Recent rulings by the Supreme Court (OGH) have already put inflation adjustments to the test, says lawyer Oliver Peschel. Many index clauses used for new rent increases are “illegal because they do not comply with the regulations of the Consumer Protection Act”. The Austrian Association of the Real Estate Industry (ÖVI) is massively questioning the procedure and has great doubts.
The subsidies that the ÖVP and the Greens launched instead of putting the brakes on are “just a drop in the ocean and associated with bureaucratic effort,” criticizes lawyer Peschel, who wants to “reverse the inflation adjustments”. The new judgments of the Supreme Court (8 Ob 37/23h and 2 Ob 36/23t) enabled a “rent price brake for hundreds of thousands of tenants”.
Unlawful: what it means
The fact that index clauses used for the latest increases in rent are illegal means “that in such cases only the originally agreed rent is valid. The overpaid rent can be reclaimed and only the originally agreed rent may be demanded in the future,” says Peschel. Index clauses are included in almost all leases.
The class action suit only targets people who rent from companies and have a private lease with index clauses to adjust for inflation. The Supreme Court (OGH) ruled – due to a lawsuit brought by the Chamber of Labor (AK) against model rental contracts.
Lawyer Oliver Peschel Image: Werner Derp
Disputed Judgments
“The effects of the two judgments of the Supreme Court on existing contracts is also highly controversial among experts. The special provisions of the tenancy law limit the reclaimability to three years,” according to the Austrian Association of the Real Estate Industry (ÖVI).
The announcement of the class action lawsuit was immediately and massively questioned by the ÖVI. “Both the broadcast in question and the advertising appearance on the Internet in cooperation with business-minded litigation financiers arouse the expectation among thousands of tenants that their value protection agreement in the rental contract is definitely invalid and that the amounts from the last 30 years can be reclaimed. It is more than questionable whether the OGH that will really decide in concrete individual cases.”
Lawyer sues against rent increases
The law firm Peschel is now suing against rent increases. They want to get back overpaid rent. Tenants who have been affected by an increase in inflation can register for the collective procedure on the website www.mietzinsklage.at, Peschel advertises his approach.
“We assume that a large number of rental contracts throughout Austria will be affected,” said Peschel. “We estimate that hundreds of thousands of index clauses are unlawful. Recovery is possible for the last 30 years.” The law firm works together with legal protection insurance companies and legal cost financiers in order to enable all those affected to “put the brake on rent” and claim back rent.
Rents usually increase parallel to inflation due to so-called “index clauses” in rental contracts. Since inflation has regularly been around ten percent in recent months, rents have also risen rapidly.
“The statements by the OGH in the decisions, which came as a surprise to all housing law experts, in which sample formulations were viewed as non-transparent or grossly disadvantageous as part of a warning procedure, have promoted creative ideas that go beyond the target and lack a factual basis,” says ÖVI Managing Director Anton crabapple in a broadcast.
“That makes long-term contracts unpredictable”
Leases are long-term. Only a few years ago, the Supreme Court confirmed the landlord’s legitimate interest in a value preservation agreement being made in the case of continuing obligations. In order to ensure the preservation and improvement of the buildings, an index agreement is essential.
Real estate trustees have been confronted with a great deal of legal uncertainty for years, the ÖVI complained. They can no longer be blamed for advising landlords to conclude short-term contracts. In the case of rental agreements based on reference values in particular, neither tenants nor landlords can be sure that they have reached a legally compliant agreement. “The sword of Damocles of the retrospective invalidity of clauses that have been agreed for decades to the best of our knowledge and belief makes long-term leases completely unpredictable.”
Peschel said there should be no cost to class action participants. This is secured if the legal protection insurance includes legal protection for tenants. Without insurance, you may have to hand over part of the success to the litigation financiers if the lawsuit is successful in the end.
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