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Jun 05, 2006

Unregulated rental market in Hungary is pro-landlord


The present act regulating rental relations in Hungary (the “Lease Act”) based on the principle of contract law, that contractual relations are created by the free will of the parties.

Rents: Can landlord and tenant freely agree rents in Hungary?

The law differentiates between two types of rental agreements – free and controlled (“obligatory rent”).

Free rental market

  • In the free rental sector, the parties can freely agree the rent, and the court has no power to intervene.

  • An increase or reduction of the rent can also be freely agreed by the contracting parties, either in the initial agreement itself (e.g., the agreement can determine the manner in which the rent is to be modified, or prescribe an exact amount), or by way of an amendment of the initial agreement. If no agreement is reached on the modified rent, both of the contracting parties may go to court to determine it.

Controlled sector

  • In cases which fall in the “obligatory rent” sector, for example residences owned by the municipality or the state, the rent is stipulated by law. The tenancy contract may be signed without even mentioning the rent. The rent shall be notified in writing by the Landlord (i.e. the municipality or state) to the Tenant within 8 days of moving in. If the Tenant does not object to the notified rent in writing within 8 days of delivery, the notified rent will become the actual rent. If no agreement is reached on the rent, both contracting parties may go to court to determine it. If the Landlord has notified the Tenant of a higher rent than provided by law, the court will order him to repay the difference. An increase or reduction in the rent can also be modified by law, or by the court.

Hungary properties and real estate

In both free and controlled cases, the rights and obligations of the Tenant and the Landlord regarding the rent during the rental period are specified by law in great detail.

In both cases, the rental agreement does not have to be drafted in any special form, it may also be a verbal agreement.

Deposits

The deposit, its rate and other conditions can be freely agreed by the contracting parties. The usual amount of deposit is around 1-3 months’ rent.

What rights do landlords and tenants have in Hungary, especially as to duration of contract, and eviction?

The tenancy agreement may be concluded for a definite term, or an indefinite term, or until the occurrence of a certain condition defined in the agreement.

In case of a definite term, the contracting parties must designate a termination date.

  1. Definite term agreements

  2. Rental agreements concluded for a definite term, or until a certain condition has occured, terminate at the termination date agreed, or when the agreed condition is fulfilled. They cannot be terminated by either of the parties, except for breach of contract.

    Reasons for termination by the Landlord for breach of contract are defined by the Lease Act as follows:

    • the Tenant fails to pay the rent by the agreed date;
    • the Tenant fails to perform his essential contractual or legal commitments;
    • the Tenant has a depraved, antisocial lifestyle which conflicts the requirements of cohabitation;
    • the Tenant damages the property or the common premises, or uses them for an unintended purpose;
    • the Landlord is able to offer a vacant property adequate for the Tenant.

    Termination must be in writing, and verbal termination is invalid.

  3. Indefinite term agreements

  4. The contracting parties may terminate an indefinite term contract in writing at any time, according to the terms of the rental agreement.

    If there are no provisions for termination in the tenancy agreement, then the Lease Act will prevail. In most cases the minimum termination period is 15 days.

    The rental relationship expires in any case if

    1. The tenancy agreement is terminated by mutual consent of the contracting parties;
    2. The property ceases to exist;
    3. The entitled contracting party terminates the agreement (i.e. termination);
    4. The Tenant dies and there is no one entitled to continue the rent;
    5. The Tenant changes the rental right of the property (with the consent of the Landlord, with very limited conditions);
    6. The Tenant is expelled from the territory of Hungary;
    7. the court terminates Tenant’s rental right;
    8. The Tenant’s rental right is terminated by other official decision.

Legislation

Relevant legislation are as follows:

  • Act IV of 1959 of the Civil Code;
  • Act LXXVIII of 1993 on Residential and Commercial Leases;
  • Various municipal regulations adopted by authorization of an act.

Hungary luxury housesHistory: Recent changes in Hungarian landlord and tenant law

Most of the legal provisions were enacted prior to the change of system in 1989. Due to these rapid political and economic changes, the adoption of a unified, up-to-date regulation became necessary. While previous acts did contain elements suitable for free market conditions, the sphere of these elements was substantially expanded by the Lease Act of 1993, which ensures a wide range of contractual freedoms.

       





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