Hungarian law differentiates between regular property leases that are used for leasing commercial and residential buildings or units and usufructuary leases that are used for leasing agricultural land. Regular leases are used for commercial, retail, industrial or residential premises and are much more common than usufructuary leases. While a lease entitles a tenant to use the relevant property, under a usufructuary lease agreement a tenant is entitled to use and collect income from the property.
A usufructuary lease agreement is common in relation to arable land, woodland and grazing land and the legal provisions applicable to regular leases also apply to usufructuary leases, with a few exceptions.
Commercial property leases follow the general rules applicable to regular property leases and more often than not are signed on a triple-net basis in line with international standards. When the property is financed, rents are usually pledged in favour of the financing bank.
In the case of office leases, the fit-out works and delivery of premises, repair and maintenance, the allocation of service costs and the grounds for termination are, as a rule, regulated in great detail.
Hotel leases are similar to office leases and often contain detailed provisions relating to the management of the property. In the case of international franchises, management is dealt with in a separate management agreement involving a dedicated hotel-management company.
Retail leases may have provisions enabling the landlord to maintain a healthy mix of tenants in the shopping centre. These agreements may contain obligations which exist for the benefit of the shopping centre as a whole, such as keep-open obligations and obligations to contribute towards the marketing of the shopping centre. Although the landlord will maintain the structure and exterior of the premises, a retail tenant may be given the right to maintain its own shopfront in its normal trading style.
Industrial property leases may contain specific provisions with respect to the activities carried out at the leased premises/property.
Last modified 13 Mar 2025
Leases in Hungary can be entered into for a definite or an indefinite period of time. There are no statutory time limitations to the term of a lease.
The usual term length for Class A office and retail premises is between 5 and 10 years, sometimes with an option for the tenant to unilaterally extend the term by three to five years. For industrial buildings the usual term is somewhere between three and five years.
Last modified 13 Mar 2025
There are some distinctions between residential leases and commercial leases.
Residential lease tenants generally enjoy stronger protection than in the case of commercial leases. Termination for non-payment and the procedure to be followed by the landlord during termination is regulated in great detail and parties are not allowed to contract out of these statutory provisions. Also, the tenant is provided with a step-in right to carry out any repair and maintenance works which the landlord has failed to carry out and to recover all reasonable costs associated with such works from the landlord.1
In commercial leases the parties enjoy great contractual freedom and are able to contract out of most provisions of the Hungarian Civil Code and the Leasing Act, allowing landlords to implement standard, institutional lease agreements in Hungary.
1 Act LXXVIII of 1993
Last modified 13 Mar 2025
No, there is no legislation in Hungary which gives a tenant of business premises the right to remain in occupation once the lease has expired, with the only exception being where the tenant remains in the leased premises and landlord fails to object within 15 days of the expiry of the lease term, in which case the lease is legally converted into a lease for an indefinite term.1
1 Civil Code 6:338.§ (1)
Last modified 13 Mar 2025
It is recommended to agree on a method and timetable for the vacation and return of the leased premises by tenant in the lease agreement. Additionally, the landlord may require the tenant to deliver an eviction consent declaration to be issued by tenant in the form of a notarial deed, upon signing the lease agreement. The landlord, relying on the notarial deed, is able to start eviction enforcement proceedings without the need to go to trial, allowing the tenant to be evicted from the leased premises within a short period of time.
If a tenant has not delivered an eviction consent declaration in the form of a notarial deed to the landlord, then the landlord can seek a court order and judicial enforcement to enable it to recover possession of the premises.
Last modified 13 Mar 2025
If the lease is lawfully terminated (eg for non-payment of rent) prior to the date originally agreed and the tenant does not surrender possession, the landlord can seek a court order and request judicial enforcement to recover possession of the premises. This procedure may take several months. If the tenant has delivered an eviction consent declaration in the form of a notarial deed based on the lease agreement, the landlord is able to start eviction enforcement proceedings without the need to go to trial.
Last modified 13 Mar 2025
In certain circumstances strictly regulated by law, the state or local authorities are entitled to expropriate real estate, including properties held under leases. Expropriation proceedings conducted by the administrative authority usually take around five to six months and the decision of the authority may be challenged in a civil court. In such cases the state or the local authority is obliged to provide the tenant with either appropriate replacement premises or monetary compensation.1
There is no obligation to provide an appropriate replacement premise if the applicant for expropriation declares that they have no suitable property to offer and that it is likely that taking the necessary steps to offer another suitable property would (due to its time-consuming nature) lead to a significant delay in the procedure.2
1 Act CXXIII of 2007 on expropriation. 9-21.§
2 Act CXXIII of 2007. 14.§ (3a)
Last modified 13 Mar 2025
The parties enjoy contractual freedom to agree in any form of security, such as bank guarantee, parent company guarantee or cash deposit.
The tenant is usually required to provide a security equal to approximately three months’ rent either in the form of a cash deposit or an unconditional bank guarantee. Although less frequent, a corporate guarantee from the tenant’s parent company may sometimes be acceptable for the landlord. If the subject of the lease is a residential real property, the tenant is entitled under the Hungarian Civil Code to challenge any security greater than three months’ rent.
The landlord also has a statutory lien on a tenant’s moveable property placed in the leased premises as security for any unpaid rent and costs. The landlord is entitled to prevent the removal of such property as long as its lien remains in effect. If the tenant removes this property without the landlord’s permission and does not provide other appropriate security, the landlord is entitled to demand the return of the property at the tenant’s expense.1
1 Civil Code 6:337.§
Last modified 13 Mar 2025
Leases normally restrict the scope of activities the tenant may carry on in the leased premises. Changing the scope of activities requires the prior consent of the landlord. Activities which may cause a nuisance are also prohibited under commercial lease agreements.
The hours of operation of consumer goods retailers are regulated in great detail, and local municipalities may impose additional restrictions on hours of operation and certain activities pursued in certain districts of an urban area.
Last modified 13 Mar 2025
The landlord and the lessee may agree that the lessee is entitled to carry out alterations or improvements to the leased premises, by agreeing on the costs as well. Without such an agreement, there is a risk that the lessee is not entitled to claim reimbursement of these costs, not even at the termination of the lease and the rules of unjust enrichment may not be applied. 1
As a general rule, a lessee shall be entitled to remove any and all items that he has added to the leased premises at his own expense without causing any damage to the premises. If items added by the lessee cannot be removed without causing damage to the leased premises, the tenant may claim compensation from the landlord on the basis that the landlord would otherwise be unjustly enriched. The tenant may remove other improvements.2
1Act LXXVIII of 1993 on rules of leasing flats and other real properties and on their alienation, 15.§ (1)
2Civil Code 6:341.§ Act LXXVIII of 1993
Last modified 13 Mar 2025
Under Hungarian law it is legally possible to transfer commercial leases with the consent of the landlord. The law requires that such consent should be given in writing. Commercial lease agreements usually provide that the landlord’s approval may not be unreasonably withheld and sometimes a deadline is also set for the landlord’s response.
Transfers of leases by tenants are not very common, because in such cases most landlords prefer to enter into a new agreement with the new tenant.1
1Civil Code 6:208-211.§§
Last modified 13 Mar 2025
Annual indexation on the basis of the consumer price index is the general practice in Hungary. Other types of variable rent arrangements – including rent review on the basis of increases in market rent – are not common in Hungary. In the case of retail leases, the rent has often two components: base rent and turnover rent. Under this structure the base rent is the minimum rent payable by the lessee, to which an agreed proportion of the turnover generated by the lessee in the leased retail premises is added, subject to certain conditions. Details of the rate and calculation of the turnover rent shall be set out in the relevant retail lease agreement.
Last modified 13 Mar 2025
If the rent is denominated in Hungarian forints, then it is normally adjusted annually in line with inflation in Hungary (as measured by the consumer price index published by the Hungarian Central Statistics Office) or by an agreed proportion of the rate of inflation. Where the rent is determined in euros or US dollars, the Harmonised Index of Consumer Prices issued by Eurostat or the equivalent US CPI is generally used for indexation.
Last modified 13 Mar 2025
Generally, the leasing out of real properties is exempt from VAT, however, the lessor may opt to treat its real property leases as subject to VAT. In this latter case the applicable VAT rate is 27%.1
1Act CXXVII of 2007 on VAT, 86.§ (1) l.
Last modified 13 Mar 2025
Security deposit: When defining the terms of the lease agreement, the parties usually agree on a security deposit payable by the tenant in order to ensure that the landlord has sufficient security in the event of default or non-payment. It is normally set at two months' rent, and if the amount exceeds three times the monthly rent, it can be reduced by the court on the tenant's application.1 The landlord may deduct the amount owed by the tenant from the security deposit if the tenant is in default, or if the tenant is in breach of any contractual obligation under the lease agreement.
Termination of the lease agreement: Pursuant to the Civil Code, in the event of non-payment of the rent (or of any other costs and charges payable by the tenant), the landlord has the right to terminate the contract provided that the landlord has given the tenant a notice to pay, setting a reasonable deadline and warning of the consequences, and the tenant has not paid by the end of such deadline.2
Statutory pledge: The landlord has a statutory pledge over the tenant's assets for the amount of the rent and service charges owed, for as long as the tenant's assets remain in the property. This means that the landlord can withhold those assets and, ultimately, satisfy its claim by selling such assets.3
Order for payment procedure4: The landlord can also initiate a so-called order for payment procedure, which is a non-contentious procedure before a notary public and is specifically designed to enforce overdue money claims. The only way to enforce a claim for money not exceeding HUF 3 million is by means of an order for payment procedure, which is the procedure most often used by landlords against tenants who have accumulated debts. However, an important rule is that this procedure cannot be used if the parties do not have a domicile or residence in Hungary, so for foreign tenants who do not have a domicile or residence in Hungary (ie an address card), this procedure will not be available. In such cases, a European order for payment procedure shall be initiated.
The European order for payment procedure covers overdue monetary claims in cross-border civil and commercial matters. For the purposes of the procedure, a matter is deemed to be of a cross-border nature if at least one of the parties resides or has his habitual residence in a Member State other than the Member State where the court (in Hungary, the notary) is located (with the exception that a European order for payment procedure cannot be started in Denmark). Unlike the Hungarian order for payment procedure, in these cases claims can be enforced regardless of the value of the claim.
In the case of an order for payment, a procedural fee of 3% of the amount of the claim must be paid in order for the procedure to start. If the tenant objects to the payment order sent to him by the notary public within 15 days, (ie disputes the existence of the debt on any grounds), the payment order procedure is converted into a judicial procedure before the civil courts, in which case additional costs will incur. If the tenant does not object to the order for payment and it becomes final, the debt can be recovered by enforcement proceedings.
In the case of a lease agreement incorporated in a notarial deed: A lease agreement incorporated in a notarial deed has special force of evidence and is directly enforceable provided that certain other conditions are met. This means that if the tenant fails to pay the rent (or service charges) or refuses to move out of the property after the lease agreement has been terminated, the landlord does not have to initiate court proceedings (or to initiate an order for payment procedure) to enforce its claim or evict the tenant. In order to enable the landlord to enforce its rights quickly and effectively, the notary will add an enforcement clause to the agreement, allowing the enforcement officer to collect the debt directly or even evict the tenant with the assistance of the police. The general rules apply in relation to rent and service charge arrears, ie the landlord can enforce his claim within a limitation period of 5 years. In addition to the debt, the landlord will also be entitled to interest on arrears for the period of the delay resulting from the non-payment.
1Act V of 2013, 6:343. §
2Act V of 2013, 6:336. § (3)
3Act V of 2013, 6:337. §
4Act L of 2009 on the rules of the order for payment procedure; Regulation (EC) No 1896/2006 of the European Parliament and of the Council of 12 December 2006 creating a European order for payment procedure.
Last modified 13 Mar 2025
These include charges for common services (including property-related taxes, sometimes even the local business tax payable by the landlord) and some form of security (typically a security deposit or bank guarantee). Retail leases in shopping malls commonly require tenants to pay an upfront sum as ‘key money’ or as an ‘opening fee’.
Last modified 13 Mar 2025
The landlord is obliged to maintain the common areas, repair defects in the structure and the interior of the building, in particular those relating to gas, water and electricity supplies, which might be dangerous, and to maintain the central appliances in the building. The landlord may also be obliged (as far as legally, economically and technically possible) to make beneficial improvements, such as the installation of appropriate waste disposal systems, sanitary appliances, lifts and sound insulation. The cost of such maintenance and repair is usually recovered from the tenants by means of service charges.1
1Act LXXVIII of 1993, 10.§
Last modified 13 Mar 2025
Unless the parties agree otherwise, the tenant, at its own expense, is responsible for the day-to-day maintenance and upkeep of the leased premises, while the landlord is responsible for structural repairs and maintenance.1
1Act LXXVIII of 1993, 10.§, Civil Code 6:335.§ (1)
Last modified 13 Mar 2025
In the case of utilities serving multiple occupiers, supply contracts for utilities and telecommunications are usually entered into by the landlord with any and all costs transferred to the tenants by contractual agreement. In certain cases, however, such contracts may be entered into by each tenant directly.
Last modified 13 Mar 2025
Quite often the full cost of insurance is passed on to the tenant(s) as part of the common service charge. In addition, tenants are normally required to take out adequate insurance on items belonging to them and brought into the property, as well as insurance against third party claims.
At a minimum, building insurance usually covers damage by fire, burst or leaking water pipes and storm. Insurance against terrorist damage and loss of rent are also available in Hungary.
Last modified 13 Mar 2025
What types of arrangement does the law recognize which allow occupation and use of real property for a limited period of time?
Hungarian law differentiates between regular property leases that are used for leasing commercial and residential buildings or units and usufructuary leases that are used for leasing agricultural land. Regular leases are used for commercial, retail, industrial or residential premises and are much more common than usufructuary leases. While a lease entitles a tenant to use the relevant property, under a usufructuary lease agreement a tenant is entitled to use and collect income from the property.
A usufructuary lease agreement is common in relation to arable land, woodland and grazing land and the legal provisions applicable to regular leases also apply to usufructuary leases, with a few exceptions.
Commercial property leases follow the general rules applicable to regular property leases and more often than not are signed on a triple-net basis in line with international standards. When the property is financed, rents are usually pledged in favour of the financing bank.
In the case of office leases, the fit-out works and delivery of premises, repair and maintenance, the allocation of service costs and the grounds for termination are, as a rule, regulated in great detail.
Hotel leases are similar to office leases and often contain detailed provisions relating to the management of the property. In the case of international franchises, management is dealt with in a separate management agreement involving a dedicated hotel-management company.
Retail leases may have provisions enabling the landlord to maintain a healthy mix of tenants in the shopping centre. These agreements may contain obligations which exist for the benefit of the shopping centre as a whole, such as keep-open obligations and obligations to contribute towards the marketing of the shopping centre. Although the landlord will maintain the structure and exterior of the premises, a retail tenant may be given the right to maintain its own shopfront in its normal trading style.
Industrial property leases may contain specific provisions with respect to the activities carried out at the leased premises/property.
Last modified 13 Mar 2025