Introduction: the largest transaction – with the fewest safeguards
For most people, the purchase or sale of real property is the highest-value legal transaction of their lives. Paradoxically, it is precisely in the antechamber of that transaction – on the real estate agency market – that the consumer encounters the fewest institutional safeguards. Real estate agency is not an entirely unregulated field: it is an activity subject to registration with the competent authority and to professional qualification requirements. Beyond that entry threshold, however, it lacks the entire institutional framework of guarantees that surrounds professions occupying a comparable position of trust. Anyone turning to an attorney-at-law, for instance, is backed by a public-law professional chamber, mandatory professional indemnity insurance, a code of ethics, a disciplinary system and the statutorily regulated, supervised regime of escrow management. Anyone contracting with a real estate agent can – at present – rely on essentially none of these.
The problem is systemic, and can be broken down into three clearly distinguishable, yet in several respects interrelated, layers. The first is the widespread use of unfair standard contract terms. In this field, in proceedings brought on the basis of public-interest actions filed by the public prosecutor – several of which reached the Curia, Hungary’s supreme court – the courts have rendered judgments against a number of nationwide franchise networks. The second, distinct problem is the handling of buyers’ funds. The standard purchase-offer forms used by real estate agents typically require the buyer to hand over a sum of money to the agent when making the offer, even though receiving and holding such sums as a deposit does not fall within the range of activities a real estate agent may lawfully pursue. Legal uncertainty is further compounded by the fact that the sum so transferred cannot be linked to the earnest money deposit regulated by Act V of 2013 on the Civil Code (hereinafter: the Civil Code), nor to any other nominate security device. The “offer deposit” (ajánlati biztosíték) is a construct created by market practice, without statutory background or settled legal content; its purpose, its legal effects, and the conditions of its retention or repayment are therefore uncertain from the outset. The third phenomenon is the blurring of the boundaries of real estate agency activity. In practice, agents in many cases no longer merely facilitate contact between the seller and the prospective buyer, or promote the conclusion of the transaction; they also make pre-drafted document templates available to the parties, adapt the content of those templates to the specific transaction, draft the parties’ legal declarations, and provide information on the legal significance and consequences of the clauses used. In doing so they enter a field of activity that is no longer merely commercial or intermediary in nature, but carries elements of legal drafting and legal advice. The following sections examine these three areas of concern in the light of the applicable legislation and published case law.
1. What does the agent actually undertake? Diligent effort or actual result?
As a starting point, it is worth clarifying what exactly the principal is contracting for. Under Section 6:288 of the Civil Code, an agency (brokerage) contract obliges the agent to pursue activity aimed at facilitating the conclusion of a contract between the principal and a third party, and obliges the principal to pay a fee.
This statutory definition, taken on its own, still points to what is known as an obligation of best efforts. In the case of such an obligation, the obligor performs in conformity with the contract if it proceeds with the care that can generally be expected in the given situation, irrespective of whether its activity ultimately leads to the desired result. The commission-based remuneration customarily applied in practice, however, fundamentally alters the nature of the legal relationship. Case law has for decades been consistent in holding that where the agent stipulates its fee in the form of a commission – that is, a “success fee” determined as a percentage of the purchase price – the relationship takes on the character of an obligation of result: the agent becomes entitled to the commission only if the contract of sale (or lease) is concluded as a result of, and in a causal connection with, its agency activity (BDT2003. 832., BDT2009. 2083., BH1992. 414., BH1997. 302.; to the same effect, arbitral award No. 3/4/2022).
To put it differently: where commission-based remuneration is used – as it most often is in practice – the agent’s claim to a fee is not established merely by the fact that it carried out its activity with the care generally expected in the given situation. Mere “diligent effort” is not enough: entitlement to the commission also requires that the contract of sale or lease be concluded as a result of, and in causal connection with, the agent’s activity. Where that causal link is absent, the agent is not entitled to a commission even if it otherwise acted diligently.
The requirement of a causal connection necessarily raises the further question of which party bears the burden of proving, in the event of a dispute, that the transaction came about as a result of the agent’s activity. In this respect, case law has also worked out the allocation of the burden of proof. Where the sale takes place while the agency contract is in force, there is a presumption that it is the result of the agent’s activity; it is for the principal to prove the contrary. Where, however, the sale takes place after the contract has terminated, that presumption no longer applies: in such cases it is for the agent to prove that the transaction is attributable to its earlier activity (BDT2009. 2083.).
A significant proportion of the standard contract terms used in practice seek, by various contractual devices, to detach the agent’s claim to a fee wholly or partly from any actual agency result. The most common methods include extending the notion of “result”, contractually presuming the causal connection, and shifting the burden of proof onto the consumer. Standard forms may, however, contain problematic provisions beyond this area as well: disproportionate confidentiality obligations, punitive payment clauses, and restrictions relating to exclusivity and to the right of termination appear in them repeatedly. The unfairness of such clauses has been examined by the case law of recent years in relation to the contract terms of several nationwide real estate agency networks. That is the subject of the next section.
2. Fine print in the balance – unfair standard contract terms
The contractual techniques described above raise more than merely theoretical concerns. In recent years the public prosecutor has brought public-interest actions under Section 6:105 of the Civil Code in respect of standard contract terms applied by several nationwide real estate agency networks. The judgments delivered in those proceedings – including the decisions of the Curia in cases Gfv.30.200/2020/8., Gfv.30.309/2021/6., Pfv.21.291/2020/11., Pfv.20.751/2023/6., Pfv.20.433/2024/4. and Pfv.21.072/2024/4. – map out the same problems time and again. The courts declared an entire series of clauses used in consumer contracts to be unfair and therefore null and void, with effect extending to all consumers contracting with the user of the terms concerned. The recurring patterns are as follows.
a) Automatic survival of the commission claim after termination of the contract.
Several standard forms provided that the agent would automatically be entitled to the full commission in respect of any contract of sale concluded within 12 months – or, in the case of properties with a guide price of at least HUF 50 million, within as much as 36 months – following termination of the mandate on any ground. And all this without the agent having to prove that the transaction came about as a result of, and in causal connection with, its earlier activity.
Such a clause simultaneously transforms the content of the obligation of result and the statutory allocation of the burden of proof. It severs the agent’s claim to a fee from any actual agency result, while compelling the consumer to prove the absence of the causal link. In the courts’ view, this upsets the balance of rights and obligations in breach of the requirement of good faith and fair dealing, unilaterally and without justification, to the detriment of the consumer.
b) Confidentiality clauses restricting the consumer’s freedom of decision.
A term imposing on the prospective buyer a confidentiality obligation so broad that they could not even inform their own family members about the property viewed was likewise found to be unfair. According to the Curia, such a clause deprives the consumer of the opportunity to discuss a major financial decision within the family, to compare the property with others, and to weigh the consequences appropriately (Pfv.20.433/2024/4.).
Not every clause aimed at preventing circumvention of the agent is unfair, however. In its judgment No. Pfv.21.072/2024/4., the Curia held, as a matter of principle, that a provision under which the prospective buyer may contact the owner of the property presented by the agent solely through the agent is not in itself objectionable. The line is drawn where the clause no longer protects the agent’s legitimate economic interest, but disproportionately restricts the consumer’s ability to obtain information, to make a reasoned decision, or to pursue some other legitimate interest.
c) Penalty and fee clauses detached from the agency result.
The courts found unfair a provision that, in the event of rejection of a purchase offer – without any examination of the reason for the rejection or whether it was justified – imposed on the principal a payment obligation equal to the full agency fee. Such a clause essentially requires the consumer to pay the success fee even where no contract of sale has been concluded, that is, where the result presupposed by the agency contract has not materialised.
The mere two-working-day deadline prescribed for responding to a purchase offer was likewise found to be unfair. It forced the consumer into an unjustifiably narrow decision-making position, while attaching to the expiry of that deadline a legal consequence serving the earliest possible maturity of the agent’s fee (Pfv.21.291/2020/11.).
d) A prohibition on termination hidden behind exclusivity.
An exclusive agency mandate is not in itself unfair: the parties may validly agree that the principal will not engage another agent to sell the same property. Exclusivity does not, however, necessarily mean that the owner may not look for a buyer themselves, or may not sell the property without the involvement of an agent.
In case No. Gfv.30.200/2020/8., the Curia found unfair a contractual arrangement that also deprived the consumer of the possibility of selling the property independently. Such a clause goes beyond the protection of the agent’s legitimate economic interest: it excludes not only the engagement of another agent, but also restricts the owner’s freedom of disposition, and may in certain cases secure a fee for the agent even where the agent played no actual part in bringing about the sale.
The dividing line therefore runs between exclusivity and the complete appropriation of the sale. The former may serve the agent’s legitimate economic interests; the latter, however, may already upset the contractual balance unilaterally and without justification, to the consumer’s detriment.
The lesson for the lay reader is simple, yet serious in its consequences: the courts have found numerous, recurring clauses in the standard terms used by several nationwide real estate agency networks to be unfair and, consequently, null and void. Having the contract reviewed by an attorney before signing is therefore not a luxury but elementary self-protection. All the more so because the consumer may also rely on the unfairness and invalidity of an individually non-negotiated contract term later, in the event of a dispute.
3. Nothing is what it seems – the “offer deposit” and real estate agents’ “escrow”
A separate set of problems, distinct from the unfairness of standard contract terms, arises in connection with the handling of money received from buyers. The standard purchase-offer forms used by real estate agents frequently require the offeror to pay an “offer deposit” – not infrequently running to millions of forints – into the agent’s bank account. Among the terms examined by the Curia in case No. Gfv.30.309/2021/6. was a clause under which, following a failed transaction, the agent could retain 50% of the sum as an “estate agency administration fee”. The unfairness of that provision lay in the fact that it secured a fee for the agent even where the agency activity produced no result: the consumer’s money was thus converted into consideration for a service whose contractually presupposed result had not materialised.
Before examining the lawfulness of receiving and handling the money, however, it is worth pausing on the construct itself. The “offer deposit” is not a security device nominate in the Civil Code. That does not necessarily render it invalid: within the bounds of freedom of contract, the parties may also devise atypical arrangements not separately regulated by statute, provided their content does not infringe legislation and, in the case of a consumer contract, is not unfair. In the absence of the statutory background rules attaching to a nominate legal institution – and, as is regularly observed in practice, in the absence of contractual terms defining the construct in sufficient detail – the purpose and legal effects of the “offer deposit” are, however, essentially indeterminable.
An examination of practice and of the actual content of the construct shows that, while the “offer deposit” is in its purpose an arrangement approximating an earnest money deposit, it cannot, despite its security-like character, be legally identified with it. Under Section 6:185 of the Civil Code, earnest money is a sum paid to the other party in confirmation of a contractual undertaking, and that purpose must be clearly apparent from the contract. Earnest money can therefore attach only to a contract already concluded: until the seller has accepted the purchase offer and the contract for the sale of the property has been concluded in writing, a sum handed over in advance cannot produce the legal effects that the Civil Code attributes to earnest money.
The assessment of the question is not, however, exhausted by examining what civil law construct the “offer deposit” actually qualifies as, or how closely it approximates earnest money in its purpose. Far more significant is the fact that the agent receives the sum into its own bank account, keeps it there for a certain period, and then – depending on the fate of the offer – repays it, transfers it on, or sets it off.
The activity described above amounts, in substance, to escrow-type handling of money. The agent does not obtain the sum in satisfaction of some due claim owed to it; rather, it receives the money for a specified purpose, subject to obligations of safekeeping and accounting, and is then required to repay or transfer it on, depending on the occurrence of some future condition. This classification is determined not by whether the standard form uses the word “escrow” or “deposit”, but by what the agent actually undertakes to do by receiving and handling the money.
This is of particular importance because, in Hungary, providing money custody services on a business basis is a financial service subject to authorisation. Point j) of Section 3(1) of Act CCXXXVII of 2013 on Credit Institutions and Financial Undertakings (hereinafter: the Banking Act) lists money custody among financial services. According to the statutory definition, this service consists in placing and managing sums of money on behalf of a client in a segregated custody account, with or without interest, under the conditions laid down by law. A real estate agent is not entitled to pursue such an activity in that capacity: authorisation to carry on real estate agency activity does not extend to holding client funds in custody on a business basis. The Banking Act regards as conducted “on a business basis” any economic activity pursued regularly, for consideration, with a view to profit or the acquisition of assets, and directed at transactions not individually determined in advance. In real estate agency practice, an indication that these conditions are met may be found in particular where the receipt and safekeeping of client funds forms a regularly applied part of the commission-remunerated agency service.
Classification under the Banking Act nevertheless requires, in every case, an examination of all the elements of the given arrangement. If the activity carried out by the agent satisfies the statutory criteria of a financial service, pursuing it without authorisation and on a business basis raises criminal-law consequences as well. Under point a) of Section 408(1) of Act C of 2012 on the Criminal Code (hereinafter: the Criminal Code), a person who carries out financial service activity without the authorisation prescribed by law commits the offence of unauthorised financial activity. The criminal-law assessment of agency money handling is therefore not automatic: establishing the offence requires proof in the individual case that the activity actually pursued qualified as a financial service under the Banking Act, that the agent pursued it on a business basis, and that it lacked the requisite authorisation. The recurring receipt and conditional handling of “offer deposits” in the agent’s own bank account may nevertheless – depending on the content of the given arrangement – raise the question of unauthorised financial activity. Nor does criminal-law exposure end there. If the agent deals as its own with money held by it – received subject to an obligation to account for it, and belonging to another – in a manner departing from the purpose of the deposit, its conduct raises the question of misappropriation (Section 372 of the Criminal Code): misappropriation is committed by a person who unlawfully appropriates property of another entrusted to them, or deals with it as their own.
It is worth contrasting the above with the framework of guarantees surrounding the safekeeping of money in a field where the legislature has expressly regulated it. Act LXXVIII of 2017 on Legal Practice (hereinafter: the Attorneys Act) confers on attorneys-at-law the right to hold funds in escrow by including escrow management among the activities of attorneys (point g) of Section 2(1)), an activity framed by strict rules: the attorney must manage escrow funds separately from all other monies, in a segregated escrow account or sub-account for each deposit (Section 49); may not use or exploit the funds for purposes other than that of the escrow (Section 48(2)); must report escrow deposits reaching a specified threshold within one working day to the electronic escrow register operated by the regional bar associations, and management of the funds in a bank account is conditional upon communicating the chamber’s confirmation to the depositor (Section 51); the depositor may request balance information directly from the account-keeping bank; and the attorney bears strict liability in damages for any shortfall in the money received, from which they may be exonerated only by proving an unavoidable external cause (Section 52(5)). The detailed rules are laid down in a separate chamber norm, Regulation No. 7/2018 (III. 26.) of the Hungarian Bar Association; escrow management is supervised by the chamber acting as an authority, and any breach entails disciplinary liability. Behind an offer deposit “parked” in a real estate agent’s account, none of this exists: there is no mandatory segregation, no register, no chamber supervision, no enhanced liability rule, and no mandatory professional indemnity insurance either. The fate of the buyer’s money depends solely on the agent’s solvency and good faith; in the event of insolvency or abuse, the money becomes an ordinary – and often unenforceable – civil law claim, while the receipt of the money itself may, as we have seen, already qualify as an unauthorised financial service.
The practical conclusion is therefore clear: any sum of money distinct from the consideration for the agency service – whether it is called an “offer deposit”, an advance payment or earnest money – should not be paid by the buyer into the agent’s own bank account. Where a sum has to be safeguarded until the offer is accepted or until some other condition occurs, escrow with an attorney-at-law or, where applicable, with a notary public is the appropriate solution, with all the statutory guarantees attaching to it.
4. Offer and acceptance – decisive declarations in unauthorised hands
The third set of problems is in part independent of the previous ones: it turns not on the content of the contract, but on what the agent actually does. It is not uncommon for the agent – emphasising the “full-service” nature of its offering – to prepare the legal documents of the transaction itself: the purchase offer, the declaration of acceptance, a preliminary contract, an “agreement on the handing over of the offer deposit”, and to provide legal advice alongside all of this. Two interrelated problems arise in this connection. The first relates to the drafting of documents and the giving of legal advice as such: it calls for an examination of whether, by shaping the content of the documents, selecting the legal construct to be applied and explaining the legal effects of the clauses, the agent oversteps the bounds of real estate agency activity and engages, without authorisation, in activities reserved to attorneys-at-law. The second problem relates specifically to the legal effects of the document aimed at the acquisition of the property, often designated a “letter of intent to purchase”.
The legal nature of the document commonly referred to as a “letter of intent to purchase” should be clarified first. Under Section 6:64 of the Civil Code, an offer is a legal declaration that unambiguously expresses the intention to conclude a contract and covers the essential terms of that contract. This must be distinguished from a mere declaration of intent, which expresses no more than a willingness to commence or continue negotiations: its acceptance does not bring a contract into existence. Case law, too, knows of instances in which the parties’ declarations during negotiations remained at the level of a declaration of intent: acceptance of the “purchase offer” meant no more than that the seller accepted the offeror as a negotiating partner and undertook not to negotiate with other offerors for a specified period (BH2003. 203.). The line between the two types of legal declaration is therefore drawn not by the label, but by the content.
Whether a document records a preliminary intention or contains a binding offer must be assessed on the basis of the declaration as a whole. One can speak of an offer for the purchase of real property where the intention to conclude a contract is unambiguously apparent from the declaration and extends to the essential terms of the contract. Without setting out the doctrinal details, in the case of a sale of real property these classically and above all (though not necessarily exclusively) comprise the proper identification of the property to be transferred and the purchase price, as well as any question whose settlement either party has made a condition of concluding the contract. A formal requirement applies in addition: since a contract for the sale of real property must be concluded in writing, an offer aimed at its conclusion likewise produces the intended legal effect only in writing (Section 6:70(1) of the Civil Code). A declaration meeting these substantive and formal conditions may therefore qualify as a purchase offer irrespective of its title – including where it is designated a “letter of intent”.
An offer meeting the statutory conditions creates, upon becoming effective, a binding effect on the offeror: while that binding effect subsists, the offeror is not free to act as though the declaration had never been made. An offer made in writing may be withdrawn only in writing, and the withdrawal of an offer that has already become effective may encounter further limitations, particularly where the offer sets a deadline for acceptance. The state of suspense is brought to an end by the seller’s decision: the offer may be accepted by a written declaration of acceptance. This does not require the parties to sign the same document: the requirement of written form is satisfied where the parties’ mutual and congruent expressions of intent are contained jointly in declarations set out in separate documents (Section 6:70(2) of the Civil Code).
Upon the substantively adequate written acceptance of a sufficiently specific written purchase offer, the contract for the sale of the property itself comes into existence – even in the absence of a separate contract to be signed later: the two declarations contained in separate documents jointly qualify as the contract having been put in writing.
All of this has serious consequences for the parties, which frequently go unrecognised. From the moment the contract comes into existence, the signatories are bound by the obligations arising from it: the seller is obliged to transfer ownership and possession, the buyer to pay the purchase price and to take possession of the property (Section 6:215 of the Civil Code). From this point on, a failure to perform is no longer a change of mind without consequences, but a breach of contract, which may found the other party’s claims – enforcement of performance, withdrawal from the contract, or damages – and may also carry the risk of losing the sum handed over (an advance payment, an “offer deposit”, or earnest money). A party may thus become part of a legal relationship from which they can no longer unilaterally escape – all the while believing that they merely expressed an intention, and that the actual assumption of obligations would be decided later, before an attorney. The risk of this unexpected binding effect is further increased by the fact that, when the declaration is made, no one as a rule informs the party of the true legal effects of the document.
At this point, two misconceptions widely held in practice should be dispelled. The first concerns the attorney’s countersignature: the parties often trust that until there is a document countersigned by an attorney, there is no “real” contract either. This is a mistake. The countersignature is not a condition of the validity of the contract of sale, but of registration in the land register – that is, of recording the change of ownership. A contract that has come into existence through an accepted offer is valid and has contractual effect even in the absence of a countersignature: the parties may demand performance from one another, including that the other party cooperate in preparing a countersigned document suitable for registration. If a party fails to comply with that obligation voluntarily, performance can ultimately be enforced through litigation: in such cases the missing formal requirement – the countersigned documentary form suitable for registration – is supplied by the court’s final judgment, which may serve directly as the basis for registration in the land register. There is therefore no escaping an accepted offer by refusing to sign the “final” contract.
According to the second misconception, the “final” contract signed later before an attorney offers a clean slate in which the terms may be freely renegotiated. The position is more constrained than that. Where the content of the contract subsequently put in writing by the parties corresponds to what was set out in the accepted offer, the document does not create a new agreement: it confers on the already existing contract the formal quality required for registration. Where, however, one of the parties seeks to enforce in the “final” contract a term differing from the accepted offer, this is in legal terms not the conclusion of the “first” agreement, but the initiation of an amendment to the already existing contract. A contract may, however, be amended only by mutual agreement of the parties (Section 6:191(1) of the Civil Code): the proposal of the party seeking the change is in itself no more than an offer to amend, which the other party is not obliged to accept. A party therefore cannot count on unilaterally correcting, in the “final” contract, terms of the accepted offer that are unfavourable to them – the other party may insist on the content of the accepted offer and demand its performance.
A “letter of intent to purchase” is therefore by no means necessarily a harmless, preparatory document: as shown above, it may carry the most serious consequences known to private law. That is precisely why it is particularly concerning where such a document is drafted by, or its content shaped with legal advice from, a person not entitled to pursue activities reserved to attorneys-at-law. In such cases the involvement is no longer merely administrative: the person involved casts the parties’ transactional intent into a form capable of producing legal effects, determines the rights and obligations attaching to the declaration, and provides information on their legal consequences. This leads on to the question of the unauthorised drafting of legal documents and provision of legal advice.
The Attorneys Act includes within the activities of attorneys-at-law – among others – the giving of legal advice and the drafting of legal documents (Section 2(1) of the Attorneys Act); as a general rule, these activities may be pursued only by those entitled to do so. In view of the position of public trust occupied by the legal profession, the legislature sanctions the unauthorised pursuit of such activities by criminal-law means as well. Under Section 286(1) of the Criminal Code, a person who, without authorisation and on a business basis, pursues activities reserved to attorneys-at-law, patent attorneys or notaries public commits a misdemeanour punishable by imprisonment for up to two years. Where the offence is committed by feigning entitlement to pursue such activity, the act constitutes a felony punishable by imprisonment for up to three years. According to the commentary on the Criminal Code (Krisztina Karsai (ed.): Commentary on Act C of 2012 on the Criminal Code), conduct falling within the statutory definition may equally include the drafting of documents and submissions, the giving of legal advice and legal representation. In the course of classification, however, the specific activity must in every case be compared with the relevant background legislation in order to establish whether it genuinely qualifies as an activity reserved to attorneys, and whether the perpetrator was entitled to pursue it. Acting “on a business basis” is not the same as merely carrying out the activity for consideration. Under the Criminal Code, a person acts on a business basis if they seek regular gain through the commission of the same or similar offences. Accordingly, neither activity carried out for consideration but only occasionally, nor activity pursued regularly but without consideration, is in itself sufficient for the statutory definition to be satisfied. The offence can be committed only with direct intent: the perpetrator’s awareness must also extend to the fact that they are pursuing an activity reserved to attorneys and that they are not entitled to do so. The fact, however, that the drafting of documents takes place as a regularly offered, pre-organised and gain-oriented part of a commission-remunerated real estate agency service may support a finding that the activity was pursued on a business basis and with the requisite intent.
In view of the above, the safest course is for the parties to instruct an attorney-at-law from the outset to draft the legally binding declarations – in particular the purchase offer, the declaration of acceptance, any preliminary contract, and any agreement governing the handing over, retention, repayment or forfeiture of money. If a document prepared by the agent is nevertheless placed before them, it should be signed only after review by an attorney. The right time to involve an attorney is not after the document has been signed, but before.
5. A threshold but no guardrails – a profession without a professional body
The common background to the problems set out above is that real estate agency activity, beyond registration with the authorities and the verification of basic operating conditions, is not accompanied by any framework of professional, ethical and financial guarantees comparable to that surrounding the legal profession or certain financial activities. The pursuit of real estate agency activity on a business basis must be notified to the authority supervising real property undertakings; the activity is subject to professional qualification, registration, a clean criminal record and, in specified cases, evidence of good business reputation. The authority maintains a register, may verify that the operating conditions are met, and may in the cases specified by law remove the service provider from the register or prohibit the further pursuit of the activity. There is, therefore, supervision by an authority – but this is not the same as chamber-based self-governance, ethical oversight and disciplinary liability extending to the profession as a whole.
There is no mandatory chamber membership or professional disciplinary system. The legal profession operates within a public-law chamber structure based on self-government, performing professional and public functions. A person practising as an attorney who breaches an obligation laid down in legislation, in the chamber’s articles of association or in the code of ethics may be subject to disciplinary proceedings; the disciplinary sanctions include fines, prohibition from pursuing certain activities and, ultimately, expulsion. Real estate agents have no mandatory professional chamber membership, and there is no professional disciplinary forum that would adjudicate breaches of professional or ethical norms by means of sanctions affecting membership status. Depending on the nature of the conduct, an aggrieved client may turn to the authority supervising real property undertakings or to the consumer protection authority, or may initiate civil or criminal proceedings; these, however, do not substitute for disciplinary control from within the profession.
There is no code of ethics binding on the profession as a whole. The Hungarian Bar Association adopts, on the basis of a statutory authorisation, a binding code of ethics, the breach of which may constitute a disciplinary offence. In the field of real estate agency, individual voluntary professional organisations may likewise adopt ethical or conduct rules, but these extend only to their own members, and their breach does not entail chamber disciplinary liability based on legislation. There is no uniform ethical minimum binding on all participants in the profession, nor any professional body empowered to enforce one.
There is no generally mandatory professional indemnity insurance. An attorney-at-law is required to maintain professional indemnity insurance covering damage caused by the pursuit of the profession and any restitution payable for violation of personality rights, with a minimum sum insured – currently – of fifteen million forints per insured event. This does not mean that all damage is compensated automatically and without limit, but the client does have the benefit of insurance cover required by law. By contrast, the general conditions governing real estate agency activity do not, under the applicable rules, prescribe mandatory professional indemnity insurance. Individual agents may of course take out insurance voluntarily, but in the absence of mandatory cover the injured party cannot count on insurance protection generally required by law. Where an agent’s incorrect information, failure to disclose material facts, or irregular handling of money received causes loss, recovery therefore depends primarily on the success of any claim brought against the agent and on the agent’s solvency.
The entry requirements are accompanied by limited professional and financial guarantees. Real estate agency activity is not entirely unregulated: it is subject to professional qualification, notification and registration with the authorities, and a business organisation must employ at least one registered person with the appropriate qualification. The regulatory framework does not, however, require mandatory chamber membership, a uniform code of ethics, continuing professional training, general professional indemnity insurance, or any separate framework of guarantees for the handling of client funds.
6. Summary and practical advice
The picture emerging from the applicable law and the published case law is not reassuring. Real estate agency practice repeatedly features standard-form contracts and general terms certain clauses of which the courts have found unfair and therefore null and void. Standard offer forms moreover frequently govern the handling of money received from the buyer, and do so within the framework of an “offer deposit” that is not nominate in the Civil Code and whose content is uncertain.
If the receipt, safekeeping and conditional release of client funds satisfies, on an examination of all the elements of the given arrangement, the criteria of a financial service under the Banking Act, pursuing it without authorisation and on a business basis may be assessed as unauthorised financial activity. And if the agent unlawfully deals as its own with money entrusted to it to which it is not entitled, the question of misappropriation may likewise arise. The regular, gain-oriented and unauthorised drafting of documents with legal content, together with the legal advice associated with it, may – depending on the circumstances of the individual case – satisfy the statutory definition of the unauthorised practice of law. In neither case is the criminal-law classification automatic: all the elements of the statutory definition must be examined in relation to the specific activity in every case. The Criminal Code regulates unauthorised financial activity, misappropriation and the unauthorised practice of law in separate provisions.
Nor is any of this offset by mandatory chamber membership comparable to that of the legal profession, by a code of ethics and disciplinary system extending to the profession as a whole, or by generally mandatory professional indemnity insurance. Real estate agency activity does not, admittedly, operate entirely without supervision: it is subject to professional qualification, notification and registration with the authorities, and the authority supervising real property undertakings has powers of inspection and sanction. That system, however, is not equivalent to chamber-based regulation providing professional, ethical and financial guarantees in combination.
Until the regulatory framework remedies these shortcomings, the parties must proceed with particular care. The most important elements of this are as follows:
1) Have the agency contract reviewed by an attorney before signing. Particular attention should be paid to provisions on the survival of the fee claim after termination, on exclusivity, on restrictions on selling the property independently, on contractual penalties, on the right of termination, on the shifting of the burden of proof, and on short response deadlines. Case law has found several clauses of this kind unfair, but this does not mean that every similar clause is automatically invalid: the full content of the particular term and its contractual context must always be examined.
2) Do not pay sums distinct from the consideration for the agency service into the agent’s own bank account. The “offer deposit” is not a legal institution nominate in the Civil Code, and therefore its purpose, recoverability and legal consequences can be established solely from the content of the particular document. Where a sum has to be safeguarded until the offer is accepted or until some other condition occurs, escrow with an attorney-at-law or – depending on the applicable rules – with a notary public may be used. An advance payment or earnest money may, once the relevant contract has come into existence, also be paid directly to the seller; these therefore need not in every case be placed in escrow.
3) Legally binding declarations should wherever possible be drafted by an attorney. If a purchase offer, declaration of acceptance, preliminary contract or agreement on the handing over of money prepared by the agent is nevertheless placed before the parties, it should be signed only after review by an attorney. An offer aimed at concluding a contract for the sale of real property may create a binding effect on the offeror, and upon the seller’s substantively adequate written acceptance the contract of sale itself may come into existence. This does not require the parties to sign the same document; their congruent declarations set out in separate documents may equally bring the contract into existence.
4) As a general rule, the agency commission is payable only in respect of a contract concluded as a result of the agent’s activity. It is not sufficient that the agent was previously in contact with the party who later contracted. A causal connection must exist between the agent’s activity and the conclusion of the transaction. Where the contract is concluded only after the agency mandate has terminated, it is – according to the case law set out above – for the agent to prove that the transaction came about as a result of its activity.
5) Before granting a mandate, check the agent’s registration and the financial background of the business. The data in the register of real estate agents are publicly accessible. It is also advisable to clarify in writing whether the agent has voluntarily taken out professional indemnity insurance and, if so, what activities and types of loss it covers and up to what sum insured. The purpose of the register is to ensure the transparency of lawful operation, but registration in itself does not certify the lawfulness of every contract term used by the agent or of any particular course of conduct.
A real estate agent can be a useful and legitimate participant in a property transaction, but the boundaries of that activity must be clearly drawn. Agency work cannot extend to shaping the legal relationship between the parties, to giving legal advice, to drafting legal documents, or to handling client funds without guarantees. The current regulatory framework secures observance of these boundaries only through limited institutional means; the protection of the parties therefore depends decisively on obtaining information in advance, on organising payments securely, and on involving an attorney in good time. This article has sought to offer practical guidance to that end.
Principal sources: Civil Code (Act V of 2013), Sections 6:63, 6:64, 6:70, 6:185, 6:191, 6:215, 6:288–6:301; Attorneys Act (Act LXXVIII of 2017), Sections 2, 3, 14, 42, 42/A, 47–52, 107, 144, 158; Criminal Code (Act C of 2012), Sections 286, 372 and 408; Krisztina Karsai (ed.): Commentary on Act C of 2012 on the Criminal Code; Banking Act (Act CCXXXVII of 2013), Section 3(1), point j); Regulation No. 7/2018 (III. 26.) of the Hungarian Bar Association; Civil Law Uniformity Decision No. 2/2005; BDT2003. 832.; BDT2009. 2083.; BH1992. 414.; BH1997. 302.; BH2003. 203.; arbitral award No. 3/4/2022; decisions of the Curia in cases Gfv.30.200/2020/8., Gfv.30.309/2021/6., Pfv.21.291/2020/11., Pfv.20.751/2023/6., Pfv.20.433/2024/4., Pfv.21.072/2024/4.
