A new way to buy parking spaces in residential buildings in Hungary

Significant changes have been introduced in Hungary as of 2 May, 2022, regarding parking spaces in parking garages.¹ As opposed to the former regime when a real property registered as “parking garage” included several parking spaces and was co-owned by several co-owners, it’s now possible to separately register each parking space in a parking garage as a separate parking space property. The statutory right of first refusal of co-owners will no longer apply to separate parking space properties. In respect of sale and purchase transactions where the parking space is located in a co-owned parking garage, notifying the co-owners as beneficiaries of statutory right of first refusal is also now possible by a simple announcement instead of sending separate letters to each individual co-owner. This was already used sometimes in practice but always with high uncertainty. These amendments are expected to facilitate and speed up the process of selling parking spaces.

Problems with the previous legislation

To better understand the legal context, three aspects must be considered. From a development point of view, in case of new residential developments, at least one parking space had to be developed for each apartment (and local municipalities can still prescribe the development of one, at most). As building parking spaces have never been a cost-effective business, developers have never really intended to build more parking spaces than they had to. While the availability of parking spaces in a residential building is limited, people prefer to buy an apartment with a parking space. From a land registry point of view, a separate parking space could not be registered in the land registry as a real property itself, but only the parking garage floor in which it was located; thus all parking spaces on a single level of a garage constituted a single property. Such parking garage level was in the common ownership of those who owned a parking space in the parking garage. Last but not least, from the owner’s point of view, this made the sale of the parking spaces difficult as each co-owner of the parking garage level had a statutory right of first refusal (ROFR) if one of the other co-owners decided to sell their ownership stake in the parking garage level.

One of the common problems in recent years has been the sale of parking spaces in co-owned parking garages located in condominiums. As the sale of a parking space usually takes place with the seller's apartment in the condominium, the statutory ROFR notification significantly slowed down the joint sale transaction of the parking space and the apartment.

To speed up the process, for many co-owners it has become a market practice to notify each beneficiary of the ROFR by means of a written notice posted on the condominium’s notice board, without direct notification to each co-owner by registered mail. This has led to divergent practices in the land registries, as in some cases a certificate by the common representative of the condominium of posting such notice was accepted, while in other cases it was not.

Possibility to notify by an announcement

Previously, if a co-owner decided to sell their ownership stake (parking space) in the co-owned parking garage level, the application for registration of the purchaser's title to the ownership stake had to be accompanied by the waiver declaration of the co-owners as beneficiaries of the ROFR. Or failing this, by the acknowledgment of receipt/receipt of delivery proving that the beneficiaries of the ROFR have been informed and have not exercised their ROFR in the relevant time limit. In exceptional cases, it was possible for the seller to substitute evidence on delivering the ROFR notice with a joint declaration of the contracting parties stating that the place of residence or other circumstances of the beneficiary would make the notification extremely difficult or would cause excessive delay. However, this provision has not been interpreted consistently in case-law. Sometimes it was upheld by courts, but there have been cases where it’s been decided that if no separate postal notification had been delivered to the beneficiary of the ROFR (with reference to the above “extreme difficulties”), and the beneficiary of the ROFR became aware of the sale from any source within three years, they could challenge the sale and exercise the ROFR. This decision has led to some uncertainty as to the application of contracts concluded in the time limit for challenge and the application of the parties' declaration in lieu of a ROFR notice.

The new rules clarify the practice from 2 May, 2022, for parking garages in common ownership of condominiums. If the property to which the ROFR applies is registered in a condominium as separate real property and its use is indicated on the land registry sheet as “parking garage,” it’s acceptable to submit, instead of an acknowledgment of receipt or delivery receipt (as indicated above), a declaration issued by the common representative or the chairman of the management committee of the condominium. The declaration must state that the purchase offer has been posted on the notice board of the condominium. The new rules make life easier in several ways. Firstly, the new possibility shortens the process of informing the beneficiaries of ROFR, as sellers do not have to spend months digging up the addresses of co-owners and trying to deliver notices through registered mail. Secondly, it’s not necessary to send a separate letter to each individual co-owner, so the seller may reduce their own administrative and financial burden relating to the notification obligation.

Introduction of ‘parking space’ as separate property

As from 2 May, 2022, the law defines “parking space” as a separate real property, ie as “an area for the accommodation of a vehicle in the premises of a building dedicated to store vehicles therein, one side of which is connected to an access road leading to the parking spaces, and the other three sides of which are delimited by a permanent physical marking on the floor of the premises or by a wall.” In addition, the area must also meet dimensional requirements set forth by the law to be classified as a parking space.

The new legislation helps the owners of condominiums under development or to be developed in the future. It will be possible to register the parking spaces as separate properties in the land registry when the condominium is established, without creating co-ownership in the parking garage at all.

In the case of existing and co-owned parking garages, it’s an option for the owners to create separate real properties (parking spaces) from each parking space located in the co-owned parking garage if the parking spaces meet the legal requirements. However, to do that all owners must agree to and sign an amendment to the deed of foundation of the condominium. Getting all owners to sign such an amendment may prove to be a challenging task.

¹FVM Decree no. 109/1999 (XII. 29.) on Execution of Act CXLI of 1997 on Land Registry, as amended by MvM Decree no. 9/2022 (IV. 29.). (The text is available in Hungarian.)