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09 February 2007
In a recent ruling the Supreme Court analyzed a standard form widely used for rent agreements and held that 39 of the contract clauses were unlawful. These clauses ranged from minor matters, such as certain formal requirements, to the key clauses of lease agreements, such as the tenant's duty to maintain the rented property in good order. This is a landmark decision as, for the first time, the court held that the Consumer Protection Act applies to the landlord-tenant relationship.
The Consumer Protection Act sets out a catalogue of provisions that are unlawful in consumer contracts. Some clauses are forbidden outright, whereas others are permitted only if they have been specifically agreed. Further, any clause contained in a standard agreement is invalid if it is unclear or liable to misinterpretation.
Until recently, it was commonly accepted that tenants are protected by the Rent Act; thus, the courts did not refer to the Consumer Protection Act when analyzing rent agreements. However, in the present case the Supreme Court applied both the Rent Act and the Consumer Protection Act.
At first glance, it appears that the Supreme Court has rewritten the landlord-tenant relationship. However, certain points must be borne in mind:
The Supreme Court blacklisted 39 contractual clauses dealing with various issues.
The following clauses relating to payments were blacklisted:
Clauses establishing the tenant's duty to carry out all necessary repairs and generally maintain the leased property in good order were blacklisted.
The court blacklisted clauses:
Certain clauses relating to building work on the leased property were blacklisted, namely:
The court banned clauses providing: (i) that the tenant is liable for any damage to the leased property or the common areas caused by the tenant, his or her family members or visitors, irrespective of any negligence on the part of these persons; or (ii) a general exclusion of the landlord's liability.
The termination of leases is closely regulated by the Rent Act. Therefore, the court blacklisted clauses that enable the landlord to terminate or otherwise rescind a lease agreement for reasons not specified in the relevant laws.
Handing over of leased property
The following clauses relating to the possession of leased property were blacklisted by the court:
The court also blacklisted certain formal requirement clauses, namely those providing that:
The following miscellaneous clauses were blacklisted:
It is hard to assess the significance of this decision for standard lease contracts. On the face of it, the decision renders 39 standard clauses unlawful. However, in many cases the court did not ban the clause in question outright, but rather stated that it was insufficiently clear. For example, the court did not generally prohibit clauses stating that stamp duty is to be borne by the tenant. However, it did hold that a clause passing "all costs connected with" stamp duty to the tenant was non-specific, and therefore unlawful. Similarly, the court did not generally prohibit clauses allowing the landlord to carry out building works without the tenant's consent. However, it did prohibit the clause in this instance as it did not take the tenant's interests into account. In such cases the Supreme Court decision will lead to more precise contract wording in future contracts, but not to a real shift in bargaining power between the landlord and the tenant.
The decision will have a greater impact on other clauses. For example, the court held that clauses stating that the tenant must bear all costs in connection with late payments are contrary to public policy. This reasoning is based not on the Consumer Protection Act, but rather on general principles of contract law. Therefore, in this case the decision will also affect lease agreements with tenants which are not consumers.
For further information on this topic please contact Nikolaus Pitkowitz or Martin Foerster at Graf & Pitkowitz Rechtsanwälte GmbH by telephone (+43 1 401 17 0) or by fax (+43 1 401 17 40) or by email (firstname.lastname@example.org or email@example.com). The Graf & Pitkowitz Rechtsanwälte GmbH website can be accessed at www.gmp.at.
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