Introduction of the Condominium Building Right into the Legal System
The Parliament has adopted the bill on the amendment of certain acts related to the introduction of the condominium building right, thereby officially creating a new concept of property law — the condominium building right — within the current legal system, alongside several other amendments affecting various areas. In addition to the above, the adopted bill clarifies the applicability of the provisions of the Civil Code concerning the building right (explicitly excluding certain rules in the case of the condominium building right), and amends Act C of 2021 on the Land Registry so that the purchasers’ right relating to a future building — similarly to the purchasers’ right linked to retained ownership — may have a suspensory effect for up to six months on subsequently submitted land registry applications.
The essence of the condominium building right is that, in a condominium under construction, an independent, registrable and encumberable property right may be created in favour of the purchaser in respect of a specific apartment that is later to be established as a separate unit under the founding deed. This right automatically converts into ownership upon the actual establishment of the condominium, retaining the same ranking. An important precondition for establishing the condominium building right is that the fact of the preliminary establishment of the condominium must already be recorded on the title deed. The condominium building right may only be created in connection with the sale and purchase agreement (or a closely related separate agreement) relating to the apartment to be built, for the benefit of the purchaser, in exchange for consideration, whereby the amount paid as consideration for acquiring the right is set off against the purchase price of the property to be created. In the event of enforcement proceedings initiated against the property or the insolvency of the owner, the purchaser obtains a position similar to that of a mortgagee, up to the amount of the purchase price already paid.
The building right may be transferred, but only if the obligor of the right, the original beneficiary, and the new beneficiary enter into an agreement in accordance with the rules of contract assignment, under which all rights and obligations arising from the sale and purchase agreement relating to the property are transferred from the original to the new beneficiary. If the sole beneficiary of the condominium building right dies, the right, as a general rule, reverts to the obligor, who must repay to the heir the amount of the purchase price (or the relevant portion thereof) already paid under the sale and purchase agreement, together with interest calculated from the date of payment.
From a business perspective, the purpose of the condominium building right is to make the risks associated with ongoing condominium developments more manageable and to make the well-known pre-sales phase of new-build projects — purchasing “off-plan” — safer. The purchaser does not merely hold a contractual claim but acquires a property-law position over the specific apartment already during construction, linked to the instalments of the purchase price paid, which ultimately converts into ownership. This may reduce risk on the purchaser’s side, thereby increasing the attractiveness of early entry into such projects. For developers, pre-sales and project financing may become more predictable, as purchasers will enter into agreements with stronger legal protection. For banks, the new structure offers opportunities because the condominium building right may be encumbered with a mortgage already during the construction phase, allowing collateral to appear much earlier and in a more structured way.
Overall, the introduction of the condominium building right is a reform affecting several pieces of legislation, aiming to strengthen the position of purchasers, financing banks, and developers simultaneously through a new legal instrument of property law. If it proves effective in practice, this structure may reduce uncertainties surrounding new-build condominium projects, improve purchaser confidence, and — particularly in combination with the Home Start Programme — contribute to making the market for new apartments more predictable, more financeable, and therefore more attractive for purchasers in the coming years.
dr. Martin Gortva / dr. Aliz Orbán
