The year 2024 brought significant changes in the laws and regulations of construction. The most important change is the entry into force of the Architecture Act (Act C of 2023 on Hungarian Architecture) on 1 October 2024.
The main goal of the Architecture Act was to replace the previously fragmented regulatory system with a transparent and unified framework. As part of the construction law reform, the entry into force of the Architecture Act was accompanied by the repeal or amendment of several government decrees. The latest amendments to Government Decree No. 191/2009 (IX.15.) on construction activities (Construction Decree) introduce several new provisions affecting investors, contractors, and financiers alike. In this article, we present the innovations introduced by the legal changes in the field of construction trusteeship.
The Role and Regulation of Construction Trusteeship in the Hungarian Legal System
Before presenting the recent legislative changes, it is necessary to briefly review the legal institution of construction trusteeship, which has served to ensure financial security and transparency in construction investments within the Hungarian legal system since the entry into force of the Construction Decree on 1 October 2009. The purpose of construction trusteeship is to monitor the proper use of funds specified in the construction contract, thereby reducing the risks of payment chain debts and financial misconduct.
This legal mechanism is regulated by the Construction Decree No. 191 of 2009, which makes the use of a construction trustee mandatory above certain project value thresholds. The trustee’s task is to verify the legality of contractual payments, thus ensuring that main contractors and subcontractors are paid on time for their work.
This mechanism contributes to strengthening financial trust among market participants and to the smooth execution of construction projects. It supports the fulfilment of contractual obligations and helps minimize legal disputes.
Mandatory Use of Construction Trusteeship
According to the Construction Decree [Section 17 (2) b)], construction trusteeship is mandatory for construction activities that do not fall under the scope of Act CXLIII of 2015 on Public Procurement (the Public Procurement Act) but reach or exceed the EU threshold value defined therein. Following amendments to the Construction Decree, the list of exceptions to mandatory trusteeship was expanded to include facilities related to the use of nuclear energy, as well as those serving defence, military, or national security purposes. For these types of construction projects, the use of a construction trustee is no longer mandatory, regardless of value.
To determine whether trusteeship is mandatory, two factors must be considered: the current EU public procurement threshold for works contracts and the monetary value of the contemplated construction project. As of 1 January 2024, the EU threshold for works contracts is EUR 5,538,000, which corresponds to HUF 2,120,223,300. When calculating the value of the construction activity, the value of the building must be determined based on the method set out in the Construction Penalty Decree (Government Decree No. 245/2006 (XII.5.)).
It is worth noting that the Construction Penalty Decree has also been amended as part of the broader construction law reform. This amendment affects how the value of a building — which forms the basis for mandatory trusteeship — is calculated. The unit prices listed in Annex 1 of the Construction Penalty Decree have significantly increased compared to previous versions of the regulation.
For example, under the former Construction Penalty Decree, the estimated value of a 5,000 m² industrial hall (calculated at HUF 250,000 per m²) was HUF 1,250,000,000. Under the current unit prices (HUF 700,000 per m²), the same building would now be valued at HUF 3,750,000,000. In this case, the structure would not have fallen under the mandatory construction trusteeship requirements under the old regulation but now does, due to the updated valuation surpassing the threshold.
For buildings not covered by the Construction Penalty Decree, the Construction Decree [Section 17 (3) b)] stipulates that the building’s value should be based on the net value (excluding VAT) stated in the main contractor’s construction contract. In determining the total construction value, all construction activities initiated within two years must be aggregated if they are carried out by the same developer on the same or related or even separate plots of land, and if the projects serve the same or closely related purposes. An important change introduced by the Construction Decree is that even construction activities on separate plots of land must be aggregated if the above conditions are met.
Further Changes to the Regulation
An incompatibility rule regarding construction trustees was added to the Construction Decree. Under this rule, a construction trustee may not perform trusteeship duties for a project in which it is or has been involved in the financing.
Clarification has also been made to the contents of the trusteeship contract. If the construction project is divided into phases, each phase must be described not only with its start and end dates and its value but also with a description of the construction work to be performed during that phase.
Section 18 (6) of the Construction Decree was also amended regarding the suspension of construction activities. According to the new rule, if the developer fails to place the contractual funds under the control of the construction trustee within the prescribed deadline — or in the absence of such deadline, within eight days after the construction contract enters into force — and if the building authority has not prohibited the continuation of construction, both the main contractor and subcontractors contracted by the main contractor are entitled to suspend the construction activity for thirty days.
Under the previous version of the Construction Decree, only the main contractor had this right; with the amendment, subcontractors now have this right as well.
Conclusion
Overall, the recent amendments concerning construction trusteeship primarily consist of clarifications and refinements aimed at aiding the interpretation of the earlier regulation. Therefore, the core rules of construction trusteeship remain essentially unchanged. However, it is important to highlight that the changes to the Construction Penalty Decree — particularly the increased unit prices and the extended aggregation rules in the Construction Decree — significantly broaden the scope of investments subject to mandatory construction trusteeship.