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Eversheds Global Estate Management

Austria

Real Estate Guide

Principles of ownership

Principles of ownership

Freehold/Ownership - the typical Austrian freehold ownership of real estate property is the free and unlimited possession (besides any obligations under law) of real estate property.

Leasehold - (as the right to have a building over or under another’s real estate property) is not very common in Austria. Leasehold can be granted for a minimum period of ten and a maximum period of 100 years only.

Common hold/Usufruct - there are several types of easement in Austrian law. The most important ones are the right of the owner of a property to use a part of another property to cross it, to install water pipes or to use a source of water. An easement has to be registered in the land registry.

Condominium ownership - one person alone or two persons together get the exclusive right to use a specific apartment or another independent premises and this right is tied to shares in the whole property.

Utilisation right - not applicable

Joint/Co-ownership - it is possible to acquire co-ownership of other types of property than apartments or other independent premises by more than two persons; Normally the property is divided into shares.

Registration - freehold ownership has to be registered in the land registry. Without registration the freehold ownership is not completed. Leaseholds also have to be registered in the land registry to obtain the full right and title of leasehold-ownership against third parties.

 

Restrictions on foreign ownership

Restrictions on foreign ownership

There are the same restrictions or liberty for Austrian citizens to buy or to sell real estate property as for any other EU citizen. For non-EU citizens there are stricter restrictions on the acquisition of real estate property in Austria.

 

Title to real estate

Title to real estate

Investigation of title - The land registry provides full information and evidence of title.

Transfer of title - the transfer of title is not performed until the registration in the land registry is complete.

Registration - freehold ownership has to be registered in the land registry. Without registration the freehold ownership is not completed. Leaseholds also have to be registered in the land registry to obtain the full right and title of leasehold-ownership against third parties.

Information on register - the land registry is public and is based on an electronic database covering all real estate property. It is managed by the district courts and provides information about any real estate property transactions, including the identity of the former owner(s) as well as any public or private burdens or rights and benefits related to the property (for example mortgages, easements etc).

Commercial leases - the duration of a commercial lease term is usually any period up to 21 years. The lease will usually contain provisions for the tenant to maintain and repair the interior premises.

 

Structure of a real estate transaction

Structure of a real estate transaction

Negotiation of terms/Agreement - commercial terms are usually negotiated between the buyer and the seller (or together with their representatives and lawyers) directly.

Heads of terms – not applicable

Investigation of title - the land registry provides full information and evidence of title. Accordingly no further search of title is necessary.

Purchase deed - not applicable

Contracts - it is possible by law (but not common because of the risks of the transaction) that the parties draft their own sales contract and apply for registration at the court without the help of a lawyer or notary. However, the signatures of the parties have to be legalised.

Completion/closing - the contract is completed upon legalised signing by both parties, fulfilment of all conditions set up in the contract or by law, transfer of the purchase price to the trustee or to the seller directly. Different conditions can be agreed.

Post completion - after completion of the contract, the new ownership must be registered in the land registry, generally by the buyer's attorney.

Leases - not applicable

Transfer of ownership of leased property (alienation) - not applicable

Language requirement – not applicable

Governance of lease signature/administration> – not applicable

 

Usual commercial lease terms

Usual commercial lease terms

Summary of available lease types - it is possible to lease an apartment, business premises, a warehouse, or a whole building. There are different legal regulations dependent on whether the Austrian tenancy Law (Mietrechtsgesetz) is applicable, partly applicable or not applicable at all. In general it is applicable in the full extent on leases of apartments and business premises built before 1945 or 1953 but several exceptions exist. However besides the Tenancy Act leases are governed by the Civil Code (Allgemeines Bürgerliches Gesetzbuch - ABGB)

There is no strict form requirement for a rental agreement. However, for a lease contract limited by time a written contract is necessary under the Tenancy Act.

Alterations/modifications - are usually permitted with the consent of the landlord or by law. Assignment and sub/under letting - alienation is usually prohibited. Different agreements can be entered into.

Destruction/reinstatement - tenants are only liable for normal wear and tear. Different agreements can be arranged for business premises only. Normally a service charge is agreed concerning all services provided by the landlord and for the housing management. If the building is older than 1953 the charges are limited by law.

Duration of lease - a commercial lease term can be agreed for an unlimited or limited period of time.

Forfeiture/irritancy - not applicable

Insurance - the landlord insures the building. The tenant insures the contents.

Rent deposit/bank guarantee - not applicable

Rent review - an increase in value is usually agreed. It is common to agree that the rent is bind to the Consumer Price Index or the Construction Cost Index.

Repair/decoration/furnishing - usually the tenant is responsible for any repairs except structural repairs. This can be agreed differently as long as Austrian tenancy Law (Mietrechtsgesetz) is not fully applicable (which is more likely to be the case for premises in buildings built before 1953).

Service Charges - it is common for the landlord to insist on the payment of a quarterly or monthly service charge payment, which is used for the repair/decoration/general maintenance of the building as a whole. Alterations are usually permitted subject to the landlord’s prior written consent (which consent should not be unreasonably withheld) and also subject to local planning laws being followed.

Tenant’s duties - not applicable

Termination/break clauses - it is possible to negotiate early termination rights. Under the Austrian Civil Code failure to pay the rent is always a break clause.

Transfer of ownership of leased property - not applicable.

 

Increasing covenant strength

Increasing covenant strength

Lease deposit - normally a rent deposit of an amount equal to three to six months rent plus VAT is agreed. Three months is normal for apartments, six months for commercial premises

Surety - sureties are not commonly used. In most cases sureties are limited to young limited liability companies where the managing director or the shareholder(s) may give surety for the rent payable.

Warranty - a bank guarantee as rent deposit is more common where the tenant is using the property for business purposes. Individuals normally have to remit or pay in cash the rent deposit to the landlord.

Rent deposit/Bank guarantee - See "lease deposit" and "warranty" above.

 

Taxes

Taxes

On sale/acquisition of real estate - relating to real estate property transactions (no matter whether lease - or freehold). Real Estate transfer tax: 3.5 % of the purchase price.

Immovable property tax - not applicable

Income tax - not applicable

Land tax - Land tax (Grundsteuer) - 1 % of the so called “Einheitswert” is payable by the owner of a property every year. The “Einheitswert” is a fiscal value of the property which is much lower than the market value. However, it is likely that this will change in the near future.

Lease tax - legal transaction fee for written tenancy agreements:

(a) apartments:

  • unlimited by time: one per cent of the rent plus charges and VAT of three years
  • limited by time: one per cent of the rent plus charges and VAT equal to the duration of rent, maximum one per cent of a three year rent

(b) offices, shops, property for commercial use:

  • unlimited by time: one per cent of the rent plus charges and VAT of three years
  • limited by time: one per cent of the rent plus charges and VAT equal to the duration of rent, maximum 18 years.

Local tax - not applicable

Mortgage - registration fee for mortgages: 1.2% of the mortgage

Other taxes - Court fee for registration of ownership in the land registry is 1.1% of the purchase price. Legalisation fees for signatures on real estate purchase contracts depend on the value (max €134,90 + VAT).

Property lease tax - not applicable

Value added tax - VAT on rent and charges:

  • tenancy agreements in general: 20%
  • if landlord waives his right for pre-tax: 0%
  • tenancy agreements for private use of apartments or houses: 10%.