Greenfield investment in Hungary

 In recent years the procedure of acquiring real estate by foreigners in Hungary has been significantly simplified under the influence of the UE law. The prices of Hungarian real estate are quite attractive, compared to the prices on the real estate markets in Western Europe. An advanced infrastructure and the strategic geographical location of Hungary in the very center of Europe make it an ideal target for foreign investments, including the greenfield investment.  

The important first step of the greenfield investment process in Hungary, even before the acquirement of the chosen plot (real estate), is to inquire about the legal regulations concerning the acquiring of real estate by foreigners in Hungary and the area, e.g. about its legal status, the cultivation, possible restrictions in land development. This information can be obtained at the competent Land Registry Office and the Technical and Construction Department of a local self-government, as well as at the National Inspectorate for Environment, Nature and Water. It is also recommended to incquire about the archaeological status of the given area. This data is managed and made available by the National Office of Cultural Heritage (from 21st Semptember 2012: Forster Gyula Nemzeti Örökséggazdálkodási és Szolgáltatási Központ). This Office is competent to issue a certificate of the archaeological status with regard to a particular area. At the design and planning phase an environmental specialist should be consulted, who will precisely indicate what types of environmental permit an investor needs to complete his project. Bisztrai Law Firm renders all services regarding the Due diligence  of the chosen real estate.

It is reasonable to apply for a preliminary building permit at the local construction office before the acquirement of the real estate. The preliminary building permit is important in view of the procedures following significant financial contributions and investmens. Such document  provides grounds for the issue of a final building permit. The documents and plans submitted to apply for a preliminary permit can also be used to apply for the final permit. Every person is entitled to apply for a preliminary building permit, whether he or she is the owner of the plot or not. The consent of the real estate owner is not required. There might be situations prescribed by law, where a preliminary building permit is obligatory.

If the planned project is to be carried out on several separate plots with different evidence numbers, it might be necessary to obtain a permit to consolidate the plots. Such consolidation should not be underestimated from the point of view of the future costs: proceedings at the Hungarian Land Registry Office are charged on the basis of a single evidence number.

It is important to know that the construction can be carried out only on uncultivated plots (non-agricultural land). In order to obtain a land conversion permit, an application should be submitted to the Land Registry Office. The application shall state precise reasons for the change of land use. If the investment is to take place on an area bigger than 400 square meters, a soil conservation plan should be prepared.

The next step of the investment process is the preparation of the technical and construction documentation (e.g. construction plan, mechanical plan, electrical plan, fire plan, health and safety plan) and its submission to competent authorities, as well as the application for an environmental permit. This is followed by the application for a (final) building permit, which is done on a standard form and should be accompanied by the the full technical documentation. In order for the procedure to be a quick and efficient process, it is recommended to obtain a consent for the project from the neighbouring land owners before submitting an application to the Land Register Office. This way the appeal proceedings and deadlines can be ommitted, as long as there are no conflicting interests.

The construction works can begin only after the investor has obtained a building permit. It is obligatory to inform the construction inspection authorities at least 15 days before the works start.

During the construction works the investor may expect numerous inspections by the authorities. Inspectors will check compliance with the requirements arising under the provisions of law, regulations and permits. They will also verify the certificate of conformity of the products used in construction, check the application of health and safety standards, as well as the construction schedule. Non-compliance with the requirements may result in fine, or even suspension of the construction.

After the construction is completed, the investor shall apply for a certificate of occupancy authorization, and – in cases specified in the law – a permit for an establishment.

Budapest, April 2013
Bisztrai Law Firm