The most important Hungarian rules for renting a home
My foreign clients have recently asked me if they would like to read about what rights they have against landlords when renting an apartment in Hungary, what their obligations are to the landlord and how can they enforce them?
Many of us have come across a tenancy agreement that was often no more than a few pages long, so there is a common perception that tenancy agreements are a very, very simple legal relationship. Unfortunately, it could not be further from that. It is a very complex and wide-ranging set of problems, so it is impossible to cover all the pitfalls of a tenancy in one article, but I will try to present the most important ones.
First, it is important to point out that Act XXVIII of 2017 on Private International Law (the Code) stipulates in Section 88(a) that only a Hungarian court may hear and determine any proceedings concerning the lease of immovable property situated in Hungary. Moreover, Article 54(4) of the Act also provides that contracts for the lease of such immovable property must comply with the formal requirements prescribed by Hungarian law.
It follows from the above that even if two foreign persons abroad conclude a contract for the tenancy of a property in Budapest under their own law(s), any provisions of that contract that are contrary to Hungarian law will be invalid. Furthermore, either party may only bring a claim against the other party arising from the tenancy before the domestic (Hungarian) court or municipality clerk’s office.
The rules on tenancy of dwellings in Hungarian law can be found in several pieces of legislation. On the one hand, these are the provisions of Act V of 2013 on the Civil Code; Chapter XLIV on lease contracts, Part 1 of which contains the general rules of lease contracts, while Part 2 contains the rules of tenancy contracts. In addition, Act LXXVIII of 1993 on Certain Rules for the Rental and Disposal of Dwellings and Premises (Housing Act) also contains rules on the tenancy of dwellings. In addition to these, further legislation is applicable to the relationship between tenant and landlord, as Hungarian law provides for protection of the tenant against the landlord in certain cases where the tenant is the rightful possessor of the rental property.
It is important to emphasise that the new Civil Code 2013 allows a great deal of freedom of the contracting parties, and thus the provisions of Civil Code laid down for specific contract types are largely dispositive. This means that the parties may derogate from the rules of the Civil Code on the rights and obligations of the parties by mutual consent unless such derogation is expressly prohibited by the Civil Code.
Contrary to the provisions of the Civil Code relating to contracts, the parties may not derogate from the provisions of the Housing Act when concluding a contract. The bad news, however, is that the Housing Act is a piece of legislation left over from the old legal system and most of its provisions deal with municipal rental housing and the specific conditions for acquiring ownership of the dwellings.
The main conclusion that can be drawn from the above is that if you want to enter into a tenancy agreement as a tenant, you can include anything that the landlord agrees to. If you have the opportunity to do so, by all means do so!
Similarly, once we have accepted the landlord’s terms that are very unfavourable to us, we will be obliged to comply with them, and the law will not protect us as tenants otherwise. Except in very, very obviously detrimental cases, but then only if we have a very good lawyer.
Let’s now look at the most important non derogating provisions in the above legislation on tenancy.
Section 2(5) of the Housing Act requires the contract to be in writing in order for the tenancy to be valid. This means that our tenancy agreement is not effective if it is not in writing.
It is common practice in domestic letting practice to stipulate a deposit of several months’ rent at the time of the conclusion of the tenancy agreement, which serves as security for any claims the landlord may have against the tenant in the event of termination of the tenancy.
The Civil Code recognises the existence of this type of security (known as a deposit) but sets the maximum amount that can be validly given at three times the amount of the monthly rent excluding charges. A higher amount is not invalid, but if the tenant goes to court, the court may reduce the excess security (Civil Code, § 6:343).
The lessor is liable under the general rental rules for the rental of the property, which must be fit for the purpose for which it was hired and comply with the contract throughout the rental period. Within this obligation, the lessor has a maintenance obligation.
The landlord’s maintenance obligation applies not only to the dwelling itself but also to the building containing the dwelling(s). The Housing Act provides in detail, in its Articles 10 and 11, what works the landlord is obliged to carry out in this context.
The Civil Code lays down binding rules on the time limit for the performance of the maintenance obligation.
It distinguishes between defects that require immediate intervention and those that do not. The former includes defects that are life-threatening, that endanger the building’s condition or that substantially interfere with the normal use of the dwelling or the neighbouring dwelling, which the landlord is obliged to remedy without delay. On the other hand, the landlord is obliged to remedy all other defects only at the same time as the maintenance or renovation of the building (Civil Code, § 6:344).
The tenant’s obligation to give notice and the landlord’s right to carry out the work shall be governed by the general rules of the Civil Code on leases. The lessee is obliged to notify the lessor if there is a risk of damage to the goods or the need to carry out works for which the lessor is responsible (Civil Code, Art. 6:335. § (2)).
The lessee may carry out the work for which the lessor is responsible instead of the lessor and at the lessor’s expense if the lessor does not carry it out (Civil Code, Art. 6:335. § (4)).
The tenant is obliged to tolerate the performance of the maintenance work necessary for the fulfilment of the landlord’s maintenance obligations pursuant to § 6:346 (1).
Under the general rules of the lease contract, the law provides that the lessee may remove anything that he has installed on the property at his own expense, without damaging the integrity of the property. However, the situation is different in the case of flats because some of the things that can be removed without damage to the property and taken away are of less use elsewhere or, if left in the rental property, are of greater value (for example, built-in kitchen furniture).
The Civil Code allows the landlord to repossess these objects for an appropriate consideration, provided that this does not harm the tenant’s substantial legal interest.
The right of the tenant to dispose of the property without compensation and the right of the landlord to take possession of the property against appropriate compensation cannot be excluded in the contract (Civil Code, § 6:345).
The rules of the Civil Code on tenancy are in some cases in conflict with the rules of the Housing Act. For example, the tenant’s obligation to tolerate renovations. According to the case law, the rules of the Civil Code on tenancy prevail over the contrary provisions of the Housing Act.
According to the Civil Code, the tenant is obliged to tolerate works necessary to preserve the condition of the dwelling, but not works necessary to modernise it.
The exception to this rule is if the works do not significantly restrict the use of the dwelling. Anything that prevents the tenant from using the dwelling for its intended purpose (including the use of the amenities and fittings) is considered a substantial restriction.
The Civil Code requires the landlord to inform the tenant in advance of such works. If, on the basis of the information, the tenant considers that it is not in the tenant’s interest to continue the tenancy, he/she may terminate the tenancy agreement by the last day of the month following the month in which the notice was received (Civil Code, § 6:346).
If the parties have agreed on a tenancy for an indefinite period, either party may terminate the tenancy agreement by giving notice of termination.
In this case, the parties may also fix the period of notice in the contract, which they may set at their discretion. Failing this, either party may terminate the contract before the fifteenth day of the month in question and by the end of the following month.
If a Party fails to do so, the termination shall take effect at the end of the second month following the month in which the termination is given.
However, the mere fact that a party has not done so does not render the termination invalid (Civil Code, § 6:347).
The tenancy/lease contract may be terminated by the tenant before the end of the fixed rental period only in the event of breach of contract by the other party, unless otherwise provided for in the contract. If the breach of contract is of such a degree that the tenant’s interest in the performance of the contract has ceased as a result, he may withdraw from the contract and exercise his right to terminate it (Civil Code, § 6:140).
Likewise, the tenant is obliged to wait for the notice period stipulated in the contract and may terminate the contract by notice only in the event of serious breach of contract by the landlord.
On the contrary, the provisions of the Civil Code relating to tenancy give the landlord additional rights around termination of the contract.
On the one hand, these provisions specify what constitutes a breach of contract on the part of the tenant and, on the other hand, how the termination can be exercised.
The landlord has the right to terminate the contract in the event of improper use of the tenant’s dwelling, or in the event of behaviour by the tenant or persons living with him/her that is contrary to the rules of coexistence and is in breach of the community rules.
According to relating case-law, the tenant’s admission of another person to the dwelling, despite a contractual provision prohibiting it, constitutes an improper use of the dwelling [judgment published in 1999, No 210].
As soon as the landlord becomes aware of any misuse or behaviour that violates the rules of coexistence, he must ask the tenant to stop. If the tenant complies with the notice, there is no need to give notice of termination. If he does not comply, the landlord may exercise his right to terminate the tenancy after giving notice. According to § 6:348 (1) of the Civil Code, the notice period must be at least fifteen days and the tenancy may be terminated on the last day of the month following the month of termination.
The landlord may ignore the prior notice if the behaviour complained of (misuse or breach of the coexistence requirements) is so serious that the landlord cannot be expected to maintain the contract.
In this case, the landlord must give notice of termination within 8 days of becoming aware of the situation. Whether the behaviour is so serious that a prior notice could have been dispensed with can only be judged on the basis of all the circumstances of the case.
The lessor may also terminate the rental contract for non-payment of rent in accordance with the general rules of the rental contract (Civil Code. 6:336. § (3)).
Although this provision is expressly derogatory, it is rare for the parties to expressly agree otherwise in their contract and stipulate that non-payment of rent is not a ground for termination.
According to judicial practice, there is no legal possibility to excuse late payment of rent, and even one month’s late payment of rent may be grounds for termination of the tenancy [judgment published in 2004, No. 13].
It is also not possible for the tenant to “set off” the costs of the work carried out in place of the landlord by unilaterally withholding the rent; the landlord may terminate the contract for non-payment of the rent in such a case [judgment published in 2001, No.474].
In the event of a breach of contract by the landlord, the tenant may withhold only a proportionate part of the rent. For example, the rent cannot be refused in the absence of adequate heating in the rented premises. [judgment published in 2020, No.145.].
In addition to the mentioned above, other provisions of the Civil Code and specific rules apply to the relationship between the tenant and the landlord. These protect the tenant against the landlord under certain conditions and ensure that the tenant has undisturbed possession of the rental property or that the landlord cannot terminate the contract and the tenant’s right to occupy the dwelling without good cause. I will write about the rights of the tenant as possessor and how to enforce them in a forthcoming article.
