Newly adopted standards aimed at balancing the market and protecting consumers in the real estate market in Austria during the COVID-19 pandemic

At present, in connection with the current situation in some countries, existing or urgently adopted normative norms, aimed at balancing the market and protecting consumers, come into force. So on April 4, 2020, Austria urgently adopted the law "4. COVID-19-Gesetz", which regulates, among other things, relations in the real estate market.

Since issues related to real estate always belong to one of the main positions of our budget - whether it is rental, property or a business asset, I decided to continue the initiative launched by some professionals and specialists in my fields, and prepared a short overview of the norms that define and characterize today real estate operations in Austria.

COVID-19, Commercial and office space for rent.

 With respect to the rental of commercial and office space in the current emergency, §1104 and §1105 ABGB come into force (General Civil Code, 1811). These paragraphs provide for the possibility of full or partial exemption from rental payments during emergency situations.

The decision on full or partial exemption from rental payments may be made in respect of any tenant of commercial premises, regardless of the type of commercial activity of his enterprise.

Directly affected by the measures introduced are enterprises in the field of trade, consumer services, entertainment and sports events.

Nevertheless, it is erroneous to assume that the law does not apply to enterprises in other areas of business and tenants cannot receive a temporary exemption from rent.

The decision on exemption (in whole or in part) from the payment of rent is taken in each case individually, based on the economic and legal indicators of a particular legal entity (company). At the same time, full exemption from rental payments is possible only if the possibility of using office premises is completely excluded, therefore, in most cases it will not be justified.

Example:

 The trading company uses the rented premises not only as a classic trading floor, but also for online sales and as its own bureau / office.

 

The Restaurant / Cafe not only serves guests in the halls, but also arranges home delivery of orders. In addition, in this case, part of the premises is used for the purposes of its own bureau.

In both of these cases, despite the fact that both companies are directly affected, the full exemption from rental payments will not be justified.

In areas not directly related to the victims, a decision on exemption from rental payments will be made on the fact of whether a temporary suspension of work entails a complete loss of operations for this period or if the execution of orders will simply be postponed to a later period.

Example:

 - Massage services will not be in demand in these conditions. In addition, specialists do not have the opportunity to provide their services = complete loss of operating turnover.
 - In those salons, all the necessary work will be done, order processing is simply delayed in time = operations, and, accordingly, business turnovers are postponed.

The early termination of the lease by the tenant on the basis of §1117 ABGB (non-compliance of the object with the agreed conditions) is not legitimate in this situation and entails legal proceedings.

COVID-19, rental of premises.

Since the actions of §1104 and §1105 ABGB do not apply to the residential rental sector, and the situation is difficult for many tenants as well, under the COVID-19 Act adopted on April 4, 2020, the government developed and implemented a package to protect the interests of tenants , which also includes amendments to contract law matters.

This package is designed to protect the economic interests of those citizens who were directly affected by the current situation, namely: citizens who either lost their jobs or work in a shortened mode (respectively, with cut wages). That is, those persons who suffered significant financial losses.

For this category of citizens, the package provides: 1. Exclusion of the lessor's right to terminate the lease and file a lawsuit for eviction from rental housing on the basis of rent arrears arising in the second quarter of 2020. This exception is valid until June 30, 2022.
2. Exclusion of the right of the lessor to file a claim for the payment of arrears of rent arising in the second quarter of 2020. The validity of the exception is until December 31, 2020.
3. Amendments to the rental law in respect of rental contracts for a limited duration.
4. Postponement of the execution of decisions on eviction from rented residential premises

Comments

Temporary delay in the lessor's right to file lawsuits against the rent payer (paragraph 1.2) It should be noted that all amendments and exceptions do not relate to the fact of the need to pay the rent - in any case, the rent must be paid in full after the expiration of the validity period of these amendments and exceptions, but to postpone the right of the lessor to the payer for a certain period of time court for non-payment of rent (a claim for the payment of arrears of rent arising in the 2nd quarter of 2020 can be filed from 01/01/2021) or terminate the lease due to arrears of rent arising in the WTO the first quarter of 2020 (this amendment ending June 30, 2022). This means that before June 30, 2022, the lessor does not have the opportunity to terminate the lease due to the existing debt on rent payments, but only if this debt arose between April and June 2020. All other statutory reasons for termination of the contract by the lessor remain in force. In addition, the amendments do not provide for the removal of interest for late payment of rent (4% per annum, § 1000 ABGB).

Since the current economic situation, unfortunately, will not change overnight and will last indefinitely, and given the issue of penalties in case of untimely payment of rent, in order to avoid sad financial consequences, we recommend resorting to the possibility of deferring payment of rent only in extreme cases only and exclusively by reaching a mutual agreement with the landlord.

Time-limited leases (paragraph 3)

If the lease contract concluded for a certain period expires between March 31 - July 1, 2020, the tenant has the right to extend the contract once. The extension of the contract must be made in writing. The maximum renewal period is until December 31, 2020.

If, after the expiration of the additional term of the contract, it is not terminated or extended, § 29 of the rental law comes into force, namely: the contract is considered extended for 3 years. This remark applies to facilities in respect of which the rental law is applicable in full or in part.

Postponement of the execution of decisions on eviction from a rented residential premises (paragraph 4)

The evicted person has the right to file a request to postpone the execution of the eviction decision. The request will be granted only if the lessor does not incur due to the deferral of material damage.

For example, if the landlord has already signed a new lease for this premises and if the income from this lease plays a significant role in its existence, the request to postpone the execution of the decision will not be satisfied.

COVID-19, homeowners

Deferred repayment of loans.

If the financing contract was concluded before April 1, 2020, the debtor is given the right not to make monthly loan payments in the period from April 01, 2020 - June 30, 2020.

We are talking about those debtors whose financial situation - as in the case of tenants - has deteriorated sharply and significantly as a result of job loss or the introduction of shorter working hours. We are also talking only about the possible suspension of loan payments from April 01 to June 30, 2020 inclusive, and, accordingly, to extend the contract in this case for three months. After this period, the contract continues to operate in full.

Rent

Partial payment of the rent in WEG facilities (apartment buildings, cottage villages) requires the consent of all the owners of this facility exclusively.

In addition, the ability to vary the size of rents fixed for a year is possible only under the "reserve for repair work" position. If one of the owners independently, without reaching the consent of all the owners of the property, ceases to pay the rent or pays it in a smaller amount, the remaining owners of the property have the right to withhold money from the non-payer (§27 WEG).

I hope you find useful information for yourself. In case you have questions - call or write - I or our specialists will try to answer them.

Health and good luck to everyone, Evgenia Khora (Director of REVISTAA)