Hungarian construction and property group Bayer Construct has applied for bankruptcy protection after the government decided to withdraw from a major office development in Budapest, the company’s owner Attila Balazs told employees on August 26.

In a letter obtained by Telex.hu, Balazs, who controls the group and is widely regarded in Hungary as close to the previous Fidesz government, said the company would continue operating during the proceedings and would complete its ongoing projects and pay its contractors and employees.

The bankruptcy proceeding would provide the company with a temporary moratorium on its financial obligations, allowing it time to reorganise its finances.

Prime Minister Peter Magyar announced earlier this month that the state would withdraw from the purchase of the complex in Budapest’s 14th district, covering 150,000 sqm. The seven office buildings were intended to house government institutions, according to the previous government's plans.

According to Magyar, almost half of the conditions required to close the transaction had not been met. He also cited the continued existence of the local government of the 14th district's pre-emption right over the properties, despite the sale agreement requiring that this encumbrance be removed before closing.

The Economy Ministry purchased the office complex for a lump sum of HUF244bn, despite mounting pressure on the state budget.

Peter Magyar, in his press briefing on August 3, said around HUF315bn had been transferred for the project, which the state is now seeking to recover from the company.

Breaches of contractual conditions identified by the Hungarian National Asset Management Company (MNV) could entitle the state to recover double the down payment, a 10% indemnity, and compensation for any additional damages, in addition to a refund of the purchase price already paid.

Bayer Construct has disputed the government's decision, stating that it considers the underlying agreement valid and that it is threatening legal action.

Zuglo may also take legal action against Bayer’s project company over alleged breaches of a 2006 agreement with the municipality. The district council is expected to decide on September 3 whether to proceed with the lawsuit.

The dispute has been ongoing for several years and includes disagreements over compliance with local building regulations and the level of compensation Bayer should pay the district.

In recent years, the state has concluded agreements worth a combined HUF600bn net for the purchase of office buildings from three businessmen aligned with the Orban government, including the son-in-law of the former prime minister Istvan Tiborcz. 444.hu writes that the state signed three agreements with these companies worth net HUF118.5bn two months before the April 12 election.

The move aligns closely with the government's broader pledge to review and potentially unwind state contracts and spending commitments made under the previous government, particularly deals involving construction, infrastructure and companies seen as politically connected.

The new government is pursuing a review of state spending as part of a wider push for greater transparency and competition, while also seeking to recover assets or funds where the state believes contractual or legal obligations have not been met.

On August 26, a parliamentary committee heard three candidates for the post of head of the National Asset Recovery and Protection Office (NVVH).

The candidates are Miklos Ligeti, legal director of Transparency International Hungary; political scientist Anna Rozsa Unger; and Nicholas Sarvari, a Tisza Party nominee with a background in corporate crisis management.

The candidates stressed the need to recover public assets, strengthen accountability and restore public trust while avoiding political retribution.

Ligeti, who is tipped to head the office from September, said the authority should avoid political "witch hunts" and should not focus solely on the past 16 years or become an instrument for purging the Orban-era system.

He said restoring public trust should be the authority’s primary objective, while acknowledging that not all those responsible could necessarily be held accountable and not all assets recovered.

Fidesz lawmakers did not attend the hearings. Parliament is expected to elect the NVVH’s head on August 28.