What does a lawyer do in a real estate transaction?
Buying or selling real estate is one of the most significant financial decisions in many people’s lives. Purchasing or selling an apartment, family house, plot of land or other property is not only a financial matter, but also involves important legal consequences. For this reason, the preparation and countersigning of a real estate sale and purchase agreement requires the involvement of a lawyer.
However, the lawyer’s role is not limited to drafting a contract for the parties to sign. In a real estate transaction, the lawyer’s tasks include preparing the legal transaction, verifying the parties and the property, creating appropriate contractual safeguards and handling the land registry procedure.
In short, the lawyer’s role may include:
- verifying the contracting parties;
- checking the legal status of the property;
- identifying issues related to the physical and technical condition of the property;
- creating contractual safeguards;
- providing information on transfer tax, exemptions and the NAV procedure;
- drafting and countersigning the contract;
- handling the land registry procedure.
The main tasks in detail
Verification of the contracting parties
One of the first steps in a real estate sale and purchase transaction is verifying the data of the contracting parties. The lawyer checks the identity of the parties and whether the seller is actually entitled to sell the property or the relevant ownership share.
This is particularly important where the seller is not the sole owner, acts through an authorised representative, or the ownership structure of the property is more complex. If a power of attorney is used, the lawyer must also examine whether it is suitable for concluding the specific legal transaction.
Verifying the parties is not a mere formality. Incorrect data, unclear authorisation or potential misuse in real estate transactions may create serious risks, so it is advisable to clarify all relevant information at the beginning of the transaction.
Checking the legal status of the property
The legal examination of the property usually begins with reviewing the property sheet from the land registry. The property sheet may show, among other things:
- who owns the property;
- what ownership shares exist;
- whether the property is encumbered by a mortgage, enforcement right or other encumbrance;
- whether there is a registered usufruct right;
- whether there is a prohibition on alienation and encumbrance;
- whether there is any right or fact that may affect the sale and purchase transaction.
In addition to the property sheet, further documents may also be required in certain cases. In the case of condominium properties, the deed of foundation, organisational and operational regulations, and the existence of any pre-emption rights may also be relevant.
The lawyer’s task is to identify, on the basis of the available documents, any legal circumstances that may prevent the conclusion of the sale and purchase agreement or the registration of ownership by the land registry.
Physical and technical condition of the property
A detailed examination of the physical condition of the property is primarily the responsibility of the buyer and, where necessary, a technical expert. However, the lawyer may draw attention to legal risks that may arise in connection with the actual condition of the property.
Such risks may arise, for example, if there is a building, extension or conversion on the property whose permitting background is unclear, or if the data recorded in the land registry does not correspond to the actual condition of the property. This may be particularly important in connection with bank financing, later resale, occupancy permits, retention permits or land registry procedures.
For this reason, before purchasing a property, it is advisable to proceed carefully not only from a legal perspective, but also from a practical point of view.
Creating contractual safeguards
Since a real estate sale and purchase transaction usually involves a significant amount of money, the contract must contain appropriate safeguards. The purpose of these safeguards is to protect the interests of both the seller and the buyer.
The contract should regulate, among other things:
- the exact purchase price;
- the payment schedule;
- the issue of earnest money or advance payment;
- the date of taking possession;
- the transfer of utility meters;
- the settlement of encumbrances;
- the conditions for issuing the registration permit for ownership transfer;
- the conditions of bank disbursement if the purchase is financed by a loan.
In the case of an encumbered property, a common solution is for a certain part of the purchase price to be paid directly to the creditor bank. This may reduce the risk that an existing encumbrance remains on the property contrary to the parties’ intention.
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Transfer tax, exemptions and the NAV procedure
When purchasing real estate in Hungary, the buyer is generally required to pay transfer tax. In certain cases, however, tax allowances or exemptions may be available, for example in connection with the acquisition of a first home, exchange of residential property, purchase of a newly built residential property or transactions between family members.
During the preparation of the sale and purchase agreement, the lawyer may draw the parties’ attention to any potentially available allowances or exemptions. However, the final assessment of transfer tax falls within the competence of the Hungarian Tax and Customs Administration, known as NAV.
It is important to examine the conditions of any transfer tax allowance or exemption based on the circumstances of the specific case, because previous property acquisitions, inheritance or the acquisition of an ownership share may also affect eligibility.
Drafting and countersigning the contract
Based on the agreed terms, the lawyer prepares the draft sale and purchase agreement. The parties may review the draft, request amendments, and after the final text has been approved, the contract is signed.
The lawyer’s countersignature confirms that the document complies with the requirements applicable to attorney-countersigned documents and may be suitable for producing the intended legal effect, in particular the registration of ownership in the land registry.
The lawyer’s role is therefore not merely to draft a document, but also to ensure that the contract properly reflects the parties’ intentions and can be used in the land registry procedure.
Land registry procedure
After the sale and purchase agreement has been signed and countersigned, the lawyer submits the necessary documents to the competent land registry. The land registry decides on the registration of ownership on the basis of the submitted application and documents.
During the land registry procedure, the lawyer monitors the progress of the case, assists with any requests for supplementation if necessary, and informs the parties about the status of the procedure.
Do you have a real estate legal question? Contact our office.
Why is it important to choose the right lawyer?
Several areas of law may meet in a real estate transaction: civil law, land registry law, tax law, transfer tax law, building law, inheritance law or even family law. A contract that is incorrectly or incompletely prepared may result in delays, additional costs, land registry rejection or later legal disputes.
The purpose of proper legal assistance is to ensure that the transaction is completed safely, transparently and in accordance with the interests of the parties.
If you are planning to buy or sell real estate in Hungary, it is advisable to seek legal assistance at an early stage of the transaction. This allows potential risks to be identified before the contract is signed and solutions to be developed that make the process predictable for both parties.
Why choose our office?
✔ LL.M. in Real Estate Law
✔ Several years of administrative and building authority experience
✔ Office in Debrecen, legal representation throughout Hungary
The information above is for general information purposes only and does not constitute legal advice. Since every case has its own specific facts and circumstances, it is advisable to seek legal consultation in relation to any specific legal matter.