CMS Expert Guide for taking security in Hungary

Yes. Note that under Act V of 2013 on the Civil Code (the “Civil Code”), there is a distinction between suretyship and guarantee.

Guarantee

Guarantee is an independent payment obligation which is not dependent on the existence or validity of the principal obligation. The guarantor must pay upon the beneficiary’s demand, regardless of any defences arising from the underlying transaction. 

The guarantee instrument shall specify the:

• conditions for the demand 
• maximum amount payable
• expiry date or event. 

Suretyship 

Suretyship is an accessory obligation, meaning its existence and validity depends on the principal obligation. There are two sub-types: 

• simple suretyship, where the surety may require the creditor to first seek satisfaction from the principal debtor
• direct suretyship, where the creditor may claim directly from the surety without first pursuing the principal debtor.

In practice, financial institutions usually prefer guarantees.

Yes.

Yes, if it is pursued as a business or business-like activity, considered such where it is performed:

• for consideration
• on a regular or recurring basis 
• directed at the public or an indefinite group of counterparties. 

Where all three elements are present, a licence is required.

There are certain exemptions under Hungarian law including intra-group lending, which allows entities belonging to the same corporate group to lend money and provide guarantees without a licence as long as it is confined within the group and is not directed at external third parties.

Yes, upstream guarantees/suretyships are permitted, subject to the considerations described in Q4.

Guarantees to secure obligations of shareholders are possible.

Yes, downstream guarantees/suretyships are permitted, subject to the considerations described in Q4.

Guarantees by shareholders are possible and market standard in Hungary.

Yes, lateral guarantees/suretyships are permitted, subject to the considerations described in Q4.

Yes.

Guarantee

Financial assistance

Under the Civil Code and Act V of 2006 on Public Company Information, public limited companies are prohibited from providing financial assistance (including guarantees) for the purpose of acquiring their own shares, subject to limited exceptions. For private limited companies and limited liability companies, the rules are less restrictive but corporate benefit must still be demonstrated.

Transfer pricing

Hungarian transfer pricing rules (aligned with OECD guidelines) require that transactions between related parties be at arm’s length. Guarantee fees (if any) should reflect market conditions; non-compliance may result in tax adjustments and penalties.

Corporate benefit

Hungarian courts recognise the requirement of corporate benefit. A guarantee granted without demonstrable corporate benefit may be challenged (e.g. by a liquidator in insolvency proceedings) as being detrimental to the company. It is recommended to document the corporate benefit in the relevant corporate resolutions.

Approval requirements

Depending on the articles of association, granting guarantees may require the approval of the shareholders’ meeting or supervisory board. Additionally, transactions between the company and its executive officers or their relatives require the approval of the shareholders’ meeting.

Consumer protection

Independent guarantees issued by natural persons in connection with consumer credit are less common in practice but would be subject to general consumer protection rules.

Suretyship 

The financial assistance, transfer pricing, corporate benefit and approval requirements described above apply equally to suretyships. 

Additionally, if a suretyship is taken from a natural person (consumer) in connection with a consumer credit agreement, additional requirements are imposed, such as:

• the creditor must inform the consumer surety in writing, prior to the conclusion of the suretyship agreement, about the debtor’s creditworthiness assessment
• the nature and amount of the secured obligation
• the consequences of default for the surety
• whether the suretyship is direct or simple. 

Non-compliance may affect enforceability.

Yes.

Guarantee

Written form is mandatory under the Civil Code; failure to comply renders the guarantee void. The guarantee instrument must specify the:

• conditions under which the guarantor is obliged to pay (i.e. the terms of the demand)
• maximum amount of the guarantee 
• expiry date or event.

Notarisation is not required for validity but is recommended if direct enforcement via notarial writ is desired. Registration is not required for validity. There is no requirement for execution in Hungarian, but a Hungarian translation may be needed for enforcement proceedings in practice.

Suretyship

Written form is mandatory; failure to comply renders the suretyship void. 

The agreement must identify the principal obligation being secured. Notarisation is not required for validity but is recommended for direct enforcement purposes. If the surety is a consumer in a consumer credit transaction, the applicable legislation requires specific written content and a separate signed declaration confirming receipt of pre-contractual information.

It is also important to note that if the suretyship, which is entered into for an indefinite period, secures all of the obligor’s existing or future obligations, the surety may terminate the suretyship agreement by giving 3 months’ notice.

Yes.

Guarantee 

A guarantee can secure future obligations. Since the guarantee is independent from the underlying obligation, the key requirement is that the guarantee itself specifies the maximum amount payable and the conditions for the demand. There is no requirement that the underlying obligation already exists at the time the guarantee is issued. 

Suretyship

A suretyship may secure future obligations, provided the secured obligation is sufficiently determinable.

Security interests (pledge)

Creation of security over future, conditional or unspecified obligations is possible, provided the maximum amount of the secured claim is determined in the security agreement.

Guarantee

No, as the guarantee constitutes an independent payment obligation, it is not dependent on the validity of the principal obligation. The guarantor is obliged to pay upon demand regardless of any defences from the underlying transaction.

Suretyship

Yes, as suretyship is accessory in nature, its validity depends on the existence and validity of the principal obligation. If the principal obligation is invalid, the suretyship is also invalid.

Security interests (pledge) 

As security interest is also accessory, such security interest ceases to exist if the secured claim ceases to exist.

The concept of indemnity as understood under English law does not exist as a separate statutory concept in Hungarian law but may be recognised if established under a foreign law-governed document.

Yes, a guarantee, suretyship or security interest can be continuing for as long as the secured obligations remain outstanding. There is no mandatory requirement for a definite term; however, it is strongly recommended.

Guarantee

An independent guarantee typically has a definite term and expires upon the earlier of: 

• expiry of its stated term 
• presentation of demand and payment
• the occurrence of a specified terminating event.

If no term is specified, the guarantee may be terminated by the guarantor after a 3-year period by giving 3 months’ notice. 

Unlike suretyship, the guarantor cannot raise defences from the underlying transaction upon demand; the guarantee is payable strictly in accordance with its terms. It is standard practice to include a clear expiry date in the guarantee instrument.

Suretyship

If granted for an indefinite period, the surety may terminate it. See Q5 above. 

Security interests

For liens/pledges there is no mandatory term; the security remains in force until the secured claim is satisfied or the security is otherwise released.

Yes, there are no restrictions under Hungarian law on granting a guarantee in favour of a foreign creditor.

In case of security, FDI-related restrictions apply in case security is created over the assets of, or held in, strategic entities. 

Yes, these structures – parallel debt, trust, security agent – are not expressly regulated by Hungarian law but are commonly used in cross-border transactions.

As a general rule under Hungarian law, accessory security rights (suretyship, pledge) follow the principal claim upon assignment. No separate assignment of the security interest is required. However, for registered security interests (mortgage over real estate, registered pledge over movables, pledge over business quota), a change of creditor must be recorded in the relevant register to ensure enforceability against third parties.

An amendment to the security agreement is not strictly required but is recommended for clarity and practical registration purposes. 

The land registry entry must reflect the new creditor for a mortgage as it has constitutive effect.

Guarantee

Since the guarantee is an independent obligation, changes to the underlying secured obligations (including a change of debtor) do not automatically affect the guarantee, provided the demand conditions specified in the guarantee instrument remain satisfied. The guarantee is payable upon demand regardless of changes to the underlying transaction. However, if the guarantee instrument refers to the principal debtor by name, or otherwise identifies the underlying obligation in a way that is affected by the change, the guarantor may require an amendment or issuance of a new guarantee instrument. In practice, it is advisable to draft the guarantee broadly enough to accommodate potential changes to the underlying transaction.

Suretyship

If the principal debtor changes (e.g. by way of assumption of debt), the surety’s consent is required for the suretyship to continue. As the surety’s liability corresponds to the obligation for which the surety was provided, the surety’s liability may not become more onerous than it was at the time the suretyship was assumed; however, it extends to the legal consequences of the principal’s breach of contract and to any ancillary claims that arise after the guarantee was assumed.

Security interests

If the security is a framework lien-type security, changes within the agreed maximum amount are generally covered without amendment. For other security interests, amendments to the security agreement and updates to the relevant register may be needed. For a pledge granted by a third party, the pledgor’s consent is similarly required upon a change of debtor. Amendments to registered security (mortgage, registered pledge) require updating of the register. Amendments to a notarised security agreement must also be notarised.

Mortgage over real estate 

Must be governed by Hungarian law.

Pledge/lien over movable assets

May be governed by foreign law, but Hungarian mandatory rules on perfection and enforcement apply to assets located in Hungary. 

Suretyship/guarantee 

May be governed by foreign law (parties are free to choose under Rome I Regulation).

In practice, security over assets located in Hungary is typically governed by Hungarian law, while intercreditor agreements and parallel debt structures are often governed by English law in cross-border transactions.

Submission of disputes to foreign courts is generally permitted if the dispute involves a cross-border element, subject to the EU Brussels I Regulation (Regulation (EU) No 1215/2012) and Hungarian procedural rules. However, certain matters fall under the exclusive jurisdiction of Hungarian courts, including disputes concerning rights in rem over immovable property located in Hungary and insolvency proceedings involving Hungarian entities. 

Arbitration clauses are valid and enforceable (subject to mandatory Hungarian rules), as Hungary is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. 

There are no currency control or capital movement restrictions with respect to guarantees, security or loans, but the Hungarian licensing requirements are to be met (i.e. a licence issued by the Hungarian National Bank/passporting of a licence issued by the supervisory authority of the place of residence of the foreign financial institution/an applicable exemption).

Additionally, the Hungarian National Bank may require certain statistical reporting for cross-border financial transactions exceeding certain thresholds.

Under the Hungarian rules concerning to bankruptcy and liquidation, a creditor or the liquidator (on behalf of a debtor) may bring a court action to challenge certain transactions, including the granting of security. Such claims must be filed within 1 year of publication of the liquidation order.

The following transactions may be challenged, the burden of proof in all cases resting with the liquidator:

Fraudulent transactions (5-year look-back)

Any contract or legal declaration made within 5 years before or after the court’s receipt of the liquidation petition, where the transaction reduced the debtor’s assets and the debtor intended to defraud its creditors, provided the other party knew or ought to have known of that intent.

Undervalue and gratuitous transactions (3-year look-back)

Any contract or legal declaration made within 3 years before or after the court’s receipt of the liquidation petition, where the transaction involved a gratuitous transfer of the debtor’s assets, a gratuitous obligation encumbering those assets, or a transaction at a conspicuously disproportionate value in favour of a third party.

Preferential treatment of creditors (90-day look-back)

Any contract or legal declaration made within 90 days before or after the court’s receipt of the liquidation petition, where the effect was to give preferential treatment to a creditor, such as amending an existing contract in that creditor’s favour or granting security to a previously unsecured creditor.

Abusive security transfers (3-year look-back)

Any contract or legal declaration made within 3 years before or after the court’s receipt of the liquidation petition involving a transfer of ownership, rights or claims for security purposes, or the exercise of a purchase right for security purposes, where the beneficiary failed to properly settle with the debtor or did not provide collateral exceeding the secured claim.

Yes, for all listed asset types, except goodwill and rights in a company as standalone assets. 

The description of collateral must be sufficient for clear identification. Under the Hungarian legal regime, a pledge may be created over any transferable thing, right or claim.

Hungarian law distinguishes between mortgage (non-possessory) and possessory pledge. For movable assets, a registered (non-possessory) pledge is created by registration with the security registry.

For immovable property, a mortgage is registered in the land registry.

For business quota, a pledge is registered in the company registry.

Yes, under Hungarian law it is possible to create security over multiple types of asset in a single security agreement. 

However, there is no such concept as a general floating charge under English law; security can be established over a certain group of assets (i.e. the entirety registered in the books of the security prover from time to time).

It is to be registered in the security registry.

Yes, subject to the same considerations as discussed in Q4 above (financial assistance, transfer pricing, corporate benefit, approval requirements).

Not required for validity but recommended if out-of-court enforcement via notarial writ of execution is desired. Notarisation is required if the security agreement is to serve as the basis for direct judicial enforcement.

Mandatory for a mortgage, as it is constituted by registration. 

Not mandatory for a pledge but required (and recommended) for enforcement against third parties and for setting the ranking and priority determination.

For both mortgages and pledges, amendments to registration are needed if there are any changes to the information contained in the relevant public registry. 

There is no mandatory requirement for execution in Hungarian. However, in practice the land registry requires submissions in Hungarian or accompanied by a certified Hungarian translation. Court proceedings and enforcement are conducted in Hungarian. 

It is common practice in cross-border transactions to have the security agreements relating to land or buildings executed in both Hungarian and English (or another foreign language), with the Hungarian version being the binding version for registration and enforcement purposes.

Executed in writing and containing mandatory terms provided by law.

Notifications:

Yes, under Hungarian law prohibition of alienation and encumbrance can be established as well (which is to be registered in the land registry in case of a mortgage or security relating to a land).

Priority/rank of security interests is determined as follows: 

• mortgage over real estate – priority is determined by the order of registration in the land registry (date and sequential number of the application) 
• pledge over movable assets – priority is determined by the order of registration in the security registry (date and time of registration). A possessory pledge has priority over a non-possessory pledge if the asset is in the pledgee’s possession.

In insolvency proceedings, secured creditors are satisfied from the proceeds of their collateral ahead of unsecured creditors, but subject to certain preferential claims (e.g. costs of liquidation, wage claims) that may have statutory priority under Hungarian insolvency laws. 

The regulatory framework is well-established. Security is easily established and encumbrances are easily checked. The system is clear, straightforward and relatively quick. 

The security registry/land registry/company registry are accessible online, and encumbrances can be checked readily. 

Costs are generally low to medium

Yes, with limitations. 

Under Hungarian law, qualified electronic signatures (QES) are legally equivalent to handwritten signatures. Security agreements not requiring notarisation can be executed with QES. However, notarised documents (e.g. for direct enforcement) cannot be executed via e-signing – the notary requires physical presence and wet-ink signatures. 

In practice, Hungarian lenders and courts still prefer wet-ink signatures for security documents, particularly for land registry filings. An electronically-signed document may face practical challenges when submitted to the land registry or security registry.

Security registry

The secured creditor (pledgee/lender), or a person authorised by it, shall apply for registration. The pledgor’s cooperation is not required, though a declaration of consent from the pledgor (or the underlying pledge agreement) is needed. 

Land registry

Either party (or their legal representative) may submit the application, together with the agreement notarised or countersigned (by an attorney at law).

Company registry

The company shall submit the notification, but in practice the pledgee ensures compliance by obtaining a power of attorney (POA) from the pledgor and the company of which the shares/business quota is encumbered.

Quick – normally within several hours to 1 business day – and low cost.

Security registry

The search is free of charge online.

Land registry

An extract (tulajdoni lap másolat) costs approximately EUR 10-15 per property (available online via e-ING or at the land office).

Company registry 

Extracts are available free of charge online.

Security registry

Registration is instant (electronic). Deregistration/amendment is also done electronically. The fee is HUF 7,000 (approximately EUR 20) per entry. 

Land registry

Registration of a mortgage typically takes 30-60 days from submission (expedited procedure of 15 days available for an additional fee). State duty for registration of a mortgage is HUF 20,000 (approximately EUR 60). Deregistration is also subject to a similar fee.

Company registry

Registration of a pledge typically takes 30 days, stamp duty and a publication fee are to be paid, depending on the company type.

Low to medium. Notarial fees in Hungary are regulated by a decree of the Ministry of Justice. 

The fee is generally based on the value of the transaction (value of the collateral or secured obligation), calculated as a percentage, subject to a minimum and maximum cap. 

For security documents, the notarial fee is calculated on a progressive scale based on the transaction value, ranging:

• from HUF 20,000 (approximately EUR 60) for transaction values up to HUF 500,000 (approximately EUR 1,400) 
• to HUF 1.165 million (approximately EUR 3,200), plus 0.1% of the amount exceeding HUF 500 million (approximately EUR 1.4 million), for higher-value transactions
• the fee base is capped at HUF 1 billion (approximately EUR 2.8 million), resulting in a maximum fee of HUF 1.665 million (approximately EUR 4,600). 

The exact fee should be confirmed with the notary.

No stamp duty or similar tax is payable on security documents in Hungary (other than the filing fee mentioned above). Attorney’s fees for countersignature/legal advice are additional costs but not regulated by statute.

Yes.

It depends on the agreement between the parties.

Usually, a breach under the principal obligation agreement does not in itself trigger the right to enforce the security if such breach can be (and is) cured. Accordingly, enforcement may be available following such breach only if it results in acceleration, termination or another mechanism making an outstanding secured claim due and payable.

It depends on the agreement between the parties.

Usually, a breach under the pledge/security agreement does not in itself trigger the right to enforce the security if such breach can be (and is) cured. Accordingly, enforcement may be available following such breach only if it results in acceleration, termination or another mechanism making an outstanding secured claim due and payable.

Yes, under Hungarian insolvency law the secured creditor has the right to seek satisfaction from the collateral in insolvency proceedings, subject to the rules on secured creditors’ claims. In liquidation proceedings, secured creditors are satisfied from the proceeds of their collateral.

Any other grounds specified in the respective security agreement.

There is no mandatory statutory cure period under the Hungarian legal regime before enforcing a pledge. In practice, security agreements often provide for a contractual cure period (e.g. 15-30 days). For direct enforcement via notarial writ, the notary must verify that the conditions for enforcement are met.

Consumer credit

In case of consumer credit agreements, Hungarian laws provide additional debtor protections. The creditor must send a written notice of default to the consumer debtor (and consumer surety, if any) before commencing enforcement. If the consumer is in default, the creditor must provide at least 90 days’ notice before terminating the credit agreement and accelerating the debt (which is typically a precondition to enforcement of security). This effectively extends the period before security enforcement can commence in consumer credit scenarios.

Yes, out-of-court enforcement is available. The pledgee may enforce the security out of court if the parties agreed on out-of-court enforcement in the pledge agreement (or a separate agreement). A notarial deed with a direct enforceability clause is an additional instrument enabling direct enforcement without court proceedings. No court approval of valuation is required for out-of-court enforcement, but the pledgee has a duty to act in a commercially reasonable manner.

Sale of the pledged asset by the pledgee

The pledgee may sell the pledged asset, either privately or publicly. The collateral value is effectively determined by the sale proceeds, provided that the sale is carried out in a commercially reasonable manner. A sale is presumed commercially reasonable if made on an exchange at the applicable market price, or in the usual manner applied in the relevant market. The pledgee must account for the proceeds, deduct permitted costs, apply the proceeds according to ranking and return any surplus to the pledgor.

Acquisition of ownership by the pledgee

The pledgee cannot automatically appropriate the pledged asset upon default; any such pre-default arrangement is void. However, after the right of satisfaction has opened (unpaid but secured debt is arisen), the pledgee may offer in writing to acquire the asset in full or partial satisfaction of the secured claim. In that case, the “value” is determined in the offer, which must state the extent to which the secured claim would be discharged, or any additional amount payable to the pledgor. Acceptance by the pledgor and absence of objections from relevant interested parties are required.

Direct satisfaction in case of financial collateral/security deposit 

For certain collateral such as cash, payment account claims or publicly traded securities, the pledgee may satisfy its claim directly. Cash and payment account claims are valued at nominal value; securities are valued at their public market value or another value determinable independently under their terms. Any excess over the secured claim must be returned to the pledgor.

Enforcement of pledged rights or receivables

If the pledged asset is a receivable or right, the pledgee may instruct the debtor of the receivable to pay the pledgee and, after maturity, enforce the receivable in place of the pledgor. The value is determined by the amount actually collected, subject to the pledgee’s accounting obligation.

The pledgee cannot automatically appropriate the pledged asset upon default; any such pre-default arrangement is void. However, after the right of satisfaction has opened (unpaid but secured debt is arisen), the pledgee may offer in writing to acquire the asset in full or partial satisfaction of the secured claim. In that case, the “value” is determined in the offer, which must state the extent to which the secured claim would be discharged, or any additional amount payable to the pledgor. Acceptance by the pledgor and absence of objections from relevant interested parties are required. For real estate mortgages, the acquisition of title must be registered in the land registry.

Yes, if the parties agreed in the pledge agreement (or a separate agreement). The pledgee may sell the collateral by direct sale (private sale) or public auction. The collateral must be sold at market value or at a price obtainable in a commercially reasonable manner. The pledgee must act in good faith and account to the pledgor for any surplus over the secured claim.

Yes, if the pledge agreement is executed as a notarial deed with a direct enforceability clause, the secured creditor may obtain a writ of execution directly from the notary without court proceedings.

For a security deposit (óvadék) over bank accounts

Enforcement may be effected by debiting funds from the pledged account based on the account pledge agreement. 

For a pledge over receivables

The pledgee may collect the receivable directly from the account debtor upon default. These methods 

Yes, POA and conditional instruments are commonly used in practice to facilitate enforcement, though they are not mandatory. See below for asset-specific recommendations. However, under Hungarian law, a POA cannot be made irrevocable vis-à-vis the principal. Any waiver of the principal’s right to withdraw the authorisation is null and void; therefore, the principal may withdraw the POA at any time.

In practice, enforcement of security over real estate can be time-consuming, particularly if the debtor resists (e.g. occupancy issues, appeals). Court enforcement proceedings may take 1-2 years or longer. Agricultural land enforcement involves additional restrictions. In insolvency proceedings, the liquidator manages the sale of assets, which may delay the secured creditor’s recovery. The secured creditor should ensure that the security agreement is properly drafted, registered and (ideally) notarised to enable direct enforcement without full court proceedings. 

Consumer credit

Enforcement of security in consumer credit transactions is subject to additional restrictions and debtor protections. In particular:

• enforcement of a mortgage over the consumer’s residential property is subject to heightened procedural requirements and potential enforcement moratoriums

the creditor must comply with the provision of the Hungarian consumer credit legislation and pre-enforcement notice requirements.

Fairly easy; balanced (neither strongly debtor- nor creditor-friendly); average in terms of timing.

Out-of-court enforcement of movable asset pledges (bank accounts, receivables) is quick and straightforward. 

Enforcement of real estate mortgages is more complex and time-consuming. Court enforcement may take 6-18 months on average, longer if contested. 

The legal framework is clear but practical execution can be affected by debtor resistance and procedural delays.

No significant upcoming changes are expected, except for bankruptcy and liquidation proceedings.