With effect from 28 January 2025, the court fees for initiating first-instance proceedings will be changed. This change will make it cheaper to initiate lower value claims, while higher value claims will become more expensive. As a result, alternative dispute resolution methods, particularly arbitration, may become more popular. From 8 February 2025, the Hungarian Supreme Court’s guidelines on attorneys’ fees will essentially be elevated to the level of legislation. As a result, prevailing parties can expect greater reimbursement of legal fees as part of litigation costs.

Changes to Court Fees

Currently, the court fee for initiating first-instance litigation is generally 6% of the claim value, capped at HUF 1,500,000. This means that even if the plaintiff’s claim is worth hundreds of millions of forints, the fee cannot exceed HUF 1,500,000 (approx. EUR 3,800).

However, from January 28, 2025, the court fee structure will change significantly. The legislator will abolish the HUF 1,500,000 cap and the 6% fee system. Instead, a nine-tier system will be introduced as follows:

Claim Value	Fee Amount
Up to HUF 300,000	HUF 18,000
HUF 300,001–3,000,000	HUF 18,000 + 4.5% of the amount over HUF 300,000
HUF 3,000,001–10,000,000	HUF 139,500 + 5% of the amount over HUF 3,000,000
HUF 10,000,001–30,000,000	HUF 489,500 + 7% of the amount over HUF 10,000,000
HUF 30,000,001–50,000,000	HUF 1,889,500 + 4.5% of the amount over HUF 30,000,000
HUF 50,000,001–100,000,000	HUF 2,789,500 + 2.5% of the amount over HUF 50,000,000
HUF 100,000,001–250,000,000	HUF 4,039,500 + 2% of the amount over HUF 100,000,000
HUF 250,000,001–500,000,000	HUF 7,039,500 + 0.5% of the amount over HUF 250,000,000
Over HUF 500,000,001	HUF 8,289,500 + 0.5% of the amount over HUF 500,000,000

 

For disputes related to residential property, if the claim value does not exceed HUF 250,000,000 (approx. EUR 620,000), half of the above fees, but at least HUF 489,500 (approx. EUR 1,300) must be paid.

In smaller-value cases (e.g., claims between EUR 20,000 and EUR 40,000), the court fee will decrease slightly compared to the current fee. However, for claims exceeding EUR 63,000 the fee will start to increase. For significant disputes with a claim value over EUR 1,200,000 initiating litigation will become considerably more expensive.

There is a growing consensus that parties will increasingly turn to alternative dispute resolution methods, such as arbitration and mediation, to resolve their disputes. The legislative change may also encourage parties to settle their disputes out of court.

It is important to note that the legislative change does not affect the fees for second-instance or review procedures. The fee for second-instance procedures remains 8% of the claim value, capped at HUF 2,500,000 (approx. EUR 6,300) and the review fee remains 10% of the claim value, capped at HUF 3,500,000 (approx. EUR 8,800). The change also does not affect the fees for cases where the fee is specifically determined by law (e.g., divorce cases).

Changes to Attorney Fees

If a party is represented by an attorney or law firm during litigation, the attorney fees are agreed upon in the engagement agreement between the client and the attorney. The agreement may include a fixed fee for the entire procedure, hourly billing, fees for specific procedural stages, or success fees.

Parties can claim the attorney fees stipulated in the engagement agreement as litigation costs or request the court to determine the attorney fees based on the claim value.

For a long time, judicial practice has reduced the claimed attorney fees, often preventing the prevailing party from passing the full cost onto the losing party. However, in the spring of 2024, the Hungarian Supreme Court significantly changed this practice (Pfv.II.20.887/2023/6).

The Hungarian Supreme Court ruled that fees based on hourly billing can only be reduced if they are significantly different from market rates and are clearly unreasonable. The court emphasized that the number of pages in submissions or the number of hours spent in hearings cannot be the basis for determining attorney fees, as other tasks (e.g., client consultations, preparation, document review) are also involved. The quality of the attorney’s work cannot be evaluated either, as this could lead to the conclusion that the attorney’s work was inadequate despite winning the case.

According to the Hungarian Supreme Court’s guidelines, the court’s reasoning for reducing litigation costs must be based on specific case data. This emphasis on detailed reasoning and the criteria set forth clearly favour prevailing parties, allowing them to pass on a greater portion of the attorney fees to the losing party than previously possible.

The Hungarian Supreme Court’s decision is precedential, and lower courts are expected to follow it. Most courts apply the Supreme Court’s guidelines, although there are occasional deviations.

Recognizing these developments, the Ministry of Justice has elevated the Supreme Court’s guidelines to the level of legislation with the issuance of IM Decree 17/2024 (XII.9.), effective from February 8, 2025.

Under the new decree, attorney fees can still be charged based on the engagement agreement between the attorney and the client, but there will also be the option to charge fees based on the claim value.

In the future, courts will have a much narrower scope to reduce the attorney fees claimed in litigation.

A significant change is that courts can only reduce the attorney fees claimed by the prevailing party at the request of the opposing party. The new regulation specifies two reasons for reducing attorney fees: if the fees are unrelated to the rights being enforced and therefore unnecessary, or if they are disproportionate to the actual work performed.

A key limitation is that attorney fees charged based on the engagement agreement can generally only be reduced by up to 50%. Greater reductions are only possible in exceptional cases where the fees are excessively high and unreasonable compared to market rates. The legislator has essentially elevated the Supreme Court’s requirements to the level of legislation by mandating detailed reasoning.

We believe that the legislative change regarding attorney fees will increase the likelihood that prevailing parties will be able to pass the full cost of attorney fees onto the losing party.

If you have any questions regarding litigation or dispute resolution, please do not hesitate to contact our colleagues.

This summary is for informational purposes only and does not cover all relevant issues. It does not constitute legal advice.

 

From 1 January 2025, a significant change will enter into force for enterprises: the introduction of TEÁOR’25, an updated version of the Hungarain activity classification. This means new TEÁOR codes for all companies, which will be automatically modified and registered by the Hungarian Tax Authority (HTA).

What happens to the TEÁOR codes?

• Automatic transfer: until 31 January 2025, the HTA will amend the TEÁOR codes identifying the main activities and other activities that can be converted to the new TEÁOR’25 system based on a conversion table. The HTA will also register these changes in the company register.
• Registration obligation:
  • If a company intends to change the main activity code that has been automatically converted by the NAV, the company must register it by 1 July 2025 at latest, based on the new TEÁOR’25 codes.
  • Other activities not automatically converted must also be registered by 1 July 2025.
• Automatic deletion: TEÁOR codes identifying other activities that cannot be converted based on the conversion table will be deleted by 31 August 2025.

What must be done in relation to the amendment of the articles of association?

The articles of association must also be amended to comply with the new TEÁOR’25 codes.

Deadline for this:

• The amended articles of association must be submitted no later than the first data change in the company register after 1 July 2025.

It is important to note that if the amendment of the articles of association is solely to comply with TEÁOR’25, the request for registration of the change may be submitted with no payment of fee and publication cost.

The Guest Investor Program, which has been known to many as the „Golden Visa”, which has been the subject of considerable interest and several amendments since its announcement, has been officially launched on 1 July 2024, giving third country investors the opportunity to apply for a guest investor visa and, on the basis of that, for a 10+10-year guest investor residence permit.

Despite of the legal provisions, investors are forced to wait for the effective launch of the program and before making their investments, the reasons and circumstances of which dr. Martin Gortva, Head of the Global Mobility Practice Group of our Kapolyi Law Firm will try to explore and describe in the paragraphs of this article.

The guest investor program

As a first step in the analysis of the situation, it is necessary to have a brief review of the main rules of the program, which has been amended several times. The main condition for obtaining the guest investor residence permit, in addition to meeting other, mainly technical and (national) security requirements, is that the guest investor makes one of the following investments, as defined by law:

1. acquisition of real estate fund shares of a minimum value of EUR 250 000 in a fund registered with the National Bank of Hungary and managed by a fund manager that meets and complies with certain requirements; or
2. acquisition of a residential property in Hungary, registered in the land register with and under its own topographical lot number worth at least EUR 500 000;
3. making a financial donation of at least EUR 1 000 000 to support educational, scientific research or artistic creation to an institution of higher education maintained by a public trust with a public-service mission.

A third-country national wishing to obtain the guest investor residence permit must first apply for a guest investor visa with a validity of 6 months, the precondition of which is the implementation of one of the investments set out above or, alternatively, a submission of a written commitment and declaration to carry out at least of the investments within three months of the issuance of the guest investor visa.

Based on the above, it would appear that everything is in place to ensure that third country investors who wish to obtain a guest investor residence permit and who meet the investment requirements can take advantage of the opportunities offered by the program, however, in practice, the individuals wishing to invest in the first two categories are faced with the fact that the actual launch of the scheme has yet to take place, the circumstances and causes of which we will try to reveal in more detail.

Circumstances regarding investments in real estate funds

The relevant legislation and implementing regulations set out specific rules and requirements – which have been amended several times since the draft legislation was first published and adopted – for both fund managers wishing to participate in the scheme and the real estate funds they manage. One of these significant conditions is that only the acquisition of units distributed by a real estate fund whose fund manager is listed on the so-called “list of qualified market operators” maintained by the Constitution Protection Office is eligible for the scheme. Registration on the list of qualified-market operators is subject to a special preliminary qualification procedure carried out by the Constitution Protection Office and its conclusion with a positive result, which includes an examination of the company, the examination of the persons affiliated with the company and an examination of the economic operator’s field of activity. The procedure itself is quite time-consuming, but the detailed rules and requirements regarding the special list of qualified market operators and the expectations for fund managers to be included in the list were only published in May 2024, just weeks before the official launch of the program. The combination of such circumstances has resulted in the fact that the preliminary qualification procedures initiated by the fund managers in front of the Constitution Protection Office wishing to participate in the program were not yet completed until the official launch of the program on 1 July 2024, and in fact, significant part of such procedures are still ongoing, resulting in that currently there is no operator on the market that meets the conditions set by the legislation and has obtained the required special qualification. As a result, there is no investment fund share, “product” on the market that meets the legal requirements and that the investors can buy for such purposes. In addition to the above qualification procedures, other significant obstacles to the program are regulatory uncertainties and open issues, mainly in the areas of capital markets and real estate law, which areas were already extremely complex even before the introduction of the Guest Investor Program. The legislator sets technical and compliance requirements for funds and fund managers at several levels, the interpretation and enforceability of which, however, under the current provisions, create considerable uncertainties and raise further questions for professionals. The clarification and specification of these circumstances is still a task for the legislator and an important prerequisite for the creation of a “product” for obtaining a residence permit, in accordance with the rules of the program, and thus for the effective launch of the program. In view of the above, it is reasonable to assume that further detailed rules on the scheme will be introduced.

While it is undisputed that, in principle, the possibility is already open for third country nationals to apply to the competent authority for the guest investor visa, it is important to reiterate and highlight that, based on the current wording of the legislation, the maximum period of validity of a guest investor visa is six months, but the applicant must declare that in which investment category he or she intends to invest within three months of the issuance of the guest investor visa. However, the current lack of a suitable “product”, carries the risk that the investor will objectively not be able to complete his investment within the committed timeframe and his visa will expire before the right conditions are in place.

Investment in residential property

According to the first draft and promulgated version of the new immigration act, the option of obtaining a guest investor residence permit through an investment in a residential property of at least €500,000 was open to potential investors from 1 July 2024, similar to the option for investment fund shares, but one of the amendments to the legislation changed the applicability of this alternative to 1 January 2025, with the additional condition that only the properties acquired after this date would be recognized and eligible for the scheme.

In addition to the rules on the validity of visas, which have already been described above, the spread of contradictory and often unsubstantiated information in the real estate market is causing third-country nationals wishing to invest to wait even longer.

The most important and controversial issue of the conflicting information circulating in the market is that whether the required residential real estate investment can be achieved by building up a portfolio of several smaller properties and adding up their value, which interpretation can not be supported by neither the current wording of the relevant legislation, nor the official forms prepared to initiate the procedure for applying for a guest investor visa and residence permit.

It is also crucial to underline that only the acquisition of an already built, finished residential property, registered as a separate property in the land register, with a separate topographical lot number, is eligible for the scheme, while project properties purchased off-plan or under construction do not, which significantly reduces the range of available and suitable properties, which may cause further difficulties for those planning to invest in this category.

In conclusion, given the fact that the capital markets focused option, which requires the investment of EUR 250,000, still requires a considerable amount of (regulatory) work to be done by the legislator and the authorities in charge of classifications, which are the preconditions for the creation of a suitable “product” by the market players, and the fact that the residential property investment option will only be available from 1 January 2025, the investors will have to wait a little longer, unless they wish to participate in the program by taking advantage of perhaps the least attractive investment option, i.e. by making a donation of EUR 1.000.000,-, for which, the way is clear.

A new draft legislative act, which is still under discussion, aiming to amend certain laws “in order to increase the competitiveness of the economy”, has recently been published for public consultation; the backbone thereof are proposals to amend the Civil Code in force. The main points of this draft concerning the Civil Code include inter alia, the introduction of more detailed rules on subordinated lien in order to clarify the legal position of the assignee, the introduction of a new, special case of separation, known as “detachment”, as well as the intention to introduce or reintroduce the law on the right of construction into the Hungarian legal system. In this article, we would like to highlight the latter legal institution, which has already been part of the Hungarian legal system once, and to present its planned regulation as well as its possible practical effects on economic life.

The concept and characteristics of the right of construction

The right to construct, as defined in the draft legislation, entitles the holder to construct or exploit a building on or under the surface of immovable property, whereby it is entitled to construct a building, to use the immovable property for this purpose, to occupy, use or collect the proceeds of the constructed or existing building. The right to construct shall extend to the building erected or exploited thereunder and to its components too.

The right to construct is a marketable and transferable right, it may be subject to succession, and held simultaneously and jointly by several holders, subject to the rules governing common ownership. The right to construct may be encumbered by a lien registering it in the Land Registry, nevertheless, it is important to stress that it is not equivalent to a mortgage on the property.

According to the proposal, the right to construct can be created by a written contract for a fixed term and requires, in addition to the contract, the registration of this right in the Land Registry in favour of the holder. The proposal provides the possibility for the owner of the immovable property to establish the right to construct in his own name as holder of the right and to pledge it independently.

It is important to highlight that the right to construct will cease to exist if it has not been exercised by the holder for fifteen years or if it has been established for more than fifty years, after fifty years have elapsed from the date of its establishment.

As mentioned above, the right to construct is a transferable right of pecuniary value, whereby it should be stressed that the transfer or encumbrance of the immovable property subject to the right to construct does not affect the existence of the right to construct, nor does the transfer or encumbrance of the right to construct affect the ownership of the immovable property. Likewise, it can be stated that the lien on the right to construct does not restrict the transfer of the property concerned or the encumbrance thereof by security rights.

Unless otherwise agreed by the parties, which is provided for by the draft legislation under the rules on the separate ownership of buildings and land, a building constructed under the right to construct remains the component of the concerned immovable property even if the owner thereof and the holder of the right to construct are different persons, therefore the construction does not automatically create an independent ownership right in respect of the building.

The detailed content and scope of the right to construct can be freely determined by the parties concerned within the framework of the legislation (including in particular the provisions of building law and land registration, such as local building regulations and building capacity), but it should be stressed that, under the proposed law, the creation and registration of this right does not in itself presuppose the existence of a building permit.

This legal instrument may be established free of charge, or for a consideration, as freely agreed by the parties. In the latter case, the holder of the right to construct is obliged to pay a one-off and/or periodic fee, the so-called construction fee, the amount and due date of which must be specified by the parties in the contract establishing this right.

Naturally, the above rules also give rise to the relevant amendment of several laws, including the Law on the Land Registry, which, if adopted, will add the right to construct to the list of rights that can be registered in the Land Registry.

This legal instrument is mainly comparable to the usufruct right, but it provides the holder of right with a stronger basis and right, because, in addition to the right of free use and exploitation granted by the usufruct right too, it also provides the right of free disposal of the buildings and their components that are created under this right. As mentioned above, the right to construct is a transferable, encumberable right, which is an additional right compared to the possibilities provided by law in relation to the usufruct right.

The practical and economic importance of the right to construct

After reviewing the rules of the draft legislation, it is worth examining the potential impact of this old-new legal instrument on economic life.

According to the explanatory memorandum attached to the proposal, the problems emerging in connection with the financing of investments related to the construction of some buildings and technical installations are an obstacle to economic growth and competitiveness. The difficulty arises from the fact that the building, structure, work, or superstructure to be constructed in the future cannot be mortgaged or accepted as collateral for a loan that could be encumbered by such a right and cannot, therefore, serve as adequate collateral for the financing needed to carry out the project.

The proposing ministry cites solar power plant investments as a typical example, since, in these cases, not only the asset to be installed and built on, but also the power plant license and the long-term take-over guarantee, that are linked to the land, are included in the value of the investment.

The reintroduction of the right to construct into Hungarian law would provide a much simpler basis for financing such investments than the systems currently in use. As in the case of renewable energy investments, the right of construction could play an essential role in facilitating the financing of construction works on, under, or even over public land (e.g. underpasses, bridges, underground car parks, tunnels), which could also stimulate economic activity. The timeliness of the introduction of this legal institution is further justified by the fact that, at the same time, a complete renewal of the land registration law is underway, which provides an appropriate basis and opportunity for the reintegration of the right to construct into our legal system.

It has become easier to recruit workers from third countries, including from Asia, through certified temporary-work agencies. In addition to the fact that labour shortages in some sectors and the uncertain economic outlook make it increasingly advantageous for employers to hire workers, the new regulation may also have negative consequences for the labour market: wage tension and fluctuation may increase due to third-country workers.

At the end of June, a new government decree[1] came into force which makes it far easier for temporary-work agencies to recruit employers not only from neighbouring countries but also from the Asian region. The new regulation could further stimulate the temporary-work agency market, while employers facing a shortage of human resources will be able to access labour force more easily and flexibly. However, the new regulation may not only provide some relief from labour shortages, but also raise new problems.

Temporary agency work has many advantages, one of the most important is that the various administrative burdens of employment are not borne by the user enterprise (i.e. the „borrowing company”), but by the temporary-work agency. The Regulation sets out the conditions for registration as a certified temporary-work agency, which are stricter than those for „normal” temporary-work agency, nevertheless, the legislation is short again of eliminating or solving a number of problems. A recent case in Curia has once again highlighted that the Labour Code[2], in force since 2012, does not in practice protect temporary agency workers, since it considers the temporary-work agency as the employer, who can dismiss the employee at any time without justification. Therefore, if the temporary agency work is terminated, the temporary-work agency (i.e. the lender of work force) can rely on this circumstance alone to terminate the employment relationship with the temporary agency worker. Nevertheless, it is precisely this possibility that makes temporary agency work attractive for employers.

In the increasingly uncertain economic climate, this type of employment may become even more popular in the future, as the user enterprise (i.e. the hirer of work force) has the flexibility to adapt the number of workers to its current needs and, in the event of redundancies, temporary agency workers will be the first to be laid off. The Hungarian legislation limits the maximum duration of temporary agency work up to 5 years, which is nowadays no longer considered a short period spent in one workplace and is close to the average of 8.9[3] years spent by workplace in Hungary. On this basis, it can be stated that temporary agency work is not tending towards short-term, temporary employment. If the user enterprise (i.e. the hirer of work force) is satisfied with the employer, he can employ him for long term with slight labour law guarantees, while he can dismiss him at any time without giving any reason.

Question marks around wage tension, fluctuation, and collective disputes

While the new legislation could benefit companies in many ways, it also raises many questions about its implications. On the one hand, it could lead to wage tensions between workers due to lower pay requirements by third-country workers. The fluctuation is also a question: in sectors where there has already been high fluctuation of workers, could this problem be solved by hiring third-country nationals or, on the contrary, could the tension between workers in different employment relationships lead to an increase the number of leaving workers employed in employment relationship. Inappropriate use of temporary agency work could therefore lead to more workers leaving by the end of the year than can be replaced by temporary agency workers, while recruitment continues. Another potential source of tension is that third-country workers will obviously not be aware of the cornerstones of national labour law or may simply be dismissed in the event of conspiracy. This in turn could lead to the erosion of the working conditions and labour law guarantees that workers have fought for or that have been established by judicial practice.

When appropriately applied, temporary agency work can not only help employers to reduce the costs of the labour organisation, but also provide great flexibility. However, to make an effective use of all this, employers would need to consider proper preparation, HR management and other factors. At the same time, it is already clear that the current regulation of temporary agency work puts employers in a more advantageous position vis-à-vis workers who are not protected by guarantee-provisions. Thus, currently, both temporary-work agencies and user enterprises face less risk than in the case of a ‘normal’ employment relationship when it comes to the legality of employer’s measures affecting temporary agency workers, such as termination of employment, for example.

[1] Government Decree 226/2022 on the registration and activity of certified temporary-work agencies

[2] Act I of 2012 on the Labour Code – “Labour Code”

[3]statistic of OECD, 2020 (https://stats.oecd.org/Index.aspx?QueryId=29561)