Buying real estate is one of the most significant financial decisions in most people’s lives. When choosing a flat or a house, buyers usually focus on the property’s condition, location and price – yet examining the legal status of the property is at least as important.
Many people believe that the lawyer’s task is limited to drafting the sale and purchase agreement. In reality, the lawyer’s role is far more complex. A diligent lawyer checks numerous circumstances before the contract is signed – circumstances that could later cause significant problems or even serious financial loss.
Why Is the Lawyer’s Review Important?
The Hungarian land registry is authentic and publicly reliable; however, a land registry extract alone does not necessarily reveal every circumstance that may be relevant to the transaction.
The lawyer’s task is to reveal any legal risks and to help ensure that the buyer really purchases a property whose ownership can later be acquired without problems.
1. Checking the Land Registry Extract
The first step of the lawyer’s review is usually examining the property’s land registry extract.
Among other things, the land registry extract shows:
- who owns the property;
- the size of their ownership share;
- what encumbrances burden the property;
- whether any pending procedure may affect the ownership.
The lawyer verifies whether the seller is actually entitled to dispose of the property and whether ownership can be acquired without obstacles.
2. Examining Encumbrances and Rights
The third section of the land registry extract lists the rights and facts encumbering the property.
These may include, for example:
- a mortgage;
- a right of enforcement (execution lien);
- a prohibition on alienation and encumbrance;
- a usufruct right;
- a utility easement;
- an easement;
- a right based on a maintenance or life annuity agreement.
Some of these do not prevent the sale and purchase, but they can significantly affect the value or the usability of the property.
3. Examining the owners and the entitled parties
It is not uncommon for a property to have several owners.
In such cases, the lawyer checks whether:
- all owners are participating in the transaction;
- they have the necessary authority;
- any further consent or declaration is required.
In certain cases, the involvement of a spouse, a usufructuary or another entitled person may also be necessary.
4. Whether the Property Is Free of Litigation, Encumbrances and Claims
One of the most important elements of a sale and purchase agreement is recording the legal condition in which the property passes to the buyer.
The lawyer examines whether any circumstance exists that could hinder or jeopardise the acquisition of ownership.
It can be especially important to check whether any court or administrative proceedings affecting the property are pending.
5. The Security of Paying the Purchase Price
The lawyer not only checks the legal status of the property but also looks after the security of the financial performance.
In doing so, the lawyer assists with, among other things:
- determining the instalments of the purchase price;
- the proper handling of the earnest money or advance payment;
- structuring the terms related to the bank loan;
- coordinating the handover of possession with the registration of ownership.
A well-designed payment structure can significantly reduce the risks of both the buyer and the seller.
6. Preparing the Land Registry Filings
Signing the sale and purchase agreement does not in itself result in the acquisition of ownership.
A land registry procedure is required for the registration of ownership.
The lawyer takes care of, among other things:
- preparing the necessary documents;
- filing the application for the registration of ownership;
- obtaining the related declarations;
- monitoring the procedure.
7. What Problems Can the Lawyer Prevent?
Proper legal review can help avoid numerous unpleasant situations.
For example:
- discovering hidden encumbrances after the purchase;
- buying from a seller who is not entitled to sell;
- disputes between co-owners;
- purchasing a property encumbered by a usufruct right;
- acquiring a property affected by enforcement proceedings;
- problems arising from a faulty or incomplete contract.
Should the Lawyer Only Get Involved at the Signing of the Contract?
In many cases, buyers only look for a lawyer once they have already agreed with the seller, or have even handed over earnest money.
In practice, however, it is advisable to seek legal assistance at an earlier stage of the negotiations.
A timely review can help prevent the buyer from undertaking obligations that may later pose significant risks.
Summary
The lawyer’s role goes well beyond drafting the sale and purchase agreement. Examining the legal status of the property, checking the land registry extract, uncovering encumbrances and establishing secure contractual terms all contribute to completing the transaction with the lowest possible risk.
Before buying a property it is therefore worth seeking legal assistance already at an early stage of the process, so that unpleasant surprises can be avoided later.
English 
Magyar