Contract fee for fixed-term tenancy agreements

26. May 2017

contract fee, apartment rent, austria, tenency, rules, fee, contracts

It is well known that tenancy agreements are subject to a fee in the amount of 1% of three times the annual rent if the agreement is concluded in writing and for an indefinite period of time. For contracts concluded for a fixed term – either because a specific term was actually set out or because both parties have waived termination for the same period, the fee is based on the actual duration of the contract. For apartments, this fee may not exceed three times the rent. For all other types of use, however, the fee is capped at eighteen times the rent.

Contract fee may sextuple

Accordingly, it is of great significance for the party liable to pay the fee, for instance regarding the rent of business premises, whether the contractual relationship is classified as one with a fixed or an indefinite term because the relevant fee ranges between 1% of three times and 1% of 18 times the rent. Hence, the fee may potentially sextuple.

According to the case law of the Austrian Higher Administrative Court (VwGH) and according to views expressed in the fee guidelines and also in the relevant literature, fixed-term contractual relationships – i.e. contracts of a specific duration – may also qualify as being concluded for an indefinite period if all conceivable (“denkmöglich”) reasons for termination under Section 30 (2) of the Austrian Tenancy Act (MRG) have been contractually agreed.

Therefore, even if an object was used for other than residential purposes, a combination of a fixed contract term and the stipulation of all conceivable reasons for termination under Section 30 (2) MRG was not uncommon.

In 2015 the Federal Fiscal Court (BFG) started to calculate the fee based on the fixed contract term if an agreement slightly deviated from the wording of Section 30 (2) MRG or if the property was not used for residential purposes. Although this case law can hardly be reconciled with the statements of the VwGH, the BFG has so far not admitted any regular appeal to the VwGH.

Current VwGH case law

In brief, under current VwGH case law, an agreement qualifies as a contract concluded for an indefinite period if the reasons for termination under Section 30 MRG which are conceivable for the relevant agreement have been stipulated. Hence, if not all reasons for termination listed in Section 30 (2) MRG are applicable to a situation, there is no limitation of reasons, provided all reasons for termination have been contractually agreed which might theoretically apply and hence are conceivable. For example, in case of commercial lease, the conceivable reasons for termination under Section 30 (2) MRG do not include the reasons for termination mentioned under the numbers 5, 6, 8 and 16 as they exclusively refer to apartments and, therefore, cannot apply to a commercial lease situation.

It is now also doubtful whether in the opinion of the BFG it is sufficient for a contractual relationship to qualify as being of indefinite duration if all reasons for termination – irrespective of whether or not they are conceivable – are included in the contracts. Therefore, inclusion of the right of presentation – hitherto undisputed in our view – in the tenancy agreement should be considered, which should ensure that the agreement will qualify as one concluded for an indefinite period under the legal provisions on legal fees. Alternatively, unilateral waivers of termination may, of course, also be used.

Therefore, it is important to be especially prudent when it comes to drawing up such agreements. It remains to be seen in what way the VwGH will respond in case of an appeal regarding this legal issue.

Our tip

It goes without saying that also in case of tenancy agreements the obligation to pay fees may be avoided by not executing a deed signed by both parties; however, this may entail so-called substitute documentation (“Ersatzbeurkundung”), especially in case of tenancies regarding business premises. Therefore, due to the significance of the contractual relationship, the execution of a written document is usually insisted upon in practice.

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