We have looked at the property we want to buy, we have paid the purchase price […] everything seems to have gone well at first, but the land registry has refused to register our title or it turns out that there was a co-owner who had a pre-emption right who was failed to notified though?
Could these issues be avoided with a due diligence procedure conducted prior to entering into an agreement?
In Part 2 of our series of articles on Hungarian Real Estates, we will cover the basic legal aspects that you should be aware of when buying a home:
– whether the Real Property is registered as a „flat”
– whether the floor area of the Real Property in m2 is in line with what was declared by the seller
– the address in the Land Registry matches the address published in the advertisement
– whether the actual owner of the Real Property is the person from whom we intend to buy the property – i.e. whether the seller and the owner are the same (it is possible that the Real Property may have more than one owner, in which case all owners must be listed as sellers in the contract of sale if we intend to buy the whole property)
– whether there is any encumbrance on the property which restricts or prevents us from acquiring ownership (a typical example is a mortgage and the mortgage encumbrance that secures it)
– flats are normally part of a condominium, which means in practice that the flat is a separate Real Property (condominium sub-unit) belonging to the condominium, usually marked …/A/1 in the plot number (the number of sub-units may vary depending on the number of flats in the condominium)
– in the case of a condominium, there are two things to do: firstly, we need to obtain the title deed of the sub-unit (apartment) (this is called the condominium separate deed) and the title deed of the property on which the condominium building itself stands (this is called the condominium master deed), which is important because the condominium master deed and the separate deed together form the whole legal picture of the legal status of the condominium
– if an encumbrance is registered on the title deed to the main deed of the condominium, it is treated as if it were also registered on the separate deed (i.e. the apartment)
For a clearer understanding of the contents of the title deed, we recommend Part 1 of our property article series, which deals with the various parts of the title deed.
2. Obtain the articles of association, by-laws and rules of the condominium:
Why is this good for us?
The contents of the articles of association will tell us whether the other residents have a right of first refusal when buying the apartment in question, which is important to bear in mind when concluding the contract/offering to buy, because A Sale & Purchase Agreement concluded in breach of the right of first refusal is void against the right of first refusal holder and can therefore be enforced against us later if the right of first refusal is entered on the title deed of the condominium. In this case, the holder of the pre-emption right could validly take action against the ‘new’ owner and even replace him, depriving him of his ownership rights.
From the deed it may also be important to clarify whether the flat has any other exclusive use premises (e.g. a cellar or storage room) or a parking place. Exceptionally, these may be registered as separate properties and the deed may contain other provisions for their purchase.
An Organisational and Operational Regulation (OOP) basically defines the organisation and functioning of the condominium, and it is good to know the rules of this regulation when a condominium general meeting is held.
And the rules of conduct themselves set out the rules of behaviour expected in a condominium (e.g. the conditions under which common areas can be used or the rules of coexistence that residents must observe).
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If you are about to buy a property or if you have a problem with the interpretation of the title deed please contact our office and get in touch with us. We will assist you in the complete management of your property purchase transaction (from making the purchase offer, through the preparation and submission of the contract to the registration of the title in the land registry), whether it is a sale or purchase by a private individual or a company.
dr. Farkas Szabolcs László
dr. Bajcsay Gergely
Please note that the general information provided in this article is for informational purposes only and does not constitute legal advice. We do not assume any liability for any misinterpretation of the above information or for any changes in the law that may have occurred in the meantime. If you have a specific question or legal problem, we are able to provide individual advice after consultation with our office and after a full investigation of the case.