Austria: legal uncertainty in the charging of rental contract fees
Tenancy agreements are subject to a statutory fee of 1% to be paid to the tax office. Since 11/11/2017, no fees have been charged on contracts for the rent of residential spaces, while for commercial leases, the fee continues to apply. Based on the latest case law, there is a higher risk that a lease contract that has been concluded for an indefinite period of time may be qualified as a fixed contract (= generally higher fee).
Fees for lease contracts
The assessment basis is (i) three times the annual value for contracts with an unspecified duration, (ii) in the case of contracts with a set duration, the annual value multiplied by this number of years, at most 18 times the annual value. If a temporary tenancy agreement is converted into an open-ended one, the calculation may be based on 21 times the annual value.
Therefore, whether the contract has a temporary or unspecified duration is of key importance. In the process, it depends whether both contractual parts are to be bound to the contract for a specific period or not, irrespective of how the contract is to be classified under contractual law in its entirety.
A contract that, based on the contractual text, has been concluded for an indefinite period, will then be treated as a temporary contract, with regard to fees, if it contains a waiver of termination for both parties. On the other hand, a tenancy agreement that is concluded for a set period of time, that can be resolved by and at the discretion of at least one of the contractual parties, is considered to be an open-ended contract.
In the scope of the Lease Law (MRG), the possibility of terminating a lease agreement by the Lessor is strongly limited by law. Nevertheless, according to consistent case-law, the Higher Administrative Court (VwGH) assumed for a long time that, when agreeing on all grounds for termination of § 30 para. 2 MRG, there is still an insufficient limitation of the termination options that opposes the fee-based classification of the contract as being open-ended. If termination was envisaged for "individually determined reasons", the issue of the fee-based classification of the contract depended on the weight and probability of the agreed grounds for termination being met.
The VwGH applied this verification of probability in one of the latest decisions on this topic in a case in which all grounds for termination of § 30 para. 2 MRG were agreed, thereby leading to legal uncertainty. In a further decision, the courts of the lower instance then invoked the above decision. The VwGH rejected the extraordinary appeal with the justification that the decision of the court of lower instance does not deviate from the case-law of the VwGH.
As a result, when agreeing on all grounds for termination of § 30 para. 2 MRG Act, the weight and the probability of these reasons being met can lead to the fee-based qualification as a temporary contract. The fact that the reasons for termination of the MRG are not relevant for the rent of business premises, per se, does not make it easier to argue that a contract should be subject to the payment of a fee.
Author: Maria Praher