Economy 20 November 2018, 3:22pm

BREAKING NEWS: Defaulting home owners may repurchase property from state

Portfolio

Under a bill submitted on Tuesday, the Hungarian government would sell the homes back to previous owners that got into the National Asset Management Programme for their inability to pay the monthly instalments on their mortgages. The residents of their previous homes that have been regularly paying the rent may buy back their property under preferential terms, the minister without portfolio in charge of the management of national assets announced in a statement on Tuesday.

Highlights of the planned buyback programme:

If the tenant (i.e. the previous owner of the home that was not evicted on the condition of paying a monthly rent) decides to pay the price of the property in full, the price will be reduced by the total rent he/she paid. The state will not charge any interest and further allowances (certain percentage) may be requested.
The above condition would be applicable also on the close relatives of the tenants, i.e. former owners may have their properties back.
For those that are unable to come up with the asking price, the cabinet would offer a long-term repayment scheme. For those in the worst financial conditions there is still the option of remaining tenants for a monthly rent.
All costs (material and procedural) arising in relation to the ownership change are to be borne by the state.
It is one of most important issues how much the properties will be bought back for. A separate implementing regulation will settle that.
If the bill is adopted into law, the new legislation could go into effect as of 1 January 2019.

If Parliament adopts the bill, NET Zrt. will notify the related parties in writing, and the repurchase contracts are expected to be signed by the end of 2019 with those that can come up with the full price.

NET Zrt. was brought to life in scope of the Home Protection Action Plan by the cabinet in 2011. In the NET programme, the state acquired the properties of mortgage holders, among them many families with children, who were unable to pay the monthly instalments, and gave them the opportunity to stay for a monthly rent.

A total of 36,000 homes were purchased in the programme, for which 154,000 people have applied for so far.

This would be the best solution probably for everyone. While the former mortgage holders get their homes back, the state will rid itself of the permanent maintenance and administrative burdens of a real estate stock (which probably exceeded the size of the rents paid). There is, however, the problem of moral hazard to consider. Debtors who were unable to clear their monthly instalments can now become the owners of real estate that they bought by taking out mortgages. Those participating in the NET programme are mostly mortgage holders with social needs, about one quarter of the defaulting home owners.