When Is Attorney Escrow Used During A Property Purchase In Hungary ?
Many property purchases in Hungary are completed without attorney escrow. The buyer transfers the purchase price directly to the seller, ownership is registered and the transaction proceeds normally.
Attorney escrow is most commonly used when additional security is needed. This often happens when a mortgage must be removed from the title deed, the purchase price is being paid in stages, or certain documents should only be released once agreed conditions have been met.
A Common Example: The Seller Still Has A Mortgage
One of the most common situations involves a seller who still has a mortgage secured against the property.
A typical transaction may look something like this:
- The buyer signs the purchase contract.
- The seller's bank confirms how much is required to repay the outstanding mortgage.
- The buyer transfers part of the purchase price to the attorney's escrow account.
- The attorney releases the agreed amount to the bank to repay the mortgage.
- The bank issues the documents needed to remove the mortgage from the title deed.
- Once the agreed conditions have been met, the remaining purchase funds are released to the seller.
- Ownership registration can proceed .
With several parties involved, including the buyer, seller, bank and lawyer, attorney escrow helps ensure that money and documents move through the transaction in the correct order.
The Lawyer May Be Holding Documents As Well As Money
Many people assume attorney escrow only applies to purchase funds.
In reality, attorneys often hold important documents as well.
A common example is the ownership registration consent signed by the seller. The seller may sign this document when the contract is concluded, but the lawyer only releases it once the final instalment of the purchase price has been paid.
This allows ownership registration to proceed while giving both parties confidence that the agreed steps have been completed.
Why Buyers And Sellers Use Escrow
Escrow is often used when neither party wants to take the next step until the previous one has been completed.
The buyer may not want funds released until the mortgage has been removed from the title deed.
The seller may not want ownership-registration documents released until the purchase price has been paid in full.
Rather than relying solely on trust, both parties follow a process that has already been agreed in advance.
This can be particularly useful if the seller is using the sale proceeds to repay a mortgage, purchase another property or complete another transaction that depends on the funds arriving on time.
Sometimes The Lawyer's Escrow Arrangements Matter
For most transactions, the lawyer's escrow arrangements remain largely in the background.
However, in higher-value or more complex transactions, they can become important. For example, some buyers using mortgage finance have discovered that their lawyer could not receive the bank's funds into escrow because the necessary escrow arrangements or insurance requirements were not yet in place. This can create delays even after mortgage approval has been obtained.
The issue can be particularly relevant when the seller lives abroad and does not have a Hungarian bank account. In some cases, the bank may require the mortgage funds to pass through a Hungarian bank account as part of the transaction structure. For escrow amounts of HUF 40 million or more, lawyers are required to carry additional insurance connected to escrow activities, so it may be worth confirming these arrangements with your lawyer before signing the contract.
Not Every Property Purchase Needs Escrow
Attorney escrow is not a requirement for every property transaction in Hungary. Many straightforward sales proceed perfectly well without it.
However, when mortgages, staged payments, document releases or multiple conditions are involved, escrow can provide a practical way to ensure that money and documents change hands in the correct order.
“Escrow is often most useful when several steps need to happen in sequence. The buyer wants to know the money will only be released at the right time, while the seller wants certainty that the funds are available once the agreed conditions have been met,” says Alex Markus, Chief Executive of City-Lets Ltd.
For many buyers and sellers, attorney escrow is less about legal formalities and more about making sure a complex transaction proceeds smoothly from one step to the next.