AUSTRIA Trends and Developments Contributed by: Christoph Urbanek, Mario Schiavon and Irena Gogl-Hassanin, Urbanek Law
the Supreme Court (OGH). For private landlords and investors, especially in the old building sec - tor, the MRG provides a central legal framework whose complexity and density of regulation go far beyond a simple contractual relationship. A particular challenge arises from the distinction between the full application and partial applica - tion of the MRG. This differentiation is based pri - marily on the date of construction of the building (before/after 30 June 1953) and on whether it is an old building, a new building, or commer - cial premises. Additional criteria such as the purpose of the lease or the ownership structure (eg, non-profit housing developer versus private owner) also influence applicability. These com - plex distinctions regularly lead to uncertainty in practice, as even the smallest differences in the legal structure can result in significantly different consequences under lease law. Complexity of Rent Setting – A Balancing Act Between Regulation and Market Reality The heavily regulated rent setting in the area of older buildings is particularly challenging and often discouraging for investors. The so-called reference rent (Section 15a MRG) forms the cen - tral basis on which private landlords must rely. This rent is not based on the free market, but on a legally defined base value that is adjusted at regular intervals. In addition, there are surcharg - es and discounts based on characteristics such as location, amenities, condition and floor level. In practice, however, this model often leads to a lack of transparency and legal uncertainty: the assessment of individual apartment char - acteristics is not standardised but is subject to subjective evaluation, which regularly leads to disputes – often in court. Market distortions arise in particular when the statutory rent caps are significantly below the actual market value. For investors, this means limited economic
attractiveness, as the rents that can be achieved are out of proportion to the increased purchase costs, maintenance expenses or financing costs. The structural lack of return prospects is there - fore increasingly deterring private investors from investing in existing properties. Austrian Supreme Court Ruling on Value Adjustment Clauses and Operating Costs – Focus on Rent Control In several landmark decisions in recent years, the Supreme Court has dealt with the admissibility of value adjustment clauses in rental agreements – in particular in relation to rent control within the scope of the MRG (Austrian Tenancy Law). The main issue here is indexation (eg, to the consumer price index) of both main rents and flat-rate oper - ating costs or advance payments. The OGH clarifies that value adjustment clauses are generally permissible as long as they contain transparent, comprehensible and proportionate provisions, and do not undermine the protective mechanisms of the MRG. Particular care must be taken in cases where the MRG applies in full to ensure that there are no hidden rent increases through operating cost clauses or indexed ancil - lary charges that would effectively circumvent the legally permissible basic rent. A striking example from case law is the find - ing that lump sums for operating costs are only lawful if their calculation is comprehensible and objectively justified – for example, by specific reference to the actual operating costs of the property. In addition, index adjustments to such lump sums must be clearly regulated and not merely designed to the detriment of the tenant. This restrictive interpretation by the Supreme Court serves the objective of tenant protection legislation, particularly with regard to affordable
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