Hungary: EU accession - real estate & construction issues

What changes have already been and will be made to the Hungarian real estate, infrastructure, construction law and standardisation?

Acquisition of real estate in Hungary

After a lengthy negotiation process between the EU and Hungary, it has been agreed that in respect of real estate related matters the following interim provisions will apply after the date of accession:

• a 7 year interim restriction period will apply in respect of Hungarian agricultural land during which period no foreign individual, foreign or domestic legal entity may purchase agricultural land in Hungary, except for those individual, or foreign entrepreneurs who have been living in Hungary for at least 3 years and have been pursuing agricultural activities in Hungary

• a 5 year interim period will be applicable in respect of the acquisition by foreigners of non-agricultural, residential/real estate (for example flats, cottages, etc.) in Hungary. According to this specific regime foreign citizens and other legal and non-legal entities of EU members will have to apply for the County Administration Office (in Budapest: the Metropolitan Administration Office) for the mandatory consent of such offices to acquire such real estate. Individuals, who have been living permanently for at least 4 years in Hungary or entities which have come out business activity in Hungary for a period are exempted from such obligation to obtain such consent.

In addition to the foregoing provisions no other restriction will apply in relation to the acquisition of real estates for commercial and investment purposes.

National standardisation with respect to real estate related matters

• there has been a lengthy process of harmonising and adopting Hungarian national standards to the EU standards, and it is worth noting that the Hungarian Standardisation Office became a member of CENEL (European Electrotechnical Standards Commission) in June 2002 and also a joined, with full rights and obligations, the CEN (European Standards Commission) on 1 January 2003

• under the framework act on national standardisation, national standards have been fully harmonised in all aspects with the EU standards. The Institution for Hungarian Standardisation Affairs is the national standardisation organisation of the Republic of Hungary, which is a public body where responsibility is to fulfil all the public tasks related to national standardisation and the harmonisation of such standards to the EU law.

Construction

After the accession there will be a mandatory obligation on Hungary to adopt various directives in respect of the requirements relating to the building products specification, the compatibility of such products and detailed rules on the sale and use of such products in the building industry.

Infrastructure

A national infrastructure development project ("National Development Plan") is now being drafted by the Hungarian government which developments will be subsidised through the various sources of EU funds. The laws with respect to the relevant governmental bodies and the appropriate financial control systems are now being adopted in order to manage the utilisation of resources from the structural and cohesion funds of the EU

The act on the unbundling of activities within the state owned national railway company has already been adopted and new laws shall also be introduced in respect of the (i) division of the railway infrastructure; (ii) usage fees; (iii) transportation of hazardous wastes by train and (iv) the mutual passage in relation to the Trans European Railway System. The National Railway Regulation will also be amended, so as to provide international railway freight for export, import and transit through Hungary on non-discriminative basis, and at least 20% of the annual total capacity of the Trans European Rail Freight Network in Hungary will be reserved for railway undertakings other than the Hungarian State Railways Co

The act on Air Traffic is almost completely harmonised with EU requirements and its provisions will come into force gradually before and after the accession.

What can you do to ensure you comply with the new law and prepare for accession?

A number of steps can be taken to ensure that you are adequately prepared for accession, including:

• ensure any agreement for the acquisition of real estate takes account of the new provisions requiring consent for foreign ownership; and

• monitoring the availability of the resources, which may be applied from the EU development funds for the purpose of infrastructural developments (railway, motor highway and utility projects etc.).

For further information please contact Gabriella Ormai.