided common property is to be carried out by mutual agreement between the owners. However, if at least two land parcels corresponding to the minimum area cannot be established, this agreement cannot be concluded. In this case, the solution is to have the property owned in its entirety by a single owner. Our law firm will assist you effectively throughout the whole process!
PROPERTY ACQUISITION TAX (PAYABLE BY THE BUYER WHEN BUYING A REAL ESTATE PROPERTY)
In the case of purchasing a real estate, the purchaser is liable to pay a tax for the Hungarian State.
The rate of property acquisition tax
Unless otherwise provided by law, the general rate of the transfer duty (property acquisition tax) on the transfer of property in rem is 4% of the market value of the property acquired, net of any encumbrances.
In the case of an exchange of ownership of immovable property, the basis of the levy is the market value of the property acquired by the exchange. In the case of a private acquirer of property, the basis of assessment for the exchange of residential property is the difference between the market value, net of any encumbrances, of the residential property exchanged, or, in the case of the purchase of residential property, if the purchaser sells the other residential property within three years before the purchase or within one year after the purchase, the difference between the market value, net of any encumbrances, of the residential property purchased and the residential property sold.
Exemptions from the tax include
– Acquisition of a plot of land (share of ownership) suitable for the construction of a dwelling house, as well as of a property right established on such real estate, if the acquirer builds a dwelling house on the real estate within 4 years from the presentation of the contract for the levy and the useful floor area of the dwelling(s) in the built dwelling house reaches at least 10% of the maximum buildable area specified in the settlement plan.
– Acquisition of land by the farmer for a consideration, subject to certain conditions.
– Exchange and purchase of residential property by a private individual, if the private individual sells the other residential property within three years prior to the purchase or within one year after the purchase, and the market value of the acquired residential property is less than the market value of the exchanged or sold residential property.
– In the case of a transfer of property between relatives in the direct line (including by adoption) and spouses.
A person under 35 at the time the obligation to pay the duty arises is entitled to a discount of up to 50% of the duty otherwise payable on the acquisition of his or her first residential property (share of ownership), if the market value of the entire residential property does not exceed HUF 15,000,000. In the case of acquisition of a share in the ownership of a dwelling with such a market value, the acquirer is entitled to a reduction in the amount of the tax in proportion to the share in the ownership acquired.
PERSONAL INCOME TAX (PAYABLE BY THE SELLER WHEN SELLING A REAL ESTATE PROPERTY)
In case of selling a real estate property, if the seller makes a profit (i.e., sells it for more than he bought it for), he is liable to pay tax, with some exceptions.
What constitutes income?
Income from the transfer of immovable property is any income that an individual receives in respect of the transfer. This includes the sale price or, in the case of a non-cash contribution (non-monetary deposit) of the property to a company or other firm, the value of the property as defined in the company contract or similar instrument.
Tax exemption, tax relief
The income from the transfer of immovable property is exempt from tax if the seller sells the property more than 5 years after the acquisition of the property.
In case the transfer of ownership of the real estate takes place in the year of acquisition or in the five years following the year of acquisition, the amount
– 100 % in the year of acquisition and the year thereafter,
– 90 % in the second year following the year of acquisition,
– 60 % in the third year following the year of acquisition,
– 30 % in the fourth year following the year of acquisition,
– 0 % in the fifth and subsequent years following the year of acquisition.
GIFT TAX (DONATION TAX)
The general rate of gift tax is, generally, 18% on the net value of the gift.
In the case of the free acquisition of residential property and of rights of pecuniary value connected with residential property, the gift tax rate is 9%.
ASSESSMENT OF THE VALUE OF RIGHTS IN REM (RIGHT OF PECUNIARY VALUE)
When calculating the value of a right in rem, it is first necessary to determine the value of the property that will be encumbered.
The market value, not reduced by the encumbrances, is then divided by 20 to give the value of the property right in one year.
The value of a property right for a fixed term is the one-year value multiplied by the number of years stipulated. However, the value of the right thus calculated may not exceed 20 times the annual value or, in the case of a right of usufruct or use in favour of a natural person, a multiple of the annual value according to the age below.
In the case of a right of indefinite duration, the value of the right is five times the annual value.
If the pecuniary right extends for the life, marriage or widowhood of a person (e.g., a right of usufruct until death), its value in relation to the age of the person concerned is determined as follows:
If the holder of the right in rem is:
under 25 years of age, 10 times the annual value
25-50 years old, 8 times the annual value,
51-65 years old, 6 times the annual value,
over 65 years, 4 times the annual value.
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