AUSTRIA Trends and Developments Contributed by: Christoph Urbanek, Mario Schiavon and Irena Gogl-Hassanin, Urbanek Law
rents. For landlords, however, it means a signifi - cant restriction of their economic and contrac - tual options. Especially in the case of long-term tenancies, where operating costs or economic conditions change significantly, the rigid require - ments lead to financial disadvantages and legal risks. The ruling thus indirectly tightens the existing rent control and reinforces the trend that rent - ing out older properties under the MRG regime is becoming increasingly unattractive for private investors. The combination of regulatory restric - tions, a lack of flexibility in cost transfers and high legal uncertainty is contributing to stagnat - ing or even declining investment in the rental housing stock, with potentially negative conse - quences for supply in the housing market. Fixed Terms and Rent Claims – A High Risk for Landlords Another factor of uncertainty arises from the strict requirements for fixed-term leases. Accord - ing to Section 29 of the MRG, fixed-term leases must be for at least three years and may only be extended or renewed under certain condi - tions. However, a key risk arises from the subse - quent review of the rent agreement: the Austrian Supreme Court has ruled on several occasions that excessive rents can be retroactively con - tested by the tenant even after the fixed-term tenancy has expired. This means that landlords are faced with substantial claims for repayment – even if the lease agreement has already expired. This retroactive review of the rent agreement poses a serious financial risk, especially for small investors who rely on the accuracy of their rent calculations. Legal practice shows that even minor formal errors, such as an inadequate rent agreement in the contract, can result in the entire rent having to be recalculated to the permissible
level – including interest payments. These uncer - tainties hinder long-term planning security and have a negative impact on investment decisions. Need for Reform and Political Polarisation Against the backdrop of these problems, a comprehensive reform of tenancy law has been under discussion for years. The aim is to cre - ate a more uniform and transparent set of rules that meets both the interests of tenants and the legitimate expectations of landlords. In particu - lar, the focus is on calls for the harmonisation of tenancy law for old and new buildings and a revision of the reference value system. Tenant representatives are calling for the scope of the MRG to be extended to all tenancies in order to guarantee equal standards of protection. This is countered by demands from many inves - tors and owners’ associations for greater free - dom of contract, more market-oriented rent setting and a reduction in state intervention in tenancies. These opposing views have led to a political deadlock, with no sustainable solution having been found to date. The draft bill current - ly under discussion contains both approaches to extending tenant protection and making rent setting more flexible – but a workable compro - mise still seems a long way off. Land Use Designation and Urban Development – Legal Framework With Far- Reaching Consequences Another key aspect of the legal framework con - cerns land use designation, which is regulated at the state level in Austria. In Vienna, as in other federal states, the zoning of land plays a deci - sive role in urban development. The rezoning of land – eg, from commercial to residential use – is subject to an extensive approval process, which often includes public participation procedures and environmental assessments.
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