Shared farmland, but shared interests?

Undivided common ownership of agricultural land has been a long-standing, unresolved issue among Hungarian landowners. This post explains one of the main procedures for ending undivided common ownership of farmland, known as acquisition by incorporation (bekebelezés).

What should you know about it?

On January 1, 2021, the new law aimed at terminating undivided common ownership entered into force, together with Government Decree 647/2020 (XII. 23.). The new framework affects more than 3.5 million landowners and nearly 2.5 million hectares of land, marking a potentially historic step in clarifying Hungary’s agricultural property structure.

If a parcel of land cannot be divided in compliance with the minimum plot size set by law, and the co-owners cannot reach an agreement on division, then the entire property may be transferred into the ownership of a single co-owner. This is called incorporation.

How does the process work?

The co-owner seeking to acquire sole ownership must notify all other co-owners in writing of their intent to incorporate the property.

The buyout price for the other co-owners’ shares is generally subject to free agreement, but the acquiring co-owner must pay at least the amount supported by a valuation offer.

If the other co-owners disagree with the valuation, they may obtain a new expert appraisal from a court-appointed forensic expert.

Situations may arise where multiple co-owners want to acquire the entire property. In such cases, the default rule is that the co-owner who offers the highest purchase price is entitled to proceed with the incorporation.

The compensation due to any co-owner who cannot be reached must be deposited with the competent court.

There may also be cases where the transfer of ownership requires the consent of an authorized person or a competent authority. These consents must be obtained before the transfer is completed.

To register the incorporation in the Land Registry, the general rule is that either all co-owners must sign a written agreement, or, if this is not possible, the incorporating co-owner must submit a unilateral legal declaration.

It is important to note that terminating undivided common ownership does not terminate any existing land-use agreements. However, the new sole owner must notify all registered users about the incorporation.