Overview of retail lease agreements in Austria

Leases are regulated by:

• The Austrian Tenancy Act (MRG) which is tenant friendly with a broad scope of application. Partial application of the MRG is possible, e.g. for certain newly built buildings.
• The Austrian Civil Code (ABGB): with a subsidiary scope of application.

The leasing of business premises may be subject to the MRG, depending on issues such as the year of construction or the building specifications. This question has to be assessed on a case-by-case basis.

There is no minimum or maximum duration. Most retail leases in practice are usually between five and ten years and often contain extension options.

MRG

• Definite period: the lease may be terminated by the landlord in the event of vastly disadvantageous use by the tenant or delay in the payment of the rent.
• Indefinite period: the lease may only be terminated by the landlord for a compelling cause as legally defined and exhaustively listed in the MRG.

ABGB

• Definite period: the lease may be terminated by the landlord in the event of vastly disadvantageous use by the tenant, delay in the payment of the rent or destruction of the whole building.
• Indefinite period: ordinary termination is possible (usually, termination dates and notice periods are stipulated in the agreement; if not, the notice period is three months, and the termination dates are at the end of each quarter).

MRG

• Definite period: the lease may be terminated by the tenant if the object is unsuitable for the agreed use;
• Indefinite period: ordinary termination is possible (usually, termination dates and notice periods are stipulated in the agreement; if not, the notice period is three months and the termination dates are at the end of each quarter).

There is neither a right of renewal nor a right to eviction indemnity payable by the landlord unless otherwise agreed in the lease agreement.

MRG (full application)

In principle, the rent cannot be revised. However, the tenant is legally entitled to sell or lease its business to a third party. In that case, the rent (for the new tenant) may be increased.

A material change of control concerning the tenant’s business may also result in an increase in the rent.

MRG (full and partial application) and ABGB: The rent may be revised under general principles of civil law, e.g. laesio enormis. If the tenant’s rights are negatively impacted (e.g. because of inadequate protection from noise and dust), the tenant is entitled to reduce the rent as long as the negative impact disturbance lasts.

There are no mandatory provisions regarding fitting-out works. The landlord is obliged to provide the premises in a condition suitable for the usual and/or agreed use.

There is no obligation on the tenant under the law regarding the reinstatement of the premises in a case of force majeure. The tenant must compensate or reinstate for damage caused by it.

The tenant is obliged to return the premises in their condition as at the beginning of the lease, taking ordinary wear and tear into account.

MRG (full application)

• The tenant is legally entitled to sell or lease his business to a third party. In that case, the rent for the new tenant may be increased. A material change of control concerning the tenant’s business may also result in an increase in the rent.
• Partial subleases are possible. The landlord has a right of termination in the event of a full sublease and if the sub-rent is inadequately high compared to the principal rent.
• Transfer of the lease agreement: the landlord’s consent is required unless otherwise agreed in the lease agreement.

ABGB

• Subleasing is possible unless otherwise agreed in the lease agreement.
• Transfer of the lease agreement: the landlord’s consent is required unless otherwise agreed in the lease agreement.

MRG (full and partial application)

Except for sublease agreements, the lease is binding on the acquirer in the case that the premises are sold. However, provisions of side agreements with unusual content are only binding provided the acquirer knew or should have known about such agreements.

ABGB (and subleases even under MRG)

The lease agreement is transferred to the acquirer. However, the acquirer may terminate the lease agreement if the lease agreement is not registered in the land register. Lease agreements may only be registered in the land register if they are concluded for a definite period.

The tenant has no pre-emption right in the case of the sale of the premises unless otherwise agreed in the lease agreement.

There are no mandatory provisions regarding the form and/or duration of a rental guarantee. Usually, guarantees are submitted in written form and remain in force until two to four weeks after termination of the lease agreement.

The landlord is obliged to do everything required to keep the lease object in a usable condition. However, this severe obligation is usually waived in the lease agreement and shifted to the tenant (as far as possible in accordance with bonos mores).

If the MRG is fully applicable, there is a system of maintenance and repair duties for both parties which may not be altered to the disadvantage of the tenant. In any case, the landlord has to repair severe defects to the building and to maintain the common areas of the premises.

The landlord may under certain circumstances decide whether to charge VAT or not. If he does (as is usually the case), rent and service charges are subject to 20% VAT. The tenant as an entrepreneur is entitled to claim input tax.

There are no other important legal provisions or practices.