From the questions of our clients, we can already clearly see that the new rules coming into force on January 1, 2024, regarding the approval of Change of Use of Real Estate will have a more significant impact on the construction permit process than was initially expected. Although the new regulations aim to provide clearer, more transparent, and more efficient regulatory frameworks in the real estate market, with particular attention to changing the function of properties, there is also an underlying intention to increase government control over commercial real estate. Below, we summarize the most important changes that could be relevant for all participants in the real estate market.
What is a Change of Use of Real Estate?
A Change of Use of Real Estate refers to the alteration of the purpose of use of a property. For example, when a residential property is converted for commercial or service purposes, or when an office space becomes a residence. These types of conversions affect not only the property’s function but also its legal and tax status.
Main points of the new rules:
- Stricter approval process: From now on, every change of use of a property requires a formal approval process from the relevant local authority. After the submission of the application, the local authority must assess whether the proposed change of use complies with local building regulations and construction laws.
- Different types of changes of use: The new regulations more specifically define which types of changes of use must be approved and which do not fall within the approval requirement. It is important to note that local authorities will subject certain changes of use, such as converting residential properties for commercial purposes, to stricter regulations.
- Expanded documentation requirements: The documentation submitted with the application has been expanded, and the property owner must prepare detailed plans for the property conversion before submitting the application. Additionally, it is advisable to thoroughly review the local government regulations and changes in building laws before changing the property’s function.
- Inspection powers: The new laws provide local authorities with stronger inspection powers when approving changes of use. Local authorities will have the ability to conduct on-site inspections to ensure that the change of use aligns with the approved plans and regulations.
- Penalties and fines: Significant fines will apply in the case of a Change of Use of Real Estate without proper approval. It is crucial for property owners to ensure that only approved changes of use are carried out, as failure to do so could result in heavy penalties.
Why is this change important?
The goal of the new regulation is to increase transparency in the real estate market, reduce legal risks, and ensure that properties are used in accordance with their intended purpose. Furthermore, the new rules offer local communities the opportunity to better monitor developments in their areas, thus preventing undesirable consequences such as excessive construction or activities that disrupt residential areas.
What should affected parties do?
If you are purchasing a property or planning a change of use, we recommend consulting with your lawyers or experts beforehand to understand the necessary permits and documentation requirements. The approval process can be time-consuming and complex, so it is advisable to prepare for the necessary steps in advance.
If you have any questions regarding the approval of a change of use, or if you need assistance with legal and administrative processes, please feel free to contact us!
Further information and assistance
If you need additional valuable information, subscribe to our newsletter. If you need help with GDPR compliance, feel free to reach out to us with any questions.
Dr. Katona Géza, LL.M. ügyvéd (Rechtsanwalt / attorney at law)
___________________________________
Katona és Társai Ügyvédi Társulás
(Katona & Partner Rechtsanwaltssozietät / Attorneys’ Association)
H-106 Budapest, Tündérfürt utca 4.
Tel.: +36 1 225 25 30
Mobil: + 36 70 344 0388
Fax: +36 1 700 27 57