At the start, it should be noted that Austrian law provides that lease agreements concluded in writing trigger stamp duty tax. Therefore, written lease agreements must be filed with the tax authorities for stamp duties by the 15th of the second month following the execution of the lease and stamp duty has to be paid. Residential leases are exempt from these requirements.

The applicable tax rate is 1% of the assessment base. The assessment base is three times the annual lease payments (rents, operational costs, VAT, insurance, key money, etc.) if the term of the agreement is indefinite. If the lease is for a definite term, the assessment base is the amount of the annual lease payments multiplied by the term of the lease (multiplied up to maximum of 18 times).

If agreements that are subject to stamp duties are not filed on time and the duty is not paid, penalties of up to 100% of the unpaid duties might be triggered. Both parties to the agreement are liable for the stamp duties and the penalties irrespective of the contractual agreement between the parties.

Stamp duties can legally be avoided and/or reduced. If a lease has an indefinite term, the stamp duty assessment base will be reduced to three years if the lease provides for a termination right waiver for a specific period. Stamp duties can be fully avoided by offering lease conditions in writing and by the other party just accepting those terms implicitly (e.g., by paying the rent). Further, stamp duty can be fully avoided by so-called “lawyers correspondence” if the parties and their lawyers verbally agree on the lease terms and subsequently the lawyers draft a memorandum regarding these terms that is sent to their respective clients.

• Austrian Tenancy Act (the “Tenancy Act”)

Most residential tenancies and most commercial leases are regulated by the Tenancy Act. The Tenancy Act distinguishes between leases that are entirely subject to this act (Vollanwendungsbereich, which provides for a wider scope of tenant-friendly provisions) and those that are partially subject to this act.

Hence, the Tenancy Act is either applicable, partly applicable, or not applicable at all. In general, the Tenancy Act is fully applicable on leases of residential properties and commercial premises built before 1945. However, several exceptions apply. If the Tenancy Act is fully applicable, the maximum rent payable is capped for residential tenancies. If the tenancy is for a definite term (minimum three years), the maximum rent provided for in the Tenancy Act is further reduced by 25%. The definite term of tenancies subject to the Tenancy Act must be in writing. Otherwise, the tenancy will be interpreted as a tenancy with an indefinite term. Key money payments are not permissible.

For leases that are fully or partially subject to the Tenancy Act, the landlord’s termination rights are restricted to termination for good cause. As a result, no termination for convenience is permissible. Also, the landlord’s termination of the tenancy must be declared in court.

• Commercial leases

There are two types of commercial leases: (i) the “ordinary” commercial tenancy of space (Geschäftsraummiete), which is subject to the Tenancy Act; and (ii) the lease of a business unit/enterprise (so-called “Pacht”), which is not subject to the Tenancy Act and includes the right of usufruct.

The Tenancy Act applies to the “ordinary” commercial tenancy if the term of lease is at least six months. However, several provisions exclusively reserved for residential tenancies, such as the restrictions of rent, will not apply.

As for Pacht, if the tenant rents a business/enterprise that includes real property or if the leased premises are part of an enterprise (e.g., a shop in a shopping mall) or if it is a land lease, only the Austrian Civil Code applies. The Austrian Civil Code sets forth provisions considerably less favorable for tenants, e.g., no termination in court necessary, no restriction of termination rights, etc.

The Austrian legal system has two main sources of tenancy law. The special regime of the Tenancy Act is, with very few exceptions, mandatory and cannot be modified by contract to the disadvantage of the tenant. If the Tenancy Act is not applicable, then the Austrian Civil Code applies. The Austrian Civil Code is applicable to commercial lease agreements for a period not exceeding six months, employee housing, or Pacht agreements. In these cases, lease provisions are basically not regulated and to a large extent are freely negotiable. The regulations become applicable if no arrangements have been agreed to between the parties.

Austrian law does not provide for a maximum term for leases. However, in order for the lease agreement to be registered in the land registry, a time limit or at least a waiver of termination by the landlord is mandatory.

The parties may agree on an indefinite or fixed term. Usually, commercial and residential lease agreements are entered into for a fixed term. However, as for residential tenancies, the Tenancy Act provides for a minimum term of at least three years.

Austrian tenancy law does not provide any mandatory provisions that allow the tenant to renew its lease. However, tenancies subject to the Tenancy Act that are limited in time are automatically renewed by operations of law for three years if they are not renewed or terminated (e.g., if the tenant continues using the premises or pays the rent and the landlord does not object).

A lease contract is terminated under any of the following circumstances:

• Termination declared by the landlord, provided that the landlord is relying upon one of the applicable grounds for termination stipulated in the Tenancy Act (including nonpayment of rent or lack of proper maintenance of the property)
• Termination declared by the tenant
• Destruction of the rental property
• Lapse of time in case a specific termination date was initially agreed upon
• Immediate termination declared by the tenant if the rental property has deteriorated to the extent that it is impossible for the tenant to use it
• Immediate termination declared by the landlord in case the rental property is used in a way contrary to the lease agreement
• The tenant is in default in payment of at least two months’ rent

Basically, there are no restrictions regarding the currency. However, arrangements for payment of rents in foreign currency are not common practice in Austria.

If not agreed otherwise, rent is due in advance on the fifth day of each month (if the Tenancy Act applies, no earlier day may be set). In business-to-business transactions, if the tenant negligently does not pay the rent on the due date, the landlord may charge default interest at the rate of 9.2% above the relevant base rate. Without negligence, only 4% default interest is due.

According to the Tenancy Act, the maximum amount of rent payable per month depends on the category and on the size of the rental property. However, these restrictions do not apply to building leases that are partially subject to the Tenancy Act, Pacht agreements, “ordinary” commercial tenancies, or lease agreements with a lease term of less than six months.

The following duties are usually required of landlords:

• Renovate and carry out emergency repairs of the structure of the property
• Insure the property
• Provide tenants with a valid notice of termination (in writing) if terminating the tenancy

The following duties are usually required of tenants:

• Pay the rent on time
• Maintain the property in good condition
• Inform the landlord in case of damages
• Allow the landlord access to the rental property for inspections

The transfer of the lease contract to a third party, such as by assignment of the agreement, is subject to landlord’s approval/consent.

With regard to subletting, tenants are generally allowed to sublet the premises or parts thereof unless the underlying lease contract states otherwise. Moreover, leases in which the Tenancy Act are fully applicable are subject to certain restrictions. For example, the Tenancy Act provides that the landlord may only invoke subletting prohibitions for important reasons.

Under applicable provisions of the Tenancy Act, the landlord is entitled to raise the rent to a fair market level if the legal and economic influence on a tenant – being a legal entity – changes and if the Tenancy Act is fully applicable to the lease. The landlord must be notified immediately of such change in entity to enable the landlord to exercise the right to increase the rent. The rent increase equals the difference between the current (and presumably lower) rent and the fair market rent payable for the premises. This applies to asset deals as well as lease-outs. The parties can further agree that this rule shall apply to leases that only partially fall under the Tenancy Act or to leases that are not subject to the Tenancy Act.

Where real property is substantially damaged or destroyed by an act of God or in time of war, the lease agreement is terminated. In any other case, the landlord is obligated to repair or rebuild the property provided an insurance company covers the costs.

The landlord is responsible for insuring the real property where the leased premises is located. The landlord may recover such costs from the tenant in a lease. The tenant is responsible for insuring residential rental objects (household insurance).

In cases where the Tenancy Act applies, the lease agreement is automatically assigned to the purchaser of the leased premises as the new landlord. The landlord does lose any further termination rights in this case. However, in cases where the Tenancy Act does not apply and where the lease agreement is not registered with the land register, the purchaser may terminate the lease agreement.

The provisions on the foreclosure of the leased premises correspond to those on the sale of the leased premises. If the tenancy has been registered in the land register, it is taken over by the purchaser without the possibility of termination. However, if it has not been registered, the purchaser may terminate the lease agreement in accordance with the legal possibilities. If the lease agreement is subject to the Tenancy Act, the termination rights are limited.