Did we like one of the duplexes? Is there more than one house on a plot and we want to buy one of them?
In Part 3 of our series of articles on Hungarian Real Estates, we will look at the specific legal situation where a Real Property has several owners at the same time and each owner has a right to use it according to their ownership share. In legal terms, they exercise this right individually, since all the owners are entitled to use and occupy the entire Real Property. This is from where the special legal category of undivided joint ownership is arisen.
What does this mean in practice?
There is a plot of land with several buildings on it, but they are not registered in the land register under a separate plot number. In this case, the land is owned jointly by all the owners, but the use of the individual houses built as residential properties or even parts of residential properties is still shared in some way between them. It is therefore possible that there may be as many as 10 to 30 owners of such a property, but the ownership of the property itself is shared between them. The problem arises because the title deed does not (clearly) show who is entitled to use what and to what extent. In such a case, it must be borne in mind that all owners have the right to possess and use the Real Property, but that this must not infringe the same rights of the other owners.
It does not matter, therefore, that, for example, 4 residential buildings are occupied by different people, but that the individual residential buildings are still jointly owned, given that they are not listed as separate properties, and this particular legal situation should be covered by an agreement that determines the use of the Real Property, which should be drawn up with the assistance of a lawyer.
Why such an agreement that determines the use of the Real Property is important?
In the case where, for example, a detached house is physically divided into two parts (with at least 2 owners), legally not qualified as two separate sub-units of a condominium though, it is recommended to draw up a use (sharing) agreement for the residents to determine which part of the undivided common property (which residential building) can be used by which owner. If there is no such agreement, all owners are entitled to use the whole property (e.g. a semi-detached house or two separate houses registered under the same parcel number). A sharing agreement can avoid future disputes, i.e. which owner is entitled to a certain use of the garden on the plot, in what proportion, or which owner is entitled to use the cellar or garage, and who is entitled to use each part of the property on the plot (or even a particular floor or attic level in the case of a single dwelling house) and to what extent. The fact is, however, that this can often cause problems, which is why it is particularly important to regulate the ancillary issues involved in the use of the property, such as the relationship between the co-owners, the preservation of the property, the bearing of common costs, etc., in detail and in a compromise manner in the above-mentioned sharing agreement.
But why should we pay attention when we want to buy a property in undivided joint ownership?
To clarify ownership shares and possible charges, please download the title deeds of the property. For a better understanding of the contents of the title deed, we recommend you read Part 1 of our series of articles on the title deed.
As a general rule, you should ask the seller for the deed of occupancy, as the provisions of the deed will apply to you as the subsequent owner.
If such a property will be bought with a loan, it is essential to submit the agreement of use in the course of the loan application, and in many cases, it is required to be a well drafted one which could be ensured if it was drafted and countersigned by a lawyer. In this case, it is essential that if the loan is granted, the mortgage will be registered only on that specific ownership of the Real Property in question and does not extend to the other owners.
In case of the sale of Real Property in which co-owners have pre-emption right, it is necessary to obtain a waiver of from all the co-owners, or at least notify them through certified mail otherwise they will be able to take legal action against us since they were excluded from applying their rights. The more co-owners there are, the longer it will take to inform them of their intention to buy, so this is also a factor to be considered with regards to this certain type of Real Property.
The rules on construction between the co-owners of an undivided jointly owned property are primarily determined by the use-sharing agreement, but it is essential that each co-owner can only use (build on) his/her share of the property, i.e. that he/she cannot encroach on the common use shares or the shares of the other owners. Otherwise, the mandatory requirements of the local building code must be respected.
The most important legal aspects of a detached house have already been covered in Part 3 of this series.
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If you are about to buy a property or if you have any problems with the title deeds or a copy of the map and other legal requirements or with the interpretation of the sharing agreement, please contact our office. We will assist you in the complete management of your property purchase transaction (from making an offer to purchase, preparing and submitting the contract/Use Sharing Agreement and registering the ownership with 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.