Overview of retail lease agreements in Hungary

Leases are regulated by Act V of 2013 on the Civil Code and Act LXXVIII of 1993 on the leasing and alienation of flats and other premises.

There is no minimum requirement of duration. Generally, the lease term is between three and ten years. The most common term is five years.

Early termination of definite term leases by the landlord is only possible in the case of a breach of contract by the tenant.

Generally, there is no possibility of early termination by the tenant of a definite term lease, only in case of breach by the landlord. Occasionally there the parties agree on unilateral break options in the case of longer leases (eight to ten years) in favour of the tenant, which are usually in the middle of the term (after three to five years).

There is no mandatory provision regarding the Right of renewal and eviction indemnity. However, the lease agreement often grants the right of renewal to the tenant upon expiry of the lease agreement, usually in the form of a unilateral extension option for another short to medium term (three to five years). In such cases  of a unilateral option, the landlord usually has no right to refuse the extension of the lease.

Except for indexation and in cases agreed between the parties, it is not possible to revise the rent, although standard practice includes the concept of turnover rent, which is usually for larger tenants.

There are no mandatory provisions regarding fitting-out works obligations and the parties are free to agree on the implementation of the works.

The tenant must reinstate the premises to the condition at the time of the original handover, subject to normal wear and tear. The only exception is if the landlord wishes to keep certain items of the tenant’s fitting-out works.

The landlord’s consent is required for the subleasing of the premises in whole or part, unless otherwise agreed by the parties. The same applies to the transfer of the lease.

Upon the sale of the premises, the new owner may not terminate a lease agreement and will automatically become the landlord under the lease agreement by operation of law.

According to the applicable law, retail tenants have no pre-emption right in the case of the sale of the premises (except for premises owned by the municipality or the State).

There are no mandatory rules regarding the form and/or duration of a rental guarantee.

However, if it is agreed that the tenant will give a rental guarantee in the form of a bank guarantee, a suretyship or a parent company guarantee, the form and content of these securities are regulated by the Hungarian Civil Code. The landlord usually requires that the guarantee be subject to Hungarian law.

The landlord is responsible for central and structural maintenance together with maintenance of the common parts (including cleaning). The landlord is also responsible for maintenance of the central equipment (heating and cooling system, water, etc.).

The tenant is responsible for the internal maintenance of the premises (including the maintenance of the fitting-out works and equipment installed by the tenant and the cleaning of the premises).

By general rule of law, rent is exempt from VAT unless the landlord opted to apply it. Almost all retail landlords opt for VAT in an amount of 27%, in respect of their leasing business.

Statutory right of pledge

The landlord has a statutory right of pledge (based on the Hungarian Civil Code) on the valuables located within the tenant’s premises to secure claims for rent and other costs.

Declaration of vacation

Upon the signing of the lease agreement, landlords often require tenants to sign a declaration of vacation in the form of a public notarial document. This document is directly enforceable in the case of termination of the lease by the landlord, and on the basis of such a document the tenant may be evicted from the premises without court procedure.