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Country - Austria
Commercial Leases
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A. SOURCES OF LEASE LAW
Applicable legislation
Leases are generally governed by the provisions of the Rent Act (Mietrechtsgesetz - MRG) containing most of the provisions protecting the lessee and by the provisions contained in sections 1090 to 1121 of the Austrian Civil Code (Allgemeines Bürgerliches Gesetzbuch – ABGB).
The full or partial application of the Rent Act depends on many factors, especially the date of the building permit of the building.
Do any specific rules apply to commercial leases?
The provisions of the Rent Act normally also apply to commercial leases. However, there are some specific distinctions of detail; generally speaking the protection level of the lessee is higher for residential leases than for commercial leases.
Do different regimes apply to leases of commercial premises depending on the use of the premises by the lessee (offices, warehousing, industrial, retail)?
Some minor distinctions are made. The biggest difference is between the lease of an entire business (especially in a shopping centre) and the lease of premises only, as the Rent Act with its clauses protecting the lessee is only applicable to the latter type.
B. DURATION AND TERMINATION OF LEASES
Is there a minimum or maximum obligatory term?
In all leases under the Rent Act, the term must be fixed in writing - otherwise it is not enforceable by the lessor. Terms of five to 10 years are common. The current trend in the market is for a reduction in the term.
Does the lessee have a right to renew the lease upon expiry of the initial contractual period?
Upon expiry of the lease any renewal is subject to mutual agreement between the parties.
Do lesses enjoy security of tenure (i.e. the right to remain in occupation after their lease expires)?
No.
Do leases involve a lengthy procedure for the effective recovery of possession?
Leases invariably contain a provision allowing the lessor to terminate on non-payment of rent or breach of the lease (under the Rent Act the insolvency of the lessee does not constitute a reason for termination).
The lessor has to seek a court order for the recovery of possession of the premises. The court order and the related proceedings often take several months.
Courts regularly allow a lessee to rectify the first breach and retain the premises.
Can government/local authorities require the compulsory termination of a lease?
Yes, local authorities have certain rights to acquire property on a compulsory basis; this also includes property held under leases.
Compulsory purchase powers may only be exercised on certain grounds, such as to enable new developments. In such cases the lessee is entitled to the market value of its interest in the property and other compensation.
Is there a preferential right of acquisition?
No, but the parties are free to contract as they wish.
C. RENT AND COSTS
Are variable rental agreements common?
It is market standard to link the rent to the increase of the Consumer Price Index. Adjustment is often on a yearly basis for commercial leases. Residential leases are normally adjusted once a threshold of 3 to 10% is reached (i.e. if the index is increasing or decreasing by 3% to 10% an adjustment of the rent will be made).
The amount of rent may also be linked to turnover. This practice is regularly applied to commercial leases.
Most common indexation
See above.
Who usually pays the common expenses?
Each lessee is usually required to pay a proportion of the service costs incurred by the lessor. The proportion is calculated based on the size of the respective unit. If the Rent Act is fully applicable, the type of expenses and sometimes the maximum amount are limited to a certain extent.
For leases of premises to which the Rent Act does not apply or only partially applicable, it is common to pass on to the lessee much more of the costs.
Certain expenses are normally excluded from the service charge, such as the initial development of the building or repairs of the static structure itself.
Are there any other expenses connected with the lease?
Stamp duty is payable on signing of a written lease-contract. The charge is 1% of the total gross rent (inclusive of service costs) payable during the lease term, with a maximum of 18 years being the calculation basis for fixed term leases.
For indefinite lease terms three times the amount of the total gross rent forms the basis for the calculation.
The stamp duty is usually paid by the lessee and much effort is put into avoiding it.
Charges for electricity, water etc are paid by the lessee directly to the respective supplier if every lessee has meters included in its premises. In larger developments or shopping centres these costs are often treated in a similar way to the service costs (see above).
Which indirect taxes apply?
VAT at 10% for housing and at 20% for commercial leases; with commercial leases the lessor may elect to charge VAT in order to recover VAT on its expenses.
D. OBLIGATIONS OF LESSOR AND LESSEE
Who is responsible for the different works on the premises?
In a multi-let development, the lessor will repair and maintain the common areas and the structure of the building.
Each lessee will only be responsible for maintenance and repair of the internal parts of its individual unit, excluding structural and external parts.
Can the lessee alter or improve its premises?
Most leases limit the lessee's right to alter or improve the premises. Structural alterations are frequently prohibited, particularly where the lessee only leases part of the building.
Non-structural alterations usually require the lessor's consent. The Rent Act allows certain specified alterations/improvements to be made. In such cases the lessor cannot obstruct such alterations.
What restrictions exist on the lessee's right to use the premises?
Leases will generally restrict the use of the premises to a particular use (restaurant, shoe retail, etc).
Specific activities which may cause a nuisance are also prohibited. The lessor may also be restricted by planning laws to allow a use not covered by the respective planning authority.
Is there any right to transfer the lease?
Where the Rent Act is fully applicable a commercial lessee has the right to sell his business in which case the lease is automatically transferred. In such cases the lessor has the right to raise the rent to a market standard rent (if the rent prior to transfer was below that). In cases not involving the sale of business the consent of the lessor is necessary to transfer the lease.
Is there any right to sub-let the premises?
Subletting of the premises is possible, if the parties do not agree otherwise. Under the Rent Act, the lessee may only sublet parts of the premises and not make an exceptional profit out of the subletting.
What are the usual guarantees?
In general the parties are free to contract as they wish. With residential leases deposits of three months' rent are common. For commercial leases it is more common to provide bank guarantees for amounts equalling up to six to 12 months rent.
E. PARTICULAR TYPES OF LEASE
Do office leases have any particular characteristics?
They will not generally contain lessor's pre-emption rights or turnover rents, but will normally correspond with the other characteristics set out above.
Do retail leases have any particular characteristics?
If located in a shopping centre they will qualify as leases of entire businesses, thus the Rent Act is not applicable.
Turnover linked rents usually combined with a minimum base rent are common.
Provisions enabling the lessor to maintain a suitable mix of lessees are common.
Retail leases are typically subject to obligations which exist for the benefit of the shopping centre as a whole. For example, an obligation to keep open and trade during specified hours and to contribute towards marketing of the entire centre.
Do hotel leases have any particular characteristics?
Hotel leases are similar to commercial leases, i.e. the lease of an entire business, in which case the Rent Act is not applicable.
Hotel leases often contain detailed provisions relating to the management of the property, or such management may be set out in a separate document with a dedicated hotel management company.
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