Rent Increases and Rent Control in Hungary

Hungary operates a purely free-market system for private residential rentals. There are no "rent brakes" or statutory limits on how much a landlord can charge. However, the procedure for modifying rent during a tenancy is regulated by both the Lease Act (Act LXXVIII of 1993) and the Civil Code (Act V of 2013), which came into effect on 15 March 2014.

1. Pre-Agreed Indexation (CPI/HICP)

Most professional residential leases in Hungary include an annual indexation clause (értékkövetési záradék).

• The Mechanism: The rent is adjusted annually (typically every January) based on the preceding year's inflation rate, often tied to the KSH (Hungarian Central Statistical Office) Consumer Price Index for HUF leases or the MUICP (Eurozone HICP) inflation rate for EUR leases.
• Notice: Even if the clause is automatic, it is best practice for the landlord to send a written notice to the tenant stating the new amount and the calculation basis, although this is not explicitly mandated by the Lease Act for automatic indexation in private contracts.

2. Increasing Rent Without an Index Clause

If a private residential lease does not contain an indexation clause, the landlord cannot unilaterally raise the rent. Any rent increase requires a new agreement between the landlord and tenant. If the parties cannot agree on a new rent, the existing rent remains in effect. In such cases, or if the rent is determined by law, the procedure outlined in Section 6 of the Lease Act (Act LXXVIII of 1993) may be followed:

1. The Proposal: The landlord must send a written proposal for the new rent to the tenant. If the rent is determined by law and not agreed upon, the landlord must notify the tenant in writing of the rent amount within eight days of moving in.
2. The Response: The tenant has 8 days from receiving the notification to object to the proposed rent in writing. If no objection is made, the tenant is obliged to pay the notified rent.
3. The Outcome:
   • If the tenant accepts, the new rent takes effect.
   • If the tenant rejects or does not respond, and the parties cannot agree on the rent or its modification, they may request the court to determine the rent amount. The Lease Act does not specify a deadline for the landlord to initiate court proceedings after the tenant's rejection or non-response. In practice, for private indefinite leases, landlords often use their general right to terminate the lease with notice if an agreement cannot be reached.

3. One-Year Fixed Term Strategy

Because of the lack of rent control for private rentals, a common practice in Hungary is to sign One-Year Fixed-Term Contracts.

• The Benefit: When the 12-month term expires, the landlord can offer a new contract at the current market rate.
• Efficiency: This avoids the negotiation process for rent increases during the tenancy and ensures the property always generates a market-appropriate yield.

4. Unreasonableness and Stigma

While there is no rent control, the Civil Code (Act V of 2013) provides general protection against contracts that are contrary to law, good morals, or public policy, or that involve exploitation. However, in the context of residential rentals, it is generally difficult for a tenant to prove a market rent is "unreasonable" unless it significantly exceeds all comparable data for the specific neighborhood.

Best Practices for Landlords

1. Standardize your Lease Date: Aligning all leases to a January-to-December cycle allows you to apply KSH indexation in one bulk action across your portfolio.
2. Use Written Notices: Never rely on a phone call or verbal agreement for a rent increase. Under the Lease Act, any change to the rent must be in writing to be legally binding.
3. Monitor KSH Releases: The official inflation data is usually finalized in late January. Ensure your Landager dashboard is synced to pull this data automatically to avoid missing increase windows.

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