2024 Rule of Law Report In Light Of Hungarian Real Estate Investments

How Does The Rule of Law Report Help Foreign Investors?

Reading the Report is an excellent way to identify reliable investment destinations within the European Union, as the it helps investors assess the stability and predictability of the legal environment in each Member State:

• Transparency: It provides insights into potential risks such as corruption, judicial independence issues, or limitations on media freedom, which could impact investment decisions.
• Investment protection: By highlighting rule of law issues, the report indirectly supports the protection of foreign investments. A strong rule of law environment is more likely to respect and enforce contracts, protect property rights, and offer effective legal recourse.
• EU support for reforms: The report encourages reforms and improvements in Member States, leading to a better investment climate overall.

Additional benefits:

• The report promotes a stable and predictable legal environment, which is crucial for long-term investments.
• It supports a level playing field for businesses, both domestic and foreign.
• It helps build trust and confidence in the EU as a whole, making it a more attractive destination for foreign investment.

Why Is Hungary A Secure Investment Target?

Hungary is emerging as an increasingly attractive and secure destination for real estate investment, and the 2024 Rule of Law Report underscores why. The country boasts a robust legal framework and a commitment to transparency that provides strong protections for investors:

Efficient Judicial System
Hungary’s judicial system is characterized by its efficiency in resolving civil, commercial, and administrative cases. This swift handling of disputes minimizes delays, providing a secure environment for real estate transactions. Investors can be confident in timely resolutions that uphold their property rights.

Digitalization of Legal Processes
The country’s justice system has embraced digitalization, which makes it easier for investors to access court documents and engage in legal proceedings. This enhanced transparency serves as an additional safeguard for property owners.

High Perceived Judicial Independence
Business confidence in the judicial system is growing, with an increasing perception of judicial independence. Companies and investors view the legal environment as fair and reliable, with sufficient protections for their assets. This reputation for impartial adjudication supports long-term investment security.

Comprehensive Anti-Corruption Strategy
The recent implementation of Hungary's anti-corruption strategy for 2024-2025 aims to enhance the integrity of public institutions, reducing the risk of corruption in real estate transactions. A strong anti-corruption framework ensures a more transparent market, providing investors with confidence in the fairness of property acquisitions.

EU Legal Standards Alignment
Hungary’s legislative reforms to align with EU standards, particularly regarding preliminary references to the European Court of Justice, enhance the legal certainty for investors. These efforts to meet European Union standards reinforce property ownership rights and ensure compliance with international norms.

Transparent Case Allocation in Courts
Recent reforms have improved the transparency of judicial case allocation, especially in higher courts like the Kúria. This ensures a fair and predictable legal process, minimizing risks for real estate investors by guaranteeing unbiased treatment in property-related disputes.

Low Risk of Expropriation
The legal framework in Hungary offers strong safeguards against arbitrary expropriation. With a history of respect for private property rights, investors can trust that their real estate assets are well-protected against government seizure, adding an important layer of investment security.

Stable Legal Framework for Property Rights
Hungary boasts a well-established and stable set of property laws that clearly outline ownership, transfer, and registration procedures. This predictable legal environment provides assurance to investors, knowing that their property transactions are governed by a consistent and dependable legal system.

Publicly Accessible Real Estate Registers
The country maintains a reliable and transparent land registry, allowing for easy verification of property ownership and encumbrances. This accessibility helps to reduce the risk of fraudulent transactions, ensuring that investors can confidently proceed with purchases.

Strong Track Record of Dispute Resolution
Hungary’s courts have a solid reputation for effectively handling real estate disputes, particularly in central regions. The consistent resolution of property-related cases instills confidence in investors, knowing that any potential legal issues can be promptly and fairly addressed.

For those pursuing a golden visa through real estate investment, these features not only ensure property security but also streamline the path to residency.

Hungary's Evolving Anti-Corruption Framework: Progress and Ongoing Challenges

According to the 2024 Rule of Law Report, Hungary has a robust legal and administrative anti-corruption framework. There have been positive developments in strengthening the capacity of institutions and the legal framework to combat corruption. For example, Hungary has extended bribery offenses to include candidates for public office and introduced additional sanctions for corruption offenses, such as the prohibition to hold public office.

Despite these advancements, concerns remain regarding judicial independence, potential political influence, and the consistent application of rules across different levels of the judiciary. To mitigate risks, Hungary is actively working to align its legal practices with EU standards:

• Effective justice systems: Independent and efficient courts are vital for resolving investment disputes fairly and transparently.
• Anti-corruption measures: Robust anti-corruption frameworks protect investments from unfair practices and ensure a level playing field.
• Good lawmaking: Transparent and predictable legal frameworks are crucial for investor confidence and long-term investment decisions.
• EU funding and technical support: The EU provides funding and technical support to Member States, including Hungary, to implement reforms that strengthen the rule of law and improve the investment climate.

In addition to legal protections, investors may also benefit from guarantees provided by Hungary’s participation in the European Union's legal framework, which offer additional recourse for resolving investment disputes. These mechanisms aim to uphold investor rights and provide a stable legal environment for business operations.

Conclusion

The European Comission's Rule of Law Report is designed to be a practical tool to uphold the rule of law, which is one of the fundamental values of the EU, and it is a valuable source of information for foreign investors because it provides insights into the investment climate and the business environment in the EU. 

It includes specific recommendations for all Member States (including Hungary) and participating enlargement countries, covering key areas such as the justice system, the anti-corruption framework, media pluralism and freedom, and other institutional issues related to checks and balances. These recommendations can help investors assess the stability and predictability of the legal and institutional framework in Hungary, and identify potential risks and opportunities for investment.

Want to consult with a legal professional for personalized advice? Contact us!