Will Paper Be Abandoned? The New Real Estate Registration Procedure That Is Efficient, Fast, and Reduces Administrative Burdens: Automatic Decision-making

The currently effective Real Estate Register the CXLI of 1997 Act will be replaced on February 2, 2023 by Act C of 2021 on real estate registration (hereinafter: “new Act“). Since this change has already come a considerable distance, it is worth saying a few words about the most important innovations that “New registration law” system brings.

By setting up the new regime, the legislator’s primary goal is to modernize the Hungarian real estate registry and put into practice the results achieved in the field of digitization in the last decade, which can also help to increase the country’s competitiveness at the international level. The most noticeable change in everyday life will be the end of paper-based administration, which will be replaced by more efficient and faster electronic administration. Thanks to this, the real estate register becomes clearer, more comprehensive and, at the same time, more up-to-date, which is also capable of connecting data in different databases.

The question may legitimately arise as to whether, by abandoning paper-based administration, the obligation to conclude a paper-based contract will also cease, or whether only the administration, the register itself, will become purely electronic. The answer is as follows: of course, it will still be possible to conclude contracts on a paper basis, but the register itself will be completely digital, and it will only be possible to submit documents in the procedure electronically.

Following the model of the General Administrative Procedure Act (“GAP“), the new Act introduces three procedural forms: full, summary, and automatic decision-making, the most novel of which is automatic decision-making. In the automatic decision-making procedure, the background rule of the new Act will be the GAP. Accordingly, an automatic decision can be taken if it is permitted by law or government decree, if the authority has all the information at its disposal at the time of the application, if the decision does not require discretion and if there is no opposing party in the procedure. These four conditions are conjunctive, i.e., all of them must be met for an automatic decision to be taken. However, the concept of automatic decision making is not to be found in the General Act on the General Rules of Electronic Administration and Trust Services of 2015 (hereinafter “E-Administration Act“). According to the provisions of the e-Administration Act, “in the case of automatic decision-making, the body providing electronic administration shall make its decision and communicate it to the customer on the basis of the data available to it and the data obtained by automatic information transfer, without human intervention” (§ 11 (1) of the e-Administration Act). The Ministerial Explanatory Memorandum to the Act predicts that in practice this type of procedure will be the most common, as the classic cases of land registration – such as sale, registration/cancellation of mortgage, registration of usufruct, transfer of a court judgment – will all be subject to automatic decision-making.

Automatic decision making could be a breakthrough for the future, as the current lengthy 8/15/30/60-day processing times will ideally be reduced to a few moments, thus ensuring the security of the transaction and the interests of the client. It should be noted that in some cases, the response time of the current land registry is also short, as some changes are at least reflected in the title deeds of the properties concerned within a few hours, in the form of a winding-up notice attesting the initiation of the procedure. However, in some cases, such as the court’s decision to issue a writ of perfection, it can often take months between the actual recording of the writ and the commencement of the proceedings. As a result of the electronic procedure, the court will be obliged to record the fact of the action ex officio, immediately upon service of the statement of claim on the defendant, which will mean predictability and legal certainty for clients and third parties.

In addition to speed and legal certainty, this new type of registration significantly changes the role of lawyers from the other side. The importance and task of the legal profession may increase with the establishment of the new system. In the electronic procedure, the procedure is conducted in accordance with the declaration of the acting attorney, based on the attorney’s self-prepared power of attorney. In the new system, the lawyer is the one who submits the application by filling out the electronic form, so the lawyer becomes the “master” of the case. As a result, he is also burdened with increased responsibility in the case, and in addition to his representative function, his role as an inspector is strengthened.

On the one hand, this increased role and responsibility requires adequate professional knowledge from the acting lawyer, and it is also necessary to maintain additional liability insurance for the lawyers who provide representation in the new procedures. The additional obligations imposed on lawyers and the conditions necessary to fulfill them are currently still being developed.



Johanna Hermann, Associate

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