Green lease law and regulation in Austria

First of all, please note that in Austria no federal building act exists, rather building laws exist on a provincial basis. In general, all provincial building laws and related regulations set forth that new buildings have to meet certain energy efficiency and heat protection criteria. However, some provincial building laws do have more detailed regulations. For instance, the Styrian building act stipulates that in new buildings with over 1,000 square metres of floor space, alternative systems (i.e, decentralized energy provision systems, solar or thermal systems) need to be implemented as long as such systems are feasible from a technical, ecological and economical perspective.

Further, the provincial building regulations set forth that a permit to construct a new building or to set up overall improvement measures of an existing building is only granted to the applicant (i.e. the constructor), if an energy certificate has been provided to the authority.

Moreover, the provinces provide for certain subsidies linked to energy efficiency measures. In particular, public subsidies are granted both, in order to improve the energy efficiency of an existing building (i.e. replacement of old windows, replacement of heating facility and implementation of alternative systems), and for the construction of new buildings (e.g., in case a building has been constructed by way of a passive-house). In order to be granted a certain subsidy, the constructor is usually bound to strictly defined conditions, such as concrete methods or ways of improving energy efficiency. Please note that each province is entitled to set up different subsidy guidelines.

It depends. The provision of an energy certificate to the authority is required when applying for a permit in order to build a new building and when applying for a permit in order to set up improvement measures regarding existing buildings. However, most of the specific energy efficiency measures apply to new buildings.

The same applies to subsidies. Based on the purpose, subsidies may affect both, new and existing buildings.

Although the owners of buildings are obliged to provide the purchaser or tenant with an energy certificate when selling or leasing the building, the private real estate market does not significantly pay attention to the energy certificate. This may be because there are not significant sanctions for not providing an energy certificate.

Currently the certification of buildings is not very popular and certification systems are not really well known in Austria. The slogan “green building” is usually misused and does not refer to officially acknowledged green building standards, rather it refers to advertisement measures. For instance, only in 2010, the first office building has been granted a LEED-certificate in Austria.

It depends on the type of the building as well as whether measuring facilities in the rental objects are installed or not.

In case of single or two family houses or buildings with not more than two offices the Austrian Tenancy Act (“Mietrechtsgesetz”) is not applicable and the parties, therefore, have to agree in the lease contract upon the operating costs. Usually the lessee has to bear the operating costs.

Also for Apartment houses or office/commercial buildings the Austrian Tenancy Act may be applicable. This act stipulates that the operating costs may be charged to the lessee. If so, each lessee’s quota corresponds to its share of the building’s total floor space. If measuring facilities for each premises are installed, only the factual consumption is relevant. However, the lessor is not obliged to install such measuring facilities. Nevertheless, it is quite common that measuring facilities for each premises in a building are installed for measuring electricity and domestic gas consumption. In that case the lessee constitutes a contractual relationship with the power and gas supply companies. The consumption for public areas of the building (e.g. electricity for the corridors etc.) is partitioned to the lessees according to the aforementioned quota.

It depends again whether the Tenancy Act is applicable or not. This Act is generally applicable if the building consists of more than two self-contained flats or offices. Basically the lessor is not allowed to affect the lessee’s right to use. If the Tenancy Act is not applicable the lessee is obliged to tolerate only necessary maintenance work. Improvements of the energy efficiency of the building or the leased object are not deemed to be necessary in this regard. In this case conflicting interests have to be balanced (“Interessenabwägung”). If the work does not affect the main interests of the Lessee he has to tolerate the improvement but has the right to a reduction in rent for the duration of disturbance (e.g. construction noise or builder’s dust).

If the Tenancy Act is applicable the Lessee is obliged to tolerate the work (also in the property) regarding improvement measures (such as improvement of the energy efficiency) on public parts of the building (e.g. the façade, roof or also the windows). As a consequence of the lessee’s obligation to tolerate the disturbance he has a right to adequate compensation.

If the Tenancy Act is not applicable the landlord can only receive reimbursement if this has been provided for in the lease.

It the Tenancy Act is applicable a (partial) reimbursement is only possible in compliance with strict requirements stated in the Tenancy Act: according to sec. 16 of the Tenancy Act a temporary rent increase is allowed when the terms (i.e. the works to be done, the costs, the increase and the duration of the increase) are agreed in advance in the lease contract (or in an amendment).

Beyond that there are several public subsidies for the improvement of energy efficiency of buildings (thermal improvement, solar technology, alternative heating methods like geothermal energy etc.).

Clauses for reimbursement or rent increase in lease contracts in case of improvements done by a lessor during the lease are not commonly used. This is one of the reasons why lessors do not invest in improvements – because they are not allowed to increase the rent (investor-beneficiary-dilemma – “Investor-Nutzer-Dilemma”). More often it agreed between the parties that an object or a building has to be renovated or reconstructed before the lessee moves into the leased object and, therefore the lessee (or the lessor) makes a contribution to the renovation costs. Clauses where the lessor contributes to the desired renovation works of the lessee might be:

The Lessor shall grant a subsidy for the improvements of the Lessee for the actual expenses of up to EUR xxx (excl. VAT) for the construction of a [definition of improvements e.g. thermal insulation improvements, new heating, thermic insulated windows, solar technology etc.].

The subsidy shall be paid in advance to the Lessee with regard to an amount of EUR xxx (excl. VAT)

• at the date of making available the Leased Property (see clause x.y.z) – but on the dd.mm.yyyy at the latest – for Lessee improvements, and
• hand over of an invoice entitling the Lessor for input tax deduction.

In case of a delayed delivery, caused exclusively by lessee, Lessor has to pay only such parts of the subsidy, which have already been paid by Lessee to third parties with regard to the construction works at the [building]. After delivery the lessor has to pay the rest as set out above.

The second part in the amount of EUR xxx (excl. VAT) shall be paid by the Lessor immediately after opening the Leased Property to the public on an escrow account of a mutually agreed escrow agent […].

The final calculation/settlement of the subsidy (first and second part) payment shall be made fourteen days after

• final completion of all improvements;
• proof of the actual expenses incurred by the Lessee, which amount to at least the subsidy amount;
• handover of an invoice entitling the Lessor for input tax deduction, but in any case not earlier than the date at which the first payment of rent falls due for [the Leased Property]. The interest on the escrow amount, after deduction of the costs of the account and the capital gains tax, shall be paid to the Lessor.

VAT in connection with the subsidy shall be settled by way of transfer (Überrechnung). The Lessor shall not be liable for the improvements. Provided the improvements concern the substance of the building the Lessee will transfer warranty and liability claims against third parties to the Lessor.

Please give examples of typical regulations.
There are no statutory regulations regarding building materials or energy efficiency etc. According to CEN-Standards and Standards of the Austrian Standards Institute (“Ö-NORMEN”) architects, engineers and technicians usually observe the state of the art of science and technology stated in these Standards. However, these Standards are not law and the parties can agree upon older (and cheaper) technical standards.

Nevertheless public subsidies (see point 1.a) and b) above) are usually bound to a concrete method or way of energy efficiency improvement (for example the “THEWOSAN”-restoration of improvement of the thermal insulation of the building).

Due to existing public subsidies and rising energy prices the
erecting of a “green buildings”or the restoration to that standard is getting more and more attractive. However, much more could be done also in terms of private law, especially in tenant law, in order to mitigate the effects of the investor-beneficiary-dilemma (“Investor-Nutzer-Dilemma”).