What does a lawyer do in a real estate transaction?

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.

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.

✔ LL.M. in Real Estate Law

✔ Several years of administrative and building authority experience

✔ Office in Debrecen, legal representation throughout Hungary