Law on Expropriation Changed in Favour of Governmental Investments

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Categories: EnglishNews

As part of an omnibus bill adopted last week, the law on expropriation will change with the entry into force of 1 January 2022. The new rules will be less favourable to dwellers. 

The prevailing law

According to the Fundamental Law, a property may only be expropriated exceptionally, in the public interest and in those cases and ways provided for by an Act, subject to full, unconditional and immediate compensation.

The detailed rules on expropriation are therefore governed by a separate law (Act No. CXXIII of 2007). Under this, in case of an expropriation of a building, the state or municipality requesting the expropriation is obliged to provide the dwellers with a proper dwelling as replacement – if the dwellers (owner of the property or tenant) prefer to claim this rather than financial compensation. 

The dwellers are not eligible to request another dwelling if they own another flat that is available in the same town. The dwellers are not entitled to a replacement either if they use the expropriated dwelling without a valid title. 

What brings the new law to dwellers? 

Under the new law adopted by the Fidesz Government last week, an expropriator (state or municipality) is not obliged anymore to offer another dwelling as replacement. 

This means that if the state or municipality declares their inability to offer an alternative dwelling and they also show the court that offering of a replacement flat would delay the public investment, they will not be obliged to provide the dwellers with a replacement. It applies in cases when the dwellers explicitly request this kind of compensation for losing their property. In such a case, the financial compensation will be the sole remedy available for losing their home. If the dwellers are not satisfied with the amount of money offered by the government, they have to sue the state before an administrative court. The amount of the financial compensation will be determined by the court then, usually on the basis of an expert’s opinion. 

The government justified the new law because it was necessary in order to protect investments. 

Streetlawyers Association’s (SA) assessment 

The SA is of the view that the new law will adversely affect housing rights as dwellers’ options will be limited sharply. 

Obviously, an expropriation procedure puts the dwellers in an unequal position as they confront the full power of the state in a very quick and costly procedure.

With a reflection on the increase of housing costs in Hungary in the last decade, a replacement housing as an offer required by law would provide a stronger protection for people losing their home than the financial compensation. 

The SA has experienced expropriation cases where the amount offered by the expropriator had not covered the cost necessary for another home but it was only enough to take out a loan.

It is important to note that much will depend on the administrative courts that are called to interpret the law. Indeed, it will be up to them to impose a strict scrutiny on the ‘very likely delay’ of the planned investment alleged by the expropriator. However, this can only be done if the dwellers file a lawsuit against the government agency which issued the expropriation decision.