András Osskó, Hungary
F I G Commission 7, Annual Meeting 1996,Budapest, Hungary
One Day International Conference, 18 June 1996
"Land Management in the Process of Transition"
Historical background of ownership in Hungary
Before I start to speak about this subject it is very important to review the Hungarian historical background concerning ownerships before the World War II and after, during the socialism and also certain unlawful measure which have effected or damaged the private ownership between 1939-49 and from 1949 till 1987.
Without these information it's very difficult to understand the present situation especially laws, legal rules in connection with privatisation and Compensation Acts which are playing very important role to develop an effective land management framework during the process of transition in Hungary.
Before 1945 the majority of agricultural lands were owned by big landowners (aristocrats, churches etc.) or medium landowners. A very large numbers of landless agricultural workers have been working on lands for very low wages. A real land reform has never been executed till 1945.
The ownership in industry, commerce, banks, residential properties have been similar to the European standard. A short review of unlawful measures is also important to understand the so called Compensation Acts which has effected approx. 2 million people.
The unlawful measure hurt private ownership and properties between 1939-1949 and 1949-1987.
1939-1945 anti Jewish laws.
1945-49 Nationalisation of large firms, lands, banks, mines, big industry, resettlement of German origin population to Germany. In the same time a land reform carried out allocating agricultural land to former landless peasants, creating new landowners. These nationalisations and other measures were implemented under democratic government.
With effect from June 1949 the democratic government
With effect form June 1949 the democratic government was replaced by a one party dictatorship. Acts, laws, legal rules, measures were issued from 1949, didn't deal with the standard nationalisations but systematically damaged private ownership even minor ones like flats, shops, etc. New landowners, former landless peasants have been forced to form agricultural cooperatives just to create new socialist formations under centralized state control. During the more than forty years socialist political system and economy, several laws, legal rules were issued, which hurt individuals because of political reasons, dispossessing them of their properties.
In 1990 which is the year of changing political regime from dictatorship to multi-party democratic system, and changing the economy from the so called state controlled one to market economy in Hungary, the newly elected parliament had to issue a lot of new laws, acts, legal rules to fit new laws it was also a very strong need for organizational changes which can support the implementation of processes, accelerating the privatisation, and compensation of those individuals who lost their properties or suffered from unlawful measures between 1939-1987.
There is no need to speak about every laws, and other details in connection with privatisation and compensation, we have to know the most important ones only:
You can ask questions why is it important to know privatisation, compensation acts and procedures in connection with Land Management matters. For development of the Land Management framework in Hungary in the process of transition, the first step is to establish new private ownerships to fit to the market economy. This is one of the reason that a comprehensive law concerning Land Management is not yet issued. Of course there are laws, legal rules dealing with certain fields of the Land Management but we still need time to establish the general framework of it.
Most important laws and procedures and factors for development of the Land Management framework in Hungary:
The first Compensation Act was issued in 1991 in order to arrange ownership and to make arrangements about partial compensation of losses in citizens properties caused by the state's unlawful measures. The compensation is partial only because of the present capacity of the country.
According to the law, individuals are entitled for compensation whose private properties was hurt the state's unlawful measures with effect from 1939 till 1987.
The compensation is not reprivatisation, an entitlement only to buy former state owned properties. The rightful individuals had to be Hungarian citizens when their private properties have been effected. In case of claimants death, descendants are also entitled for compensation. The quantity of compensation was a limited value. The maximum compensation value was five million forint (approx. USD 7000).
Organisation for preparation and implementation of Compensation Act
National Compensation Office was established for implementation of Compensation Act. The Office is responsible to issue compensation vouchers, and to approve application of claimants. It is also responsible to carry out auctions of agricultural lands.
The way and methods of compensation
Compensation vouchers were issued against the value of claims. The voucher is interest bearing for three years. The owner of vouchers is entitled to buy former state owned properties, flats, agricultural lands. Against compensation vouchers life annuity can also be paid.
Special rules concerning compensation for agricultural land
In case of former agricultural land properties the quantity of claims have to be based on the so called Golden Crown value of land. One Golden Crown value is equal with 1000 Ft value of voucher. The Golden Crown value was a calculated figure based on the net income of the land. The original evaluation was carried out during the nineteenth century and we are still using it as a value of agricultural land. The land value information was provided by Land Offices (Land Registry) using old records. Every claimants had to prove his entitlement collecting the true information about his formerly owned land (location of the land, Golden Crown Value, ownership, etc.) Compensation vouchers were issued against Golden Crown value of the land. Agricultural lands for compensation purpose was allocated by former state farms, cooperatives. Claimants could buy agricultural lands through auctions. Auctions have been carried out by Compensation Offices. After completing the auction, the Compensation Office issues a record of auction which is the legal document (deed) for registration of new ownership rights. The document has to be sent to country level Land Offices for further procedures. Land Offices are responsible for carrying out the necessary survey, subdivision, setting out of parcels according to valid auctions based on purchased Golden Crown value. After carrying out the survey, the Land Office is responsible to enter new ownership rights, updating land records (property sheets and cadastral maps as well). The whole procedure is financed by the state and is tax free.
Restrictions and special rules of compensated agricultural land
1. It's compulsory to cultivate and can't be withdrawn from agricultural cultivation.
2. Compensated land can't be sold within 3 years. In case of selling the land within 3 years, duty and procedure fee have to be paid by the owner.
3. Under compensation procedure, any size of land can be formed, subdivided as a parcel no need approval by building authorities.
Result of the implementation of Compensation
The compensation of agricultural lands created 2 million new parcels, 1.5 million new owners and effected 5 million hectares of land.
The former large state farms and cooperative are divided into small pieces. The number of agricultural land owners is multiplied, cultivation of parcels is not economical.
After the completion of compensation there will be a very strong need to carry out a new land consolidation, land development to establish proper size of agricultural lands to fit to conditions of the market economy. The completion of Compensation Acts have effected approx. 2 million individuals.
The other most important process during the transition period has been the privatisation of state owned properties. It was necessary to issue new laws, legal rules, for completion and acceleration of privatisation.
The privatisation in Hungary began in the 80's, during the last few years of socialism, with selling of state owned residential properties, flats for individuals. The occupant got priority to buy it at a very low price. Apart from residential properties, privatisation of industrial and commercial properties began as well during the 80's, but at very low level only.
The mass privatization of state owned enterprises, properties started in 1990 after changing our political system and economy. The State Property Agency was established to support and implement privatisation. This organisation has represented the state as the owner and acted enforcing owner rights on behalf of the state. During the first years of privatisation the state faced difficulties in implementation. With effect from 1990 new laws legal rules were issued by the parliament to support privatisation procedures. The last law was issued in 1995 in order to accelerate privatisation and to reduce the state role in supervising the economy. There was also an organisational change establishing the state corporation.
The next factor for developing a basic framework for effective land management is the environmental protection matters. According to experiences of developed countries the advanced environmental protection is a very essential component of the modern land management. The environmental protection was neglected during socialism, both in legislation and practical level. As a result of the last decades there was a very strong need to issue new laws, improving the implementation of environmental projection measures. It was required by the general public in Hungary and by the European Community as well because Hungary is moving towards EU membership. And at last but not least land consolidation re-allocation can't be possible without taking the environmental protection into consideration.
Land use and land protection
And other important factor of the effective Land Management is the land use and land protection.
Land Offices are responsible in the monitoring of land use, land classification and partly the land protection.
The responsibility for land protection and environmental monitoring is not clear. There is apparent overlay or duplication of the work of the Ministry of the Environment and the Land Office network. This should be solved both legislation and practical level. If it's not be solved there can be a conflict between the demands for commercial development and the demands of environmental protection.
Land classification, valuation of agricultural land
The current value as a figure of agricultural land, the so called Golden Crown value, is based on a land valuation (soil quality, market conditions, transport facilities etc.), was carried out during the end of the XIXth and the beginning of the XXth century. The Golden Crown value of land was up to date information that time and we are still using it. Of course this figure doesn't show the market value of agricultural land today, but we don't have any other better or more reliable figure for validating agricultural land. The maintenance of Golden Crown value was very occasional during the last few decades.
Development of viable land market
Today there is no real Agricultural Land Market in Hungary. One of the reason is that during socialism individuals could own a very limited area of agricultural land only. Large farms were owned by cooperatives and the state, there was no Land Market under these conditions.
The other reason is that the valuation of agricultural land today is based upon factors, such as aspect and soil. However it does not take into account land usage and development (or improvement). The official valuation is therefore unconnected to the market price, which is going to be a volatile response to local factors, such as availability and demand.
This could promote speculative price spirals with consequent risks of falls and hence credit rating insecurity.
Indeed it is not clear if agricultural land can be used as security of credit at the present time. The conservation of agricultural land and it's clearance for development with consequent financial benefits, are also matters which are not clear at the present time.
In case of real estate market the situation is a little bit different. There is a real estate market in Hungary but the valuation of urban property is completely unregulated, with prices purely driven by demand (much of it speculative) with consequent dangers of over reliance upon ever increasing prices. The levels of credit rating for loans are also unregulated. The role of private sector, the development of estate management skills, property valuation is not purely market controlled there is a base valuation which underpins the demand price, the role of government in controlling the regulatory framework for buying/selling, leasing and the terms applicable for mortgages, are all factors which influence the behaviour of land markets.
It's also know that any intended introduction of local property tax (there is no property taxation in Hungary) is going to receive a sound basis of objective valuation, in order to avoid possible injustice or obfuscation. The development of the regulatory, framework, the establishment of the role of the private and public sector, the role of professionalism, must be considered urgently.
Problems in policy and problems in implementation
I have looked over many segments for developing a basic framework for effective Land Management in Hungary. But before I would summarise the present situation of Land Management matters in Hungary I have to speak about difficulties which effected the implementation of laws, acts, legal rules during the last six years.
Very strong need to create and issue new laws, legal rules to accelerate political and economical changes and shortening the transition period.
This practically meant, that too many laws, legal rules were issued during the last six years and if it effected the quality of legislation.
The newly elected members of parliament didn't have experiences in legislation and the lack of professional knowledge has also interfered to issue more effective laws.
The last six years period was too short to fulfil all of the demands requested by the economy, policy, and the people.
The capacity of government offices, agencies, organizations was not enough to implement laws like compensation procedures, privatisation, etc. For example: the capacity of land offices couldn't follow the increasing numbers of transactions especially in Budapest. Privatisation, registration of new owners by the compensation act, registration of new owners, privatized companies firms, registration of increasing number of transactions, etc. effected the Land Offices. There was a strong demand to improve the technical and personal conditions.
Political restrictions during the implementation of compensation and privatisation. The increasing number of unemployments delayed the implementation of privatisation
Conclusions, tasks in the future
As I reviewed the present situation concerning the development of the land management framework in Hungary, we can say that we dont have comprehensive law dealing with land management matters and the framework of this very important activity hasnt completed yet. But we can also prove that components of land management framework are existing in Hungary. There are laws regulating activities, there are state organisations, agencies implementing and supervising different fields of land management matters.
What are our most important tasks to develop the final and comprehensive land management framework in Hungary?
Completing the implementation of Compensation Act registering new owners of agricultural lands in the Land Registry as soon as possible. Without doing this we cant start land consolidation of agricultural lands which is very important to establish the real land market in Hungary.
Acceleration the privatisation of state owned properties.
Reorganization of government offices, agencies, responsible for land management matters to fit to new requirements, improving the capacity and effectiveness of the unified Land Registry (Land Office network) responsible for legal and cadastral registration to fulfil the multiplied demands of the Hungarian market economy.
Completing the computerisation of Unified Land Registry and land management procedures.
Improvement of the professional knowledge of the involved staff especially at government level, by training and foreign know how transfer.
Coordination of all activities and financial support concerning the development for an effective Land Management in Hungary.
Hungary is moving towards EU membership. It is very important consequent harmonisation of many of our laws, regulations concerning land management in the EU.