Our Cases

Our client was a real estate developer company which started to build a condominium
building in the city centre of Budapest. In the course of construction, it concluded sale and
purchase agreements regarding a few apartments to be built. In line with these agreements, the
purchasers paid a part of the purchase price while the remainder part had to be paid when the
building receives its occupancy permit and the condominium is registered in the land register.
Under the agreements, facts of sale with reservation of ownership have been registered on the
title deed of the real property in favour of the purchasers on the ownership stakes equal to the
purchased apartments.

However, our client went under liquidation before it could finish the construction. The
liquidator sold the real property at auction and, in line with Art. 47. (1) of the Liquidation Act,
rescinded and also terminated the sale and purchase agreements concluded by our client so
that the new purchaser could acquire an exclusive ownership and therefore the liquidation
procedure could be finished. Then, referring to rescission and termination, the liquidator
demanded the land registry to cancel the facts registered in favour of the purchaser. The land
registry refused the claim because the purchasers’ permission for cancellation was also
needed.

Therefore, we had to file a lawsuit against the purchasers for the cancellation. We lost on both
instance. According to the reasoning of the judgements, the liquidator was not entitled to
rescind the agreements because Art. 47. (1) of the Liquidation Act makes it possible only if
the parties have not fulfilled any service while in the present case the purchasers have already
paid purchase price instalments. Therefore, only termination was possible under the law.
However, the courts found the termination by the liquidator unlawful too because a decision
of the Supreme Court stated that a sale and purchase agreement cannot be terminated as it
regulates a short term legal relationship.

By their above decisions, the courts created a deadlock because if the sale and purchase
agreements have not been terminated then the new purchaser cannot acquire an exclusive
ownership, therefore the liquidation procedure cannot be finished but in lack of sufficient
funds, our client under liquidation cannot finish the construction (which would be impossible
otherwise because the new purchaser has already acquired ownership on the part of the real
property which was not burdened by the registered facts). Therefore the purchased apartments
will never be built and our client’s liquidation procedure will never be finished.
In the light of the aforesaid, we claimed for remedy at the Supreme Court of Hungary which
decided in our favour and ordered the cancellation of the facts registered in favour of the
purchasers. In line with our reasoning, the Supreme Court held that the Civil Code does not
exclude the termination of a sale and purchase agreement, moreover the subject of the present case is not a sale and purchase agreement but a mixture of sale and purchase and construction
agreement as our client undertook not only the transfer of ownership of apartments but also
the construction thereof thus the term of the legal relationship lasted for years. Furthermore,
the Supreme Court also accepted our reasoning that the Liquidation Act has priority over the
Civil Code and Art. 47. (1) of the Liquidation Act entitles the liquidator to terminate every
agreement concluded by the company under liquidation without any precondition therefore
the termination in the present case was also lawful. Finally, the Supreme Court also found
lawful our reasoning that the purchasers may claim for the repayment of the purchase price
instalments as a consequence of the termination only in the course of the liquidation
procedure while paying them separately is not an option as it would be a crime committed by
the liquidator.

Our client bought an ownership stake on agricultural land in a real property of which she had already been a co-owner. According to Act CXXII of 2013 on the transfers of agricultural lands and forests (Land Act) it is obligatory to indicate in the agricultural land sale and purchase agreement if the purchaser has pre-emption right on the given land. Therefore we indicated in the sale and purchase agreement that our client had pre-emption right as co-owner under Art. 18. (3) of the Land Act.

Under the Land Act, agricultural land sale and purchase agreements have to be accepted by the agricultural authority before the purchaser’s ownership could be registered. However, the authority refused to accept our client’s contract. It reasoned that, according to the abovementioned article of the Land Act, a co-owner has pre-emption right only if the purchaser is a third party, not the co-owner himself.

Therefore, we filed a lawsuit against the authority and demanded to accept our client’s contract. The final decision was made by the Supreme Court of Hungary which decided in our favour. In line with our reasoning, the Supreme Court held that Art. 18. (3) of the Land Act has to be interpreted in line with the rules of the Civil Code governing co-owner’s pre-emption right. Thus, the term “third party” means not any purchaser but only purchasers who are not co-owners. That is why the term “third party” is written in the abovementioned rule of the Land Act and not in order to exclude the co-owner purchaser to refer to his pre-emption right. So the authority misunderstood the Land Act and its refusal to accept our client’s contract was unlawful.