30 January 2020 – need2know

There was a lot of activity in the past decade regarding the increasingly popular short-term rental of housing, as through Airbnb. However, the legal prerequisites are not clear yet. In addition to public law issues, considerable hurdles also lurk in lease and condominium ownership law.

Time limit for renting out condominium ownership

Every condominium owner is basically entitled to also rent out his or her condominium. However, the Austrian Supreme Court has already decided differently for short-term letting in 2011: The short-term letting of a condominium is only permitted if it is covered by the dedication in the condominium contract (3 Ob 158/11y). Experience has shown that these contracts generally lack an explicit permission for short-term letting. Therefore, this is a change of dedication according to Sec 16 para. 2 of the Austrian Condominium Ownership Act, which, if it affects the interests of other condominium owners worthy of protection (the Austrian Supreme Court sees this already in the “high frequency of the apartment building by constantly changing strangers”), requires the consent of all other condominium owners – or alternatively that of the district court. The former is difficult or impossible to achieve in practice, depending on the size of the house. Many people do not go to court. Without a change of dedication, each individual condominium owner is free to prevent the short-term letting by means of injunction.

In a decision from 2014, the Austrian Supreme Court considered a period of two to 30 days as a short-term lease (which would trigger a change of dedication) (5 Ob 59/14h). Recently, a district court decision extending this period to six months has caused discussions. This opinion of the district court does not appear unjustifiable: Austrian law provides for a maximum period of six months in another place, in the so-called “Philharmonic Paragraph” of Sec 1 para. 2 no. 3 lit a of the Austrian Rent Act – an exception for the short-term letting of certain apartments. There are therefore arguments for equating “short-term letting” with “less than six months” in Austrian lease and condominium law.

What is the legal situation regarding subletting?

Apartment lessees risk even more with short-term letting. The Austrian Rent Act allows contractual subletting prohibitions for good cause, for example if the rented property is to be sublet in its entirety or if subletting is carried out in return for a disproportionately high sublease rate. Property owners as lessors also make regular use of this option. Short-term letting is often a reason for termination, which is also confirmed by an Austrian Supreme Court judgement from 2018 (7 Ob 189/17w). In this case, the short-term lessor also used the condominium rented out by her at least partially herself. Thus, the reason for termination of the entire subletting – which “usually” affects short-term letting – was not fulfilled. However, the Austrian Supreme Court still considered the request for termination to be justified, as the apartment was sublet for a disproportionately high fee. This is generally the case when the rent received for the sublet exceeds the main rent by 80% or more. The Supreme Court did not make this comparison on a monthly basis but in such a way that it reduced the main rent for the apartment to a daily rent and then compared it with the remuneration charged for the subletting. However, this does not affect the “normal case” of subletting an otherwise vacant dwelling in its entirety; this case remains problematic under tenancy law, no matter how high or low the price charged is.

What other legal aspects have to be taken into account regarding the lease?

In principle, “mere room rent” is not subject to trade law, but only accommodation. Whether it is the one or the other depends on the ancillary services provided (e.g. daily cleaning of towels and bed linen constitutes an accommodation business, but the mere final cleaning of the linen is harmless). At least until a decision of the Austrian Administrative Court in February 2019 (Ra 2018/04/0144), this was the common opinion; however, the Administrative Court again questions this distinction by including the external appearance and considering the offering via an internet platform as sufficient for a commercial enterprise, irrespective of the fact that only a final cleaning was performed. Even if the letting is in principle subject to the trade regulations (which could be the case in many cases in the future), this does not yet mean an insurmountable hurdle, because under certain conditions (maximum ten beds) it is not a regulated but a free trade for which no certificate of competence is required. Even if this limit is exceeded, some short-term lessors (with an academic background) may find unexpected solutions, as a regulated hotel and restaurant business can be run with any university degree. The only “downer” remaining are the chamber fees and the commercial social insurance. Overall, the requirements of trade law still seem to be easier to meet than some of those created by the civil courts.

The local tax, which is due in Vienna for a stay of less than three months, plays a role in tax law. It remains to be seen whether and how building law will also play a role here in the future.

Lately, the recently published government program of the new turquoise-green Austrian government has also proclaimed that measures shall be assessed to ensure that “apartments that have been built to meet the year-round housing needs are available to the people living here.” More precisely, the use of private housing for tourist purposes shall be limited to a maximum of 90 days per year, in addition to an obligation for short-term lessors to register at the tax office. Where and how these measures will be implemented, remains to be seen.

Conclusio

In summary, whether tenant or owner, short-term letting is in many cases prohibited by standards and agreements of civil law. In order not to expose oneself to the risk of a lawsuit, everyone who plans to rent out a flat for a short period of time should inform himself well in advance whether he or she is allowed to do so under the rental or condominium ownership contract, especially considering imminent legal developments.

Authors:
Michaela Pelinka
Philipp Bertsch

Questions? Please contact us:
Michaela Pelinka

Practice Groups:
Real estate and lease law

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