The land registration system is a key part of the legal infrastructure for a private real estate market. Reliable records of ownership, mortgages and encumbrances are necessary for acquisitions and financing. Today, reforms undertaken in Hungary in the early 1990's are playing an important part in facilitating a visible real estate development boom, particularly in and around Budapest.
Reform Efforts
When Hungary embarked upon its transition to a private market economy in 1989, the land registration system, which was administered for decades by the Ministry of Agriculture, was ill-prepared for the demands of a private property market. The system was paper-based and inefficient. The land registry offices were understaffed, underfunded and operated under procedures devised in the early 1970's.
Privatization of real property on a mass scale began in 1990, and as a result, the land registry offices quickly became inundated with new registration claims. For instance, in Budapest by 1993 there was a backlog of over 100,000 registrations. This backlog grew to over 300,000 in 1996 and reached more than 600,000 by the end of 1998. Although registration applications are supposed to be processed within 30 days under Hungarian law in Budapest it takes on average over one year for a registration to be completed through normal processing procedures. The only thing that has kept the registry in Budapest from entirely breaking down has been a system of entering a "margin note" on the title page ("tulajdoni lap") whenever a claim is filed. These notes give anyone conducting a title search knowledge that a claim has been filed but has not been registered.
In 1992 and 1993, various technical and legal reform proposals were introduced with the aim of making the land registration system more efficient and reliable. On the technical side, computerization was introduced with assistance from the European Community's Phare Program. Certain procedural reforms allowed for the acceleration of processing. Today, these efforts are beginning to bear fruit. Title page extracts -- key documents in the acquisition and financing process -- can be obtained with greater ease. Computerization of the title page is beginning to allow for more rapid updating of ownership records.
For instance, all title page data for the entire country has now been computerized. The backlog of registrations in Budapest has been reduced from 600,000 at the end of 1998 to approximately 300,000 today. The Ministry of Agriculture has set the end of the year as the deadline for the elimination of the backlog entirely, and based on progress to date, it appears as though this goal may be achieved.
Land Registration System
A title page is the record of the legal status of a parcel of land maintained by the land registry office. A title page extract is a snapshot of the legal status of a parcel as of the date of the extract and is issued by the land registry office. By law, such an extract is valid for a period of 30 days.
A title page consists of three parts. Part I of a title page shows data with regard to a property, such as general zoning classification, address, type of building/land and surface area. Part II of a title page shows ownership rights, including the name and address of the owner and previous owners, name and address of any other person having quasi-ownership rights (e.g., handling rights, usufruct, usage) in the property concerned, and the proportion of ownership or rights of owners or other interest holders in relation to the entire property. Part III of a title page lists encumbrances on the property, such as mortgages, easements, restrictions on transfer and liens.
It is important to note that not all kinds of rights, interests or encumbrances can be recorded on the title page. The Decree contains an exclusive list of the types of information and data that are recordable. (A long-term lease, for instance, is not recordable.)
The records of the land registry office publicly and officially attest to the existence of rights and status of real property. Under Hungarian law, a person acquiring any right for value in a property based on information concerning such property on file at the land registry office and without knowledge of rights or interests not reflected in the title page is a good faith acquirer. A good faith acquirer obtains title subject only to those matters which appear on the title page (or otherwise by law, such as utility easements and zoning restrictions).
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