Following the rise in demand for real estate in recent years, owners hoping to maximise their profits have started to look for new opportunities for liquidating their property. Willing to take extra risks, they have entered unfamiliar legal territory. Two recent Higher Administrative Court decisions regarding real estate lotteries show that such an approach is not always successful.
The Supreme Court was recently asked to assess whether a buyer of a house could rightfully initiate warranty claims against the seller by reason of defective insulation when the parties had confirmed in the purchase agreement that the exterior walls of the house had been damaged by moisture. The Consumer Protection Act provides that a consumer can waive its warranty claims only with regard to known defects.
The Supreme Court recently ruled that under the terms of a lease agreement between a tenant and its landlord, the landlord was obliged solely to hand over the property in the condition as at the conclusion of the contract. Any necessary repairs for both existing and subsequently occurring defects were shifted effectively and validly to the tenant. As this also comprised hidden defects, any repairs were the tenant's responsibility.
In a recent decision, the Supreme Court ruled on the permissibility of clauses in rent agreements requiring the tenant to repaint the leased property and refurbish the flooring at the end of the lease, as well as on contractual penalties that would apply following late handover of the leased premises at the end of the lease. The decision will affect all types of tenant and types of leased property.
Parliament recently introduced the Act on Late Payment, implementing the new EU directive on the same topic. The act aims to improve payment behaviour by introducing new due dates and increased interest rates. The act introduces new payment dates for rent agreements, depending on the type of property and parties involved, while taking into account the needs of tenants.
In light of a Constitutional Court decision, Parliament recently passed a bill amending the provisions on the Land Register registration fee. As of January 1 2013, the fee for all types of property acquisition is generally calculated on the basis of the fair market value of the real estate. The amendments have a considerable impact on ancillary costs of such acquisitions.
The Act on the Presentation of Energy Performance Certificates 2012 implements the EU Energy Performance Directive, which replaced EU Directive 2002/91/EC. The act introduces disclosure requirements for advertisements in commercial media, more stringent sellers' and landlords' obligations in relation to energy performance certificates and an effective regime of administrative penalties.
Parliament recently passed the Fiscal Stability Act 2012, introducing a number of measures intended to consolidate the budget. As these measures, among other things, introduce new taxes or increase existing taxes on real estate transactions, the act has sparked a huge outcry by the industry and will have a significant impact on the Austrian real estate market.
Real estate investors are increasingly renting out fully furnished apartments to tourists or business travellers for short periods. While short-term leases are highly attractive to respective lessors, owners of neighbouring apartments within a complex are usually not fond of such agreements, due to the high turnover of guests. The Supreme Court recently dealt with cease and desist proceedings instituted by apartment owners.
The Constitutional Court recently declared unconstitutional an article of the Court Fee Act, under which the fee for the registration of a new owner in the Land Register by reason of a deed of gift is taxed on the basis of the tax value. Although this judgment concerns court fees only, it calls into question all occasions where property transactions are taxed on the basis of the tax value rather than the market value.
The Supreme Court recently handed down a decision concerning a real estate agent's fee in connection with a cross-border sale agreement under which an Italian estate agent had facilitated the sale of an Austrian hotel to an Italian investor. The court ruled that the agent's contract had no close connection with Austria but was instead governed by Italian substantive law. The claim was therefore dismissed.
The Supreme Court recently handed down a decision concerning the disruption of a tenant's business by severe construction work carried out by the landlord, and held for the first time that corporate entities can claim compensation for discomfort. The damages will be consolation for the tenant, but will not induce landlords to take tenants' interests into consideration when planning such work.
In civil law jurisdictions, sale and purchase agreements frequently use key phrases which either trigger or exclude a set of legal rules laid down by statute, and which thus need not be explained in detail. Consequently, contracts require careful drafting. The Supreme Court recently handed down a decision concerning the contractual exclusion of a seller's warranty in a property transaction, with surprising results.
The Supreme Court recently applied the rules of unlawful return of equity to a rental agreement. A company and its majority shareholder agreed on rent payments of approximately three times the market value. The company realised that it was overpaying and argued that the excessive rent payments constituted an unlawful return of equity. The court's decision will have a significant impact on M&A transactions involving property.
Estate agents are entitled to a statutory commission if they facilitate the conclusion of a contract for the sale or lease of real property. In the absence of an agreement between the estate agent and the respective party to the agreement, the estate agent is entitled to claim the maximum amount as laid down in a regulation by the minister of economics. A new regulation, which recently entered into force, significantly reduces these limits.
Value added tax (VAT) regulations allow landlords either to charge 20% VAT on commercial leases or treat them as VAT exempt. In the latter case, VAT on any costs related to the lease becomes non-deductible. In commercial leases the parties usually agree to charge VAT on rent because the tenant is entitled to claim VAT input tax deductions. However, certain tenants are not entitled to claim input tax deductions.
The Supreme Court recently handed down a decision concerning a lease agreement in a shopping centre. Although the court once again stressed that there is no general rule on the legal qualification of shopping centre agreements, for the fourth time since its landmark 2006 decision, the court held that the agreement must be qualified as the rent of retail space rather than the lease of a business.
When restructuring an insolvent company, it is often necessary to divest all or part of its business. Such a sale is possible only if the purchaser is aware of the liabilities that come with the assets. In a recent decision the Austrian Supreme Court clarified the purchaser's liability for outstanding rent payments.
Section 12a of the Tenancy Act provides that if the shares in a company that rents property are sold, the landlord has the right to increase the rent to market level. The managing directors of such company must inform the landlord of the change in ownership. In a recent judgment the Supreme Court held that failure to notify the landlord can result in managing directors being held personally liable by future landlords.
As in most countries, landlords in Austria regularly require a security deposit as a condition of the rental agreement. This deposit provides the landlord with a degree of protection from any damage done to the rented premises or any failure on the part of the tenant. Despite its significant practical importance, no previous legal framework existed for the security deposit. A recent amendment to the Rent Act has filled this gap.