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Tenancy Law and COVID-19 Crisis

  • Austria

    25-03-2020

    The Civil Code provides in its Sections 1104 and 1105 ABGB for total or partial exemptions from existing rent payment obligations for tenants in the case that the leased property is unusable due to epidemics.

    When is a complete rent exemption expected to be possible?

    Anyone who has to close his shop because of the COVID-19 regulations introduced by the Austrian authorities should therefore check whether one of the exemption provisions is applicable to him. A complete exemption of rent will only be possible where not only a closure of the business for personal customer traffic but for the entire business activity is ordered. At present, this applies in particular to restaurants and bars. Unless they are covered by an exemption (company canteens, catering establishments in health resorts and hospitals, hotel kitchens for hotel guests, establishments on campgrounds for their guests or establishments in youth and childcare facilities, as well as food delivery services), they must close their business completely and are no longer allowed to enter it.

    Businesses that have to close for customer traffic can enter their business premises themselves, but they can no longer serve customers, so that - as long as they cannot use the business for any other activity (e.g. for the handling of online trading, video training, etc.) - it is likely that a complete rent waiver is also possible. This applies in particular to the majority of stationary trade as well as service companies that carry out their activities in sales outlets (such as hairdressers, massage, foot care, nail studio etc.).

    In which cases is there an aliquot rent exemption?

    If there is still a residual benefit left on the leased property, then under certain circumstances there may only be an aliquot rent exemption, depending on the possibility of use. For example, a car dealership can provide services, but must close down business premises for the sale of cars. A partial reduction will take effect here.

    Important: The provisions on rent exemption can be waived for lease agreements outside the full scope of the Austrian Tenancy Act. It therefore depends on the respective provisions in the lease agreement.

    For leased properties in which professions are practiced that usually have no or only very limited customer traffic and which do not have to close because of the COVID-19 regulations, the rent reduction will only be much smaller or even not possible. In individual cases, the court will have to determine the extent of the justified reduction.

    Leases under the Austrian Tenancy Act or partial application of the Austrian Tenancy Act:

    If a rent exemption is applicable the rent can be reduced without prior agreement of the landlord if the lease is partial or in its entirety governed by the Austrian Tenancy Act. If the landlord files a claim for payment of the rent and termination of the lease because of the overdue rent the court will have to make a declaratory judgement to what extent a rent reduction was appropriate. If the court decides that the tenant reduced the rent to much the tenant must pay the amount determined by the court within a given time period. If he fails to do so the claim for termination and payment of the rent would be satisfied.

    Leases governed by the Civil Code only

    If a Lease is governed by the Civil Code only tenants need to be carefully in reducing the rent without the agreement of the landlord. There is no provision for a declaratory judgement in such cases and any overdue rent may cause the termination of the lease if so claimed by the Landlord.

    Our recommendation: We therefore recommend that you contact the landlord. We would be happy to assist you!

     

    For more information contact

    Alexander Stolitzka
    alexander.stolitzka@eversheds-sutherland.at

    Birgit Schleindl
    birgit.schleindl@eversheds-sutherland.at

    Disclaimer

    This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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