Consumer Protection in Austrian Tenancy Law*

Dr. Elisabeth Lovrek / The Councilor of the Supreme Court – Austria

1. The development of the Austrian Tenancy Law

The Articles 1090 to 1121 of the Austrian Civil Code (ABGB) constitute the principles of the contract of tenancy and also of the contract of lease. Almost all of these articles still are in the original wording of 1811 – when the Austrian Civil Code was put into force. Only some articles where changed by the third amending law in 1916 („Dritte Teilnovelle“). One of the fundamental principles of Austrian private law, the freedom of contract, is reflected in these articles. Originally, a need to protect the tenant was not a priority: The legislator of 1811 believed that the parties to the contract would be able to protect their rights without the help of the law against unfair terms in contracts. The otherwise profound reforms of the Code did not extend to the rules concerning the contract of tenancy, but were codified in special rules outside the Code:

The protection of the rights of tenants started during World War I: Tenants of apartments enjoyed strong protection against eviction and benefited from rent control. In 1922, the first specific Tenancy Act was put into force (Mietengesetz). It strictly regulated the rent not only in respect of tenants of apartments, but also regarding the tenants of business premises. In connection with the fact that the landlord had no possibility to dissolve or terminate the contract without serious causes, the landlord became in fact the weaker party of the contract. Even unforeseeable changes regarding the market price of the object or inflation did not authorize the landlord to increase the rent or end the contract. When the tenant died, his successor had a right of entry in the contract under the same conditions. When I started to work as a judge in a rent court in Vienna in 1987, many big apartments in best town locations had a monthly rent which corresponded to the price of a meal in a not too expensive restaurant.

This situation led to the Tenancy Act of 1981 (Mietrechtsgesetz) and several subsequent law amendments. This Tenancy Act is still valid, regards the tenant as the weaker party and protects him accordingly. On the other hand it enables the landlord to demand appropriate rents for well equipped apartments and all kind of business premises. Generally, these rules have no effect on old contracts, therefore the Austrian market is still divided in the group of the „happy old tenants“ and the „new tenants“, who often pay a multiple of rent for a similar object.

The Consumer Protection Act (Konsumentenschutzgesetz) of 1979 caused significant changes also in the rights of tenants. In respect of moveable objects, for instance renting a car, the Consumer Protection Act gained also great importance, as the Tenancy Act is not applicable to these contracts. The modern contract of leasing is a mixed contract and not regulated in the Austrian Civil Code or in another statute. It combines elements of tenancy and sale and mainly serves financing purposes. If the lessee is a consumer, he is protected by the Consumer Protection Act.

2. Sources of the Austrian Tenancy Law

The Austrian legal system has two main pillars of tenancy law: The Civil Code (ABGB) and the Tenancy Act of 1981 (MRG). Where the MRG is not applicable (for instance regarding flats which are rented merely as a second domicile for holiday purposes, or concerning moveable objects) or where the MRG does not contain any regulations, the provisions of Article 1090 to 1121 ABGB have to be applied to a tenancy agreement. Otherwise the provisions of the MRG are applicable. The majority of these provisions are mandatory and cannot be changed by the parties to the contract. This different legal sources and frequent amendments led to a tenancy law which is difficult to understand. Therefore, Austrian tenancy law is considered a complicated and highly specialized field of law. Intentions of unification failed until now because political consensus is difficult to achieve in this sensitive branch of law.

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3. Principles of Austrian Tenancy Law

Austrian law distinguishes between the permission to use a thing in exchange for the payment of a certain amount of money (this is tenancy) and the permission to use a thing and profit from its benefits (which is called a lease). Tenancy may apply to all non-consumable things. Tenancy of business premises is also subject to considerable protection, whereas lease of businesses is not. The Agricultural Lease Act 1969 (Landpachtgesetz) also contains protective rules.

Whereas according to the Austrian Civil Code rent agreements are subject only to general restrictions, according to the Tenancy Act rent restrictions exist for all objects except objects in newly built houses. Generally, only rents can be agreed on which are legally adequate. Particularly for old apartments the upper limit is even lower and follows a reference value system („Richtwertsystem“): The Federal Minister for Justice fixes the „reference value“ for every federal province under consideration of building and land costs per square meter based on an average standardized apartment. This is a fictitious apartment in a certain location and equipment with a certain standard. The actually permitted rent results from additions and reductions to a reference value which is calculated by comparison to the location and equipment of the standard apartment. In Vienna the reference value is now 4,91 EURO per square meter and month. Portions of the rent that exceed those upper limits are invalid and can be reclaimed within three years.

Tenants of apartments as well as tenants of business premises in Austria have a strong protection of vested rights: The landlord may dissolve the contract only in case of prolonged delays in rent payments and grave breaches of contract, for instance severe damages to the object caused by the tenant or illegal conduct. Contracts unlimited in time are terminable by the landlord by notice of termination. The landlord can only give notice based on an important reason for termination. One of those cases is when the landlord requires the use of the apartment for himself or for a family member or in case of lack of usage on the side of the tenant. In any case, it is necessary that the landlord delivers an action for eviction and thus termination is only possible by judicial decree („gerichtliche Kündigung“). Contracts for a limited time period are permissible, but in this case the admissible rent is reduced by 25 % as compared to a contract with no time limit.

In addition to the rent the tenant has to pay operating costs („Betriebskosten“). These are, for instance, costs for water supply, insurance and tax on land and building. For this purpose the overall cost of the premise is divided by the respective square meters. Special rules are in place for elevators and other parts of the premises not used equally by all tenants.

The landlord has the risk of accidental loss or destruction and must generally bear maintenance and repair costs. Costs of preservation of the rental object („Erhaltungsarbeiten“) have to be borne by the landlord. Only minor works to service the apartment have to be undertaken by the tenant.

The modern contract of leasing is a mixed contract and not regulated in the Austrian Civil Code or in another statute. It combines elements of tenancy and sale and mainly serves financing purposes. If the lessee is a consumer, he is protected by the Consumer Protection Act.

4. Special Consumer Protection Rights

The Austrian Civil Code does not mention consumers at all. All provisions pertaining to consumers are summarized in the Consumer Protection Act of 1979. The Consumer Protection Act offers the tenant protection if flats are rented by professional landlords. The Supreme Court of Austria regards a landlord a professional lessor when he owns at least 5 apartments. Beside the national Consumer Protection Act tenants rights are also protected by the rules in the Civil Code concerning general business conditions, which allow a general control over standard conditions.

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The implantation of the European Time-Sharing Directive in Austria („Teilnutzungsgesetz“) led to the introduction of the protection of consumers in respect of certain aspects of contracts relating to the purchase of the right to use immoveable properties on a timeshare basis. If the lessee is a consumer and the lessor an entrepreneur in the sense of the Consumer Protection Act, several special protective rules come into play which have been partly influenced by European consumer protection directives; for instance the protection against pre-formulated unfair contract clauses or the right of withdrawal in doorstep-contracting situations.

5. Control of Standard Terms

Standard terms are subject to Articles 864a, 879 of the Austrian Civil Code and to the special rules of interpretation of Article 915 of the Austrian Civil Code and to the Consumer Protection Act. According to Article 864a of the Austrian Civil Code special consideration has to be paid when general terms and conditions or standard terms are used. These terms are in general not the result of negotiations and typically they are not read by the other party; they are provided only by one party. Standard terms of one party only become part of the contract if the parties agree so and the other party has the possibility to read the standard terms under reasonable conditions. According to Article 864a of the Austrian Civil Code, unusual clauses in standard terms of one party do not become part of the contract if the other party could not expect such provisions under the circumstances and if the clause is unfavourable to the other party. Article 879 paragraph 3 of the Austrian Civil Code provides protection against clauses which do not define the main service of one of the parties and which worsen the position of the other party in an unreasonable way. Such clauses are invalid. For consumer contracts Article 6 of the Consumer Protection Act lists a large number of forbidden unfair contract clauses. Unclear clauses are interpreted against the party who used it. Assuming the landlord was acting in a commercial way and the tenant is a consumer, the demand of transparency leads to the incomprehensible conditions being invalid.

6. Frequently used clauses

The following clauses are frequently used in tenancy contracts and have been examined by the Austrian Supreme Court:

a.The tenant must not withhold rent against any alleged claims of his own, except authorized by a judge.

Such a clause is valid in contracts between a landlord and a tenant who is not a consumer. Within the scope of application of the Consumer Protection Act, the clause is invalid, because the right of retention and compensation is mandatory.

b. The tenant has to bear all costs of repair.

This clause is partly invalid even if the tenant is no consumer, because according to the Austrian Tenancy Act the cost of preservation of the rental object („Erhaltungsarbeiten“) have to be borne by the landlord. The contract can contain a different agreement if the tenant is no consumer: In this case the tenant can commit himself to bear all repair costs except costs concerning grave damages as for instance due to the whole house being damp or damages of the roof of the house. Clauses providing different rules are invalid. Only outside the scope of application of the Austrian Tenancy Act, for instance in a contract in respect of a second home, a shifting of the costs to the tenant is possible, because the provisions of the Austrian Civil Code are not considered mandatory. Even in that case the clause is invalid when the contract is part of the business activity of the landlord and the tenant is a consumer, because the obligation of the landlord to pay the costs of preservation of the object is considered as a warranty against defects of the rented object. The Austrian Consumer Protection Act forbids the exclusion of warranty in advance when declared by a consumer.

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c. The tenant must not diminish the rent in case of defects in the object or in case of a disturbance caused by another party.

The landlord has to keep the rented object in useable condition and has to preserve it at his own cost. He must not disturb the tenant in the exercise of his rights and has to avoid disturbances, as noise or odour immissions caused by other parties. The violation of these duties – irrespective of a fault of the landlord – leads to the consequence that the tenant does not have to pay the rent or parts of the rent. The right of rent reduction can never be waived in advance in cases of immovable objects. Therefore the clause is invalid in all tenancy contracts.

d. The tenant will make no claims for damages caused by the landlord.

This term is invalid when the tenant is a consumer: The Austrian Consumer Protection Act forbids the exclusion of liability except the exclusion of liability for slight (minor) negligence in respect of damages of property.

e. At the end of tenancy, the apartment has to be repainted by a professional painter at the expense of the tenant.

Normally, a term that provides that at the end of tenancy the apartment has to be repainted at the expense of the tenant is valid according to the Austrian Civil Code. The Austrian Supreme Court considers this term as invalid when it worsens the position of the tenant unreasonably, for instance in a contract limited in time or when the term leads to an obligation to give the object back in a better condition as the tenant received it.

f. The landlord has the right to enter the apartment whenever he considers it necessary.

Except of danger ahead, the landlord may only enter the object in accordance with the tenant at usual times of the day. A term that allows the landlord to enter the apartment whenever he chooses is considered as invalid.

g. The tenant must not keep animals of any kind

The Austrian Supreme Court considered a complete ban on keeping animals in an apartment unlawful.

7. Conclusion

As in many other European countries, consumer law in Austria is an effective method of protecting tenants, especially in contracts to which the Tenancy Act is not applicable. The Austrian courts take provisions protecting the tenant seriously. It is a main aim in Austria to reach a fair balance between the interests of landlords and tenants. The conflict of interests between the parties of a tenancy contract mainly concerns the matter of rent. On the other hand the economic interests of the landlords must not be forgotten: Their economic survival guarantees that they carry out useful improvements in the house.

*Bu metin, 24-25 Kasım 2011 tarihinde gerçekleştirilen Uluslararası Tüketici Hukuku Sempozyumu‘nun 2 . Gün 2. Oturumunda Dr. Elisabeth Lovrek tarafından sunulmuştur.