The interest rate market is booming. It seemed to me to be of interest to take a closer look at contract practice when drafting sales contracts. For this purpose, I collected and analyzed 350 sales contracts for apartment buildings and 250 purchase contracts for co-ownership shares in apartment buildings from the land register. In addition, I have questionnaires1 Ask the respective buyers whether and to what extent they have examined the object of purchase, possibly with the assistance of experts, in order to protect themselves from surprises. The analysis of contracts includes the question of what contractual promises buyers can make to protect them. Conversely, it was also of interest how sellers contractually protect themselves from the buyer not later using the extensive legal options — warranty,2 Compensation for damage caused by defects3 and subsequent damage caused by a defect,4 right of error,5 List,6 information requirements,7 Shortening by more than half of the true value8 or loss of the business or contract basis9 — “renegotiates” the purchase price with legal arguments, i.e. tries to reduce it with legal assistance if necessary.
In the 350 sales contracts examined for (entire) apartment buildings, the purchase prices were between €400,000 — and €34,050,000 —, on average around €3,590,000, ‒.
I have already had an analysis of the legal situation elsewhere regarding the “disclaimer in real estate purchase contracts”10 and on the subject of “Unclear contract clauses in real estate purchase contracts”11 published. In my current investigation of contract practice, these contract clauses, which were identified as “unclear”, were frequently found.
The investigation has shown that the purchase contracts for property/apartment buildings or interest house co-ownership shares often have this or a similar structure:
The evaluation of contract practice follows the typical scheme of purchase contracts set out above:
Although purchase contracts for real estate and apartment buildings can be concluded formally and therefore the oral conclusion of the contract, if it is seriously intentional (if there is a commitment), already creates an obligation to duly sign the written purchase contract, the purchase contract must be established in writing and with a certified signature of the seller and buyer in order for it to be bookable in the land register. A court judgment or a court settlement replaces the certified signature.
To register in the land register, it is necessary to specify the deposit number, the cadastral municipality and the individual plots of land of the object of purchase, as well as the “declaration of dispatch”.
80% of apartment buildings buy corporations. Only rarely do individual natural persons (9%) or several natural persons (3%) buy apartment buildings. In addition, private foundations act as buyers in 3% of cases and partnerships in 2% of cases. In 3% of cases, it is “other” buyers (such as cooperatives, associations, church institutions or public corporations) who buy an apartment building.
Interest buyers are sold by natural persons in 50% of cases. In 39% of cases, it is a single natural person and in 11% of cases a community of owners who sell an apartment building. Corporations act as sellers in 44% of cases. As with buyers, private foundations (3%) and partnerships (1%) are only rarely represented as sellers. The remaining sellers (2%) are in turn “other” sellers, such as cooperatives or public corporations.
The characteristics of the seller of the property depend largely on the contractual agreement on what the seller owes, in particular on the description of the object of purchase and the discussions held before and at the conclusion of the contract, the information exchanged and the overall conduct of the parties.12 For legal warranty and contractual agreements (assurances, limitations and exclusions of liability), see points 9. and 10 below.
In all cases (100%), the purchase price was agreed with a fixed amount and in euros. An agreement according to which the purchase price is initially only determinable is agreed and is only to be calculated on the basis of the actual floor or residential area, was not agreed in a single case.
A subsequent purchase price adjustment, e.g. in accordance with the actual floor or residential area, was agreed in 5% of cases, with a fluctuation range of +/- 3% or +/- 5% often agreed, which is not taken into account, and the purchase price only had to be adjusted insofar as this exceeds or falls below the agreed fluctuation range.
An improvement in the purchase price, if the buyer resells the property within a certain period of time, was agreed in 1% of cases.
In 1% of cases, the purchase price was subject to interest or secured in value from the date the contract was concluded until the actual succumb.
In 5% of the contracts, the value added tax option was used: In this case, in 83% of these cases, the transfer of the buyer's input tax assets at the tax office to the seller's tax account was agreed as a payment method. If the transfer of input tax assets was agreed as a payment method, 64% of the contracts provided for payment of sales tax by the buyer in the event that the transfer of the input tax balance to the seller's tax account does not work; only 8% of the contracts also included contractual protection from the seller, such as a bank guarantee.
In 26% of cases, the purchase price was paid by the trustee before the contract was concluded. In the other cases, a period was agreed for the buyer to pay the purchase price including additional costs: namely a payment period of up to one month (80%), one to three months (13%), three to six months (1%), a payment period of more than six months or an installment payment (1%); other (5%). In one case, the purchase price was transferred to the seller before the contract was signed.
31% of the purchase contracts regulated default interest in the event that the purchase price was not received on time.
In the event that the buyer fails to pay the purchase price, including additional charges, in due time, 43% of the purchase contracts saw a right of withdrawal by salesman before.
In 1% of cases, an additional contractual penalty was imposed in favour of salesman, who justifiably declares the withdrawal, agrees. In 2% of cases, a down payment on the purchase price was agreed, in a further 2% a “deposit” (§ 908 ABGB). In a single case, a “repentance” (Section 909 ABGB) was agreed.
A right of withdrawal of purchaser was agreed in 5% of cases.
In 1% of cases, a compensation ban (offsetting ban) was agreed. A withholding ban due to alleged deficiencies was not included in any of the sales contracts examined.
The purpose of escrow processing — for example through a lawyer or notary — is regularly to protect both the seller and the buyer, sometimes also a third party, such as the financing bank:
The seller does not want to give up his ownership of the property until payment of the purchase price is secured by full succumption of the purchase price including ancillary costs (real estate transfer tax, land register registration fee) and, through the trustee's payment commitment, he has the security of receiving the purchase price due to him (minus real estate income tax, ImmoEst). Conversely, the buyer is secured by escrow processing, in that the trustee assumes to use the purchase price, including ancillary costs, imposed by the buyer only and to follow up on creditors secured by the land register and the seller (or the tax office with regard to ImmoEst and GRest) if the first-rate collection of the right of ownership for the buyer and the complete release of burdens are ensured, or at least all the original documents necessary for the reprieve Certificates and permits are available. In this way, the fulfillment of the purchase contract, in this “pure form”, as set out in Section 1052 of the Austrian Civil Code, is13 envisages that would be virtually impossible to implement in real estate, best achieved.14
The escrow transaction is intended to avoid advance payment by one contractual partner to the other and to secure the insolvency of the seller or buyer.15 The trustee can also act in the interest of the bank financing the purchase price, ensuring that its lien is registered in the agreed rank at the same time as the buyer's right of ownership, i.e. without interim entries.16
However, involving a trustee necessarily creates the risk that the trustee himself may be “unfaithful” and misuse the purchase price.17
In 89% of cases, an escrow settlement was agreed to carry out the interest house purchase. The escrow agreement itself was included either in the sales contract (79%) or in a separate agreement (10%). The escrow settlement was agreed as follows:
In 93% of cases, the trustee was only allowed to pay out the purchase price if certain payment conditions were met, including
In 1% of cases, the trustee was authorized to book the property for the buyer even before the purchase price and ancillary costs had been met in full (without having to book a remaining purchase price mortgage or provide a bank guarantee or other security at the same time).
In 31% of cases, the trustee also had to calculate the real estate income tax for the seller and pay it to the tax office from the purchase price paid by him.
In 57% of cases, the property was burdened with a mortgage or other cash charges. The following regulations have been made for this purpose:
Almost all contracts examined (99%) explicitly regulate a “handover date” as the time for the transfer of risk to the buyer (i.e. the assumption of risk for damage and destruction of the object of purchase). In 1% of cases, reference was made to a separately concluded agreement/framework agreement. But let's first look at the legal situation:
According to the law, the seller is obliged to “hand over the purchased item with all its components and accessories “at the right time” — i.e. at the agreed time — “and in the exact condition in which it was when the contract was concluded” to the buyer “for free possession” and the latter is obliged to take over18 (SECTION 1047 ABGB).
Following on from this provision on the time of the required transfer, the law regulates the transfer of risk: Will the purchased item upon Conclusion of contract and with If their transfer is damaged or destroyed without any of the parties being responsible for this, the risk falls on the “debtor”, i.e. the seller. The same applies if the seller is objectively or subjectively behind schedule as a result of an accidental event.19
After the time of the required transfer or in the event of default by creditors, the risk of random events falls on the “creditor”, i.e. the buyer; but not if the default occurs due to the seller's fault.20 The transfer of ownership does not matter for the transfer of risk; this is especially the case in the case of real estate acquisition, in which ownership is only transferred through collection in the land register,21 significant.22
If the item is completely destroyed by the time it is handed over or loses more than half of its value as a result of accidental damage, the contract expires in accordance with the Austrian Civil Code.23 If the loss in value is lower, the purchase contract remains valid and the buyer is entitled to an improvement; if the improvement is impossible, he can demand a price reduction or optionally change it, provided that the defect is not just a minor defect.24
As a result of contract interpretation, a claim for surrender of a representative advantage obtained by the debtor (seller), such as insurance compensation, is also considered.25 A property buyer who does not enter into the seller's fire insurance contract also participates in the seller's insurance coverage if the time of transfer of risk and benefit with The book transfer of ownership and the resulting change of ownership lies: In case of doubt, the contract clause setting the cut-off date for the transfer of benefits is to be regarded as an assignment of all future claims against the insurer.26
92% of contracts also explain the handover date by the fact that “risk and chance, advantage and burdens” (or something similar) are transferred to the buyer on this date.
According to legal regulations27 Until handover, the “uses” of the object of purchase, i.e. all benefits from the right of ownership of the contract object and related contractual agreements, are charged to the seller: This includes in particular income from rent and lease, compensation from an insurance contract or any expropriation compensation.
If a handover date falls within the contract period (interest period), the pro rata temporis rule must be followed.28 Rental income must therefore be distributed proportionally in accordance with the periods of the interest period attributable to the seller and the acquirer. The same applies to recurring costs. If tenants had paid the inventory interest in advance, the buyer may demand the proportionate share of prepaid rent based on the transfer date.29
From the time of transfer of risk, the buyer must bear the costs of the item (e.g. taxes, duties). Periodically recurring charges must be borne pro rata temporis, such as insurance premiums paid in advance by the seller.30
The sales contracts examined included the following contract regulations:
After that, the “handover deadline” is
Other regulations were made in 5% of cases.
Purchase contracts often differentiate between “handover date” and “settlement date.” The “handover deadline” then refers to the transfer of risk.31 The “settlement date” then regularly means, on the one hand, the obligations associated with the property, liabilities including fees and taxes, on the one hand, and rental income on the other hand. In half of the purchase contracts examined (50%), the expenses associated with the property (obligations, liabilities including taxes, etc.) were allocated on the one hand and the income on the other hand on the basis that these are to be borne by the seller or owed to the seller until the settlement date, are then borne by the buyer or fees. In 1% of cases, it was explicitly regulated: If the settlement date is not at the end of an interest period (end of the month), the rental income is distributed between seller and buyer pro rata temporis.
In 12% of cases, it was also settled: If the handover date is not December 31, the operating costs paid by tenants will be apportioned pro rata time between seller and buyer against the operating costs actually accrued so far.
16% of the purchase contracts contain explicit rules on the day-to-day administration between the time of conclusion of the interest house purchase agreement and the handover: In 13% of cases, it is agreed that the seller may no longer conclude rental agreements and/or no administrative measures (5%) and/or only carry out transactions “to the extent of ordinary administration” (2%).
In 8% of cases, it was agreed that from the handover date — regardless of whether he is already registered as owner — the buyer must manage the house himself and may conclude rental contracts for the house and give cancellations and early termination of contracts.
As regards the transfer of road safety obligations to the buyer as of the handover date (e.g. pavement and snow removal, other protective and due diligence obligations), regardless of whether the buyer is already registered as a new owner as a new owner in the land register at the time of the handover date or not, none of the purchase contracts contained any provision (0%).
In 1% of the purchase contracts, the seller undertook, upon conclusion of the contract, to grant the buyer a power of attorney so that he could view the municipality's building act, make copies and submit building applications at his own expense.
As is well known, the buyer of the property, in particular an interest building, enters into the legal status of the owner (landlord or lessor) upon handing over the existing property (rental or lease property) ex lege.32 The decisive date for the transfer of the tenancy agreement is the granting of ownership to the acquirer, i.e., in the case of real estate, the receipt of the application for binding before the land registry court.33
In the case of real estate, the seller may assign the rights arising from the inventory contract (rent claim; design rights, in particular termination rights) to the acquirer, which has not yet been secured, by providing ownership and administration. In the absence of consent of the client to full entry34 However, the seller continues to meet the tenants' existing contractual obligations to the tenants until the property right for the buyer has been set aside.35
In the event of the acquisition of a mere share of co-ownership, the leases — even in the case of successive sale of co-ownership shares — are only transferred to the buyer or buyers if all Co-ownership shares were sold.36 However, the seller of a co-ownership share may assign his claims for proportionate rent to the buyer, but remains the relevant tenancy agreement party to the tenants under the rental agreement. This can be significant if the tenant is injured for reasons for which the landlord (s) is or is responsible.
By taking on the position of owner, the acquirer of the property assumes its rights and obligations as they were at the time of transfer.37 In principle, this also applies to ancillary conditions that are factually related to the existing contract — such as with regard to transfer rights — regardless of the acquirer's knowledge and practice,38 However, in the full scope of application of the MRG, Section 2 (1) sentence 5 MRG must be observed restrictively.
In case of doubt, the rent due until the acquirer arrives will be charged to the seller of the property.39 The acquirer does not have to accept advance rent payments to the predecessor unless they are recorded in the land register (Section 1102 ABGB).
Upon transfer of the tenancy to the acquirer of the property, the buyer is obliged to repay a deposit still paid by the tenant to the seller at the time.40
Since, according to the foregoing, the buyer of the property also assumes the rental agreement with regard to deposits paid, he too must refund the deposit to the tenant later on termination of the rental agreement. Property purchase contracts therefore often — in 51% of cases — regulate the issue of rental deposits: In most cases (49%), the purchase contract contains the seller's obligation to hand over received rental deposits (such as cash, savings accounts, bank guarantees) to the buyer. Only in rare cases (2%) is the case that a bank guarantee is addressed to the previous owner as a former landlord taken into account. In this case, according to the case law, the right to retrieve the warranty may be assigned to the buyer if the assignment does not result in any change to the detriment of the guarantor.41 In 1% of cases, the purchase contracts regulate an obligation on the part of the seller to recall the guarantee provided as a rental deposit on the buyer's instructions.
In 2% of cases, the purchase contract explicitly states that the tenants did not make any deposits.
The remaining 49% of purchase contracts do not address the issue of rental deposits.
As is well known, Section 18 (1) MRG obliges the owner of the house, whose tenancies fall within the full scope of the MRG, to first use the rental income of the last ten years to repair “serious damage”, i.e. in particular for major repairs of the house, before he can pass on the additional shortfall in coverage to the tenants. It would therefore be important for the buyer of the house that the seller of the property provides him with at least a complete and proper statement of the main rent and the repairs paid as a result, including supporting documents. Surprisingly, in no single case is such an obligation on the part of the seller explicitly regulated in the contracts examined; however, it is often agreed (50%) that the property management documents are transferred to the buyer or must be succeeded by him.
In the majority of cases (58%), there is a mention of the “rent reserve” or “main rent reserve” of the last ten full calendar years, which “is considered settled” (45%) or “the buyer waives to charge” (13%). Only in a single case (= 0.2%) was it regulated that the main rent reserve was to be paid to the buyer.
If nothing is agreed on the main rent reserve, the “rent reserve” does not form an accessory to the sold house, which is why it is not payable by the seller.42 According to literature reviews, however, the seller must hand over the records (accounting), which include his rental income on the one hand and maintenance expenses on the other hand, to the buyer of the property in order to enable him to correctly calculate the main rent reserve. The violation of this secondary obligation could also result in consequences of compensation.43
Although the handing over of rental contracts, correspondence with tenants and professionals, invoices from professionals, etc., may be of considerable importance for the buyer, the transfer of administrative documents was agreed in only 50% of the contracts examined. In 1% of cases, the guarantee of the accuracy of the administrative documents was explicitly excluded.
In 12% of cases, the handover of building plans was agreed; in 1%, the warranty for the accuracy and compliance of the construction plans was contractually excluded.
In 2% of cases, it was also explicitly agreed to hand over documentation for professional work.
As is well known, the object of purchase must — unless the parties agree otherwise —
Conversely, the seller has no warranty obligation for defects corresponding to the age of the house or likely to be expected46 and for obvious defects that the seller has not maliciously concealed.47 In principle, there is no guarantee for burdens apparent in the land register (Section 928 sentence 1 ABGB); however, liability is generally to be provided for cash charges (mortgages, real charges; Section 928 sentence 2 ABGB).
Is the object of purchase described in more detail in the purchase contract by mentioning negative features (“defects”) (e.g. need for renovation,48 moisture in the cellar, lift does not comply with the applicable regulations, parts of the house have external walls), these “defects” are in accordance with the contract and do not represent a defect in the legal sense, but a (restrictive) “service description”.
13% of the sales contracts examined contained explicit references to adverse characteristics or defects of the purchased object, namely: “in need of renovation” or “in need of repair” (6%), “demolition object” (2.7%), mold formation or water damage (0.8%), technical equipment does not comply with applicable regulations or the latest technology (0.7%), lack of permits (0.7%) “façade in need of renovation” (0.3%), monument protection (0.5%), roof leakage (0.3%), or other adverse properties (1%). In 5% of all cases, the guarantee that there was no contamination of the soil or the building was explicitly ruled out; in 0.3%, the risk of potentially contaminated soil was pointed out.
If certain (concrete) defects or disadvantageous features are disclosed in the purchase contract, not only the warranty but also, as a rule, a challenge and adjustment of the contract in accordance with principles of error law is excluded.49 The same applies if the purchase contract draws attention to existing risks.50
In addition to mortgages — see points 6. and 11a above — the following burdens were apparent on the properties:
The comment on the security zone of an airport (14%), prohibition of sale and encumbrance in favour of third parties (8%), the obligation to establish altitude, to produce sidewalks and to transfer land to public property (7%), real loads and servitutes, in particular development restrictions or approval requirements in favour of neighbors (3%), servicing law of housing use law (3%) and fruit participation rights (3%), other servitutes (4%), pre-emption rights (5%), monument protection (2%) and other charges (5%).
In 3% of cases, the buyer also undertook to assume extracurricular charges.
Sales contracts for apartment buildings regularly contain the seller's explicit assurance that the object of purchase will become the property of the buyer free of bookkeeping and extracurricular charges and rights of third parties (or that the existing burdens must be repaid at least simultaneously): Explicitly 88% of the cases. In these cases, it is usually also expressly mentioned that the disclosed leases are excluded from this assurance.
In some cases, it is also mentioned that the object of purchase is free from liens (5%), free from real charges (2%), free from servitutes and other charges (4%), that there are no tax arrears (60%), that all continuing obligations have been disclosed to the buyer (3%).
In 60% of cases, sellers assured that the object of purchase was not entangled in dispute; in 1%, however, a dispute was explicitly mentioned.
Often, the seller also provides assurances regarding public law circumstances:
However, in addition to all of these previous assurances, there were also explicit rules to the contrary in 1% of the cases!
The following assurances were also found:
Assurances about the absence of contamination of the soil or the building with contaminated sites were given in 38% of cases, explicitly excluded in 5% of cases. The absence of health-threatening building materials, such as asbestos, eternite or lead pipes, was guaranteed in 2% of cases.52 It was assured in 1% of cases that all technical equipment in the house, switchgear, electrical, heating, water, gas, air conditioning and ventilation installations comply with the latest technology and legal or official regulations and comply with the maximum allowable emission values.
The fact that the existing lift complies with the applicable safety regulations or that the existing boiler complies with legal requirements and complies with the prescribed exhaust gas values has not been explicitly mentioned in any case.
The assurance that the object of sale is not a listed building and that no related proceedings are pending was given in 15% of the cases.
When buying an interest house, tenancy naturally plays an important role. The prospective buyer regularly carries out a due diligence review (see the statistical evaluation under point D). In addition, the purchase contracts explicitly contain the following assurances:
In 2% of the purchase contracts, the contract parties agreed that the profitability of the house was one of the factors determining the purchase price. 2% of the purchase contracts contained information about the possible risk of liability on the part of the buyer as an asset transferee in accordance with Section 1409 of the Austrian Civil Code, with a corresponding recourse obligation (indemnification obligation) from the seller.53
None of the purchase contracts contained a clause according to which the seller declares and assures that the building built on the property is owned by him as a landowner and does not constitute a superedificate.54
It is noteworthy that all or some of these assurances are limited in 44% of cases and thus reduced to “to the knowledge of the seller” or “to the best of the seller's knowledge.” In 1% of cases, the purchase contract also defines what is meant by the clause “to the knowledge of the seller” or “to the best of the seller's knowledge”.
Only 11% of the sales contracts examined define when the seller's assurances or guarantees relate to:
Sales contracts rarely explicitly regulate the legal consequences if individual assurances or guarantees do not apply (3%). In 2% of cases, the purchase contract explicitly excludes the buyer's right to convert if guaranteed features or circumstances do not apply.
A concept deviating from statutory warranty law for compensation from the seller to the buyer — for example in accordance with principles of compensation law — is provided for in the purchase contracts in only 1% of cases.
In 1% of cases, the buyer's contribution to the costs of remedying defects is also regulated. A benefit transfer in the event that, in the event of warranty, the buyer receives a lasting advantage as a result of the exchange or repair of defective items (“new for old”)55 and the fact that the buyer would be obliged to pay this advantage to the seller was not regulated in any single case. Nor are there any contractual provisions which preclude an obligation to rectify defects in the absence of guaranteed features if the rectification effort would be disproportionate.56
In 26% of cases, it is explicitly stated that no warranties and assurances other than those expressly promised in the purchase contract are given.
2% of sales contracts include a de minimis clause: According to this, the buyer can only assert warranty, price reduction and compensation claims against the seller if these claims exceed a minimum amount. In 90% of these cases, this is an “exemption limit”, in 10% of cases it is an “allowance” in tax terminology. Insofar as such de minimis clauses were agreed, the lower limit was set at €50,000 — in 40% of cases and €20,000, —, €10,000 or €5,000, ‒ in each case.
A maximum limit (“cap”, “cap”) of the buyer's claims was agreed in 4% of the purchase contracts. The maximum limit was set
In 15% of cases, in addition to the maximum limit for material defects of 10%, a further maximum limit for legal defects of up to 100% of the purchase price was set.
Insofar as sales contracts provide assurances or guarantees, “any additional liability of the seller/warranty/contestation or adjustment of the purchase contract” was explicitly excluded in 16% of cases. In 8% of cases, the warranty for material and legal defects was excluded; in a further 12% of cases, liability was explicitly excluded only for material defects. In 4% of cases, the warranty for legal deficiencies was explicitly maintained. Sales contracts often included even more extensive exclusions of liability; this is discussed in more detail in Section 12.
warranty period: In 5% of cases, the warranty period is explicitly mentioned in the purchase contract and in 2% to one year57 reduced to two years in 0.8% and to 30 months in 0.2%. In 1% of cases, the warranty period is extended.
The burden of proof of the existence of a defect at the relevant time is placed on the buyer in 1% of cases, even if the defect emerges within six months of delivery.58
The right to challenge or adjust the purchase contract due to fallacy In 37%, the right to appeal due to Elimination of the basis of the transaction excluded in 10% of cases.
An express waiver of appeal against the contract due to Shortening by more than half of the true value contain 44% of contracts. In a further 17% of cases, the purchase contracts contain the following (or similar) content: “By signing this contract, all contractual partners declare that the purchase price and the The object of purchase is to be regarded as equivalent, performance and consideration meet their economic expectations and explain to know the true value of the object of purchase in accordance with Section 935 of the Austrian Civil Code. ”
The three-year limitation period for contesting the purchase contract due to error was only contractually reduced in two cases.
74% of sales contracts include explicit exclusions of the seller's liability, as follows:
In 67% of sales contracts, it is mentioned that the buyer had the opportunity to view the object of purchase and/or that he viewed the object of purchase.
In 3% of cases, the purchase contract mentions that the buyer had the opportunity to examine the object of purchase in detail and to examine it with the assistance of experts, and therefore any warranty and contest/adjustment of the purchase contract due to error is excluded. This combination of the inspection option with the legal consequence of the extensive warranty exclusion has led to a restrictive interpretation of the warranty exclusion in case law.60 In such cases, if you want to limit the warranty exclusion not only to the defects identified during the inspection, but to extend it more comprehensively — for example to undetectable defects, hidden defects or secret defects — this would have to be formulated accordingly. To limit the warranty exclusion in the case of “inspection clauses”, see the case law.61
Only 1% of sales contracts explicitly assign the risk of unknown, “secret” or “hidden defects” to the buyer.
In 15% of the contracts, the parties to the contract agree on the assignment to the buyer of warranty and compensation claims, which the seller may be entitled to against builders, professionals and/or property managers in connection with a defect/damage to the house or property, to the buyer. 1% of the contracts explicitly exclude the seller's liability for the accuracy and recovery of the assigned claims.
According to the Energy Performance Certificate Template Act (EAVG), the seller of the property is generally obliged to provide the buyer with an energy certificate before concluding the contract. In 69% of the sales contracts examined, the transfer of the energy certificate is expressly confirmed in the purchase contract.
The Insurance Contract Act (VersVG) contains several regulations relating to the transfer of insurance contracts in the event of the “sale of the insured property”, in this case the insured property. The following statements deal separately with the sale of sole ownership of the property or of all co-ownership shares in a sale transaction on the one hand and the mere sale of individual co-ownership shares on the other hand:
Entry into the insurance contract
According to legal regulations, insurance contracts relating to the purchased property, which”insured thing“— i.e. usually building insurance — is basically transferred to the buyer.62 Seller and buyer are fully liable for arrears in insurance premiums from the current insurance period.63
Notification obligation
The parties to the property purchase must immediately notify the insurer of the sale of the “insured property”, i.e. the property sold. The notification obligation arises immediately upon the sale of the insured property within the meaning of Section 69 VersVG:
“Sale” could now already mean the conclusion of the “sale agreement” (purchase contract), the agreed or actual transfer (stitch) date or the date of acquisition of ownership under civil law by incorporation of the buyer in the land register: Here, the case law is based on the incorporation (registration) of the property right for the buyer in the land register arrives.64
If neither buyer nor seller notifies the sale of the insured property and thus of the transfer of the insurance contract to the insurance company, the insurer may be exempt from performance65 If the insurance claim is more than one month upon occurs at the time at which the insurer should have received the above-mentioned notification.66
Right of termination
In addition to the insurer's right to cancel the insurance upon change of ownership, the buyer of the property also has the right to terminate the insurance relationship. The termination by the buyer can only be made either with immediate effect or at the end of the current insurance period. The right of termination expires if it is not exercised within one month of the purchase of the property; however, if the acquirer has no knowledge of the insurance, his right of termination remains valid until one month after the acquirer becomes aware of it. In the event of such termination by the acquirer, the buyer is not liable for the insurance premium.67 If the insurance contract is terminated by the buyer, the insurer may be entitled to reclaim a long-term discount granted to the seller as the previous policyholder.68 In connection with the acquirer's right of termination, an earlier decision of the Supreme Court had69 Although the termination of the insurance contract was already pending the filing of the land register application for the incorporation of ownership, the case law later moved70 away from that.71
If the contracting parties to the property purchase have not addressed the issue of termination of the insurance contract by the buyer and have not regulated that the buyer must enter into the existing insurance contract, then — if the buyer cancels and the insurer reclaims the long-term discount — the burden of repayment falls on the seller.72
63% of the sales contracts examined contain regulations or instructions from the contracting parties on the subject of insurance contracts: 38% of the contracts mention the buyer's right of termination. In addition, some sales contracts also include
Only a few purchase contracts contained an indication of the insurer's possible exemption from payment in the event of failure to report (2%) or a reference to the joint liability of seller and buyer for arrears of insurance premiums (3%).
In 33% of the purchase contracts, it was agreed that the seller himself must bear any premium discounts recovered from the insurer, and in 5% of cases that the buyer must replace them with the seller.
If the sole owner of a property sells all co-ownership shares — in total 100% of the property — to two or more acquirers, the protective purpose of the Act is equivalent to the total sale and is considered a “sale of the insured property”, to which the above with regard to a applies equally. The new owners therefore generally enter into the insurance contract instead of the seller 73 However, they can also cancel it.
If the sole owner sells only a co-ownership share (ME share) to a third party, the acquirer of the ME share joins the insurance contract in accordance with Section 69 VersVG. He becomes the second policyholder; this joint ownership community also becomes a joint contract ex lege.74 If there were several co-owners from the outset who were insured as policyholders and if the sale of ME shares takes place among the co-owners, the seller in question withdraws from the Community and from the insurance contract. The contract will be continued as policyholders by the remaining co-owners. The same principles apply mutatis mutandis to transfers of residential property.75 By analogy, the transfer of contract from sole owner (property developer) to the condominium owners' association is also affirmed.76
Right of termination when acquiring co-ownership shares
The case law affirms the right of termination of the acquirers of co-ownership shares and the insurer under The predominant principle: If more than 50% of the ME shares are sold, this is equated to the complete sale of the insured property and the termination of the insurance contract by the joint ownership community as policyholder on the one hand77 and by the insurer on the other hand78 Approved in accordance with § 70 VersVG. The same applies if several successive ME share sales finally exceed the 50% limit in total.79
4.7% of sales contracts contain suspensive conditions. As such, it was agreed:
99% of the purchase contracts state that the buyer bears the costs of the real estate transfer tax and the land register registration fee alone; 1% of the purchase contracts provide for the costs to be borne by the seller alone.
In none of the 5% of cases in which the sales tax option was exercised — which is primarily in the interest of the seller, who may have to adjust the sales tax80 and can pass this on to the buyer through the option for sales tax and thus be replaced — the costs of the resulting additional real estate transfer tax and land register registration fee were provided for by the seller.
As is well known, real estate income tax must be paid to the tax office when selling real estate if the seller is a natural person or — if seller is a partnership — natural persons are involved in this partnership. 34% of sales contracts in which sellers were natural persons or such partnerships referred to real estate income tax. 33% of purchase contracts provided for the payment of real estate income tax by the seller and 1% by the buyer.
The costs of contract preparation and escrow processing were borne by the buyer alone in 93% of cases, and by the seller alone in 4% of cases; 1% provided for a division of costs between buyer and seller. 2% of the purchase contracts contained no provision.
The costs of burden-relief (cancellation of mortgages, real charges, etc.) were regulated differently in the sales contracts examined as follows: According to this, in 33% of the cases, the costs of the relief were borne by the sellers alone, in 2% of the cases by the buyers; 65% of the purchase contracts contained no provision.
The contracts also included the following clauses:
To complete the picture of how the interest house purchase is initiated and what measures the buyer is taking to provide him with better information and protection, I investigated buyer behavior by means of a questionnaire campaign. Around 19% of buyers answered the questions I asked. The following is the evaluation of these answers:
Question 1: How did you find out about the opportunity to buy the property in question?
Here, buyers stated that they had become aware of the buying opportunity through direct contact with the seller (28%), through friends/acquaintances (15%), via a broker (48%), via a website or via a sales platform (5%) or otherwise (4%).
Question 2: Did the seller provide you with a more detailed description (exposé) or an expert opinion about the property?
39% of buyers answered the question in the negative. 55% of buyers stated that they had received a detailed description (exposé), 4% received an appraisal from a real estate expert. In 2% of cases, the buyer received both a detailed description (exposé) and the opinion of a real estate expert from the seller.
Question 3: Have you (the buyer) examined the object of purchase yourself, possibly with the assistance of experts?
19% of buyers answered this question in the negative.
62% of buyers stated that they had examined the object of purchase themselves because they were professionally experienced. Notwithstanding this, buyers brought in professionally experienced employees from the buyer company/group in 18% of cases and external experts in 39% of cases, namely structural engineers (7%), builders (4%), architects (26%) and other specialists (11%). None of the interviewees stated that they had brought in roofers, plumbers or heating, ventilation and air-conditioning technicians.
Question 4: Have you checked the following documents before the purchase or had them carried out by experts?
5% of respondents answered this question in the negative.
The remaining buyers stated that they had carried out an audit themselves or with the help of consulted experts, namely
Question 5: The final question was whether there were disagreements or disputes between buyer and seller about the condition or other characteristics of the purchased property after the purchase.
95% of buyers answered this question in the negative; 5% reported such disputes (4% out of court, 1% in court).
Conclusion
I would like to take this opportunity to express my heartfelt thanks to all buyers who have contributed to the success of this study by answering the questionnaires.
Overall, I hope that in this way I have given the interested reader a realistic insight into contract practice and also this or that suggestion for future contract drafting.
1 See point D below
2 Sections 922ff, 1048f ABGB.
3 Section 933a ABGB.
4 Supreme Court 9 Ob 31/13v; RIS Justice RS0054272.
5 §§ 871ff ABGB.
6 SECTION 870 ABGB.
7 A. Reich-Rohrwig, disclosure obligations before conclusion of contract (2015); A. Reich-Rohrwig, company acquisition, due diligence and disclosure obligations, ecolex 2016, 4ff.
8 §§ 934f ABGB.
9 Fenyves in Fenyves/Kerschner/Vonkilch, ABGB3 § 901 Rz 39 ff, 54 ff; Rummel in Rummel/Lukas, ABGB 4 § 901 Rz 12 ff; Reidinger in Schwimann/Kodek, ABGB4 § 918 Rz 73; Aicher in Rummel/Lukas, ABGB4 § 1060 Rz 1.
10 J. Reich-Rohrwig, Disclaimer for real estate purchase contracts, NZ 2015/145, 441.
11 J. Reich-Rohrwig, Unclear contract clauses in real estate purchase contracts, NZ 2016/14, 41.
12 On the interpretation of the contract according to overall conduct and the declarations made by the parties RS0017807. Conclusive assurances that precede a general warranty exclusion, RS00126093 [T1]; RS0018523; 9 Ob 50/10h, 9 Ob 45/17h.
13 Binder/sharpener in Schwimann/Kodek, ABGB4 § 1052 Rz 24 and 26.
14 Apathy/Perner in KBB, ABGB5 § 1062 Rz 1 and 2; RS0000264. According to the case law, the purchase of real estate is settled step by step in such a way that the purchase price is paid when the land register application for the incorporation of the property right is submitted or at least that it is secured (OGH 5 Ob 139/17b; 5 Ob 231/13a; 1 Ob 630/81); however, there may be a gap in this settlement and therefore a risk if in the last hours before the current basis Application for the incorporation of property with simultaneous payment a land register entry that does not yet appear in the land register extract, such as For example, due to a transfer of ownership to a third party or the creation of a mortgage for a third party, should have arrived at the land registry court and no “seal” appears in the land register extract. The procedure considered valid by the Supreme Court can only be implemented if a sale ranking has been obtained beforehand and the settlement is now carried out step by step with their help and in their rank.
15 Apathy/Perner in KBB, ABGB5 § 1062 Rz 3.
16 More about Apathy/Perner in KBB, ABGB5 § 1062 Rz 4.
17 On embezzlement by the joint trustee P. Bydlinski in KBB, ABGB5 § 1002 Rz 7; Ch. Rabl, The Unfaithful Trustee (2002).
18 However, the “obligation” to take over is usually only an obligation; see OGH SZ 37/108; Ch. Rabl, JBL 1997, 488 ff; F. Bydlinski in Klang, ABGB2 IV/2, 348.
19 Sections 1048 and 1049 ABGB; OGH 2 Ob 287/24, SZ 6/161; see also 6 Ob 97/19m.
20 Supreme Court 7 Ob 243/73, JBL 1974, 423.
21 RS0011111; 8 Ob 12/19a.
22 Ch. Rabl, The transfer of risk when buying (2002) 86ff; Apathy/Perner in KBB, ABGB5 § 1049 Rz 1 UhA; OGH 1 Ob 890/47, EvBL 1948/165; 8 Ob 17/72, SZ 45/18.
23 Section 1048 ABGB; OGH 6 Ob 660/95, SZ 69/181.
24 Ch. Rabl, The transfer of risk when buying, 224ff; Apathy/Perner, KBB, ABGB5 § 1049 Rz 3.
25 See Bollenberger in KBB5 § 878 paragraph 11; Griss/P. Bydlinski in KBB5 § 1447 paragraph 10; OGH 9 OBa 157/98y, SZ 71/205 = ZAS 2003, 26 (crit Bollenberger).
26 Binder/sharpener in Schwimann/Kodek, ABGB4 § 1050 Rz 5 UhA OGH 7 Ob 18/82, SZ 55/32.
27 SECTION 1050 ABGB.
28 Supreme Court Jud 155 old; binder/sharpener in Schwimann/Kodek, ABGB4 § 1049 paragraph 4.
29 OGH GlU 7518; binder/sharpener in Schwimann/Kodek, ABGB4 § 1049 paragraph 4.
30 OGH GluNF 354; Apathy/Perner in KBB5 § 1049 paragraph 4.
31 See point 6 above.
32 RS0021208; RS0104141
33 Supreme Court 1 Ob 512/93, SZ 66/148; 8 Ob 554/78, SZ 51/151.
34 OGH 5 Ob 102/04t.
35 Supreme Court 3 Ob 507/95, WoBL 1996, 244 (Dirnbacher); RIS Justice RS0021174.
36 RS0026168; aA Hoyer, WoBL 1991, 154.
37 RS0021158
38 RS0002979
39 Supreme Court 5 Ob 174/12t, immolex 2013, 210 [Limberg]
40 Supreme Court 10 Ob 26/08h.
41 Supreme Court 1 Ob 681/87, SZ 60/266 = ÖBA 1988/80, 390 (P.Bydlinski); 8 Ob 583/88, ÖBA 1989/168, 818 (P.Bydlinski); 7 Ob 2410/96d, ÖBA 1997/651, 826; 7 Ob 48/07w; 8 Ob 5/12m; Koziol in Apathy/Iro/Koziol, Banking Contract Law V2 Rz 3/113ff; Dullinger in Rummel/Lukas4, § 880a Rz 22.
42 JBL 1957, 646; EvBL 1963/357; binder/sharpener in Schwimann/Kodek, ABGB4 § 1047 paragraph 12.
43 According to Nowotny, RdW 1990, 104.
44 Section 922 ABGB; see also J. Reich-Rohrwig, NZ 2015, 442.
45 SECTION 923 ABGB.
46 Supreme Court 7 Ob 156/16s.
47 This is the very brief and therefore superficial content of Section 928 sentence 1 ABGB. If, despite the fact that the defect is obvious, the seller expressly agrees to be free of defects or certain features, he must provide warranty (Section 928 sentence 1 ABGB), unless the interpretation of the contract clause shows that the parties had meant the warranty commitment restrictive (OGH 2 Ob 570/94 NZ 1995, 129; 1 Ob 61/20g Zak 2020/433).
48 Supreme Court 7 Ob 156/16s; 2 Ob 176/10m.
49 Supreme Court 8 Whether 99/08g; 3 Whether 111/09h; 2 Whether 176/10m.
50 Supreme Court 2 Ob 176/10m, 1 Ob 14/13k; on the risk-based information value of contract clauses A. Reich-Rohrwig, disclosure obligations before conclusion of contract, 65ff MWn.
51 Each of the stated percentages is to be seen for each individual assurance; as a result of the fact that sales contracts sometimes include several of these assurances, the sum of the stated percentages exceeds 100%.
52 See OGH 2 Ob 176/10m.
53 For deficiencies in the apartment building, see also J. Reich-Rohrwig, NZ 2015, 441, 445 MWn
54 See OGH 6 Ob 38/14b Ecolex 2015/32.
55 The case law rejects the payment “new for old” in accordance with warranty claims: RS0018699; but see deduction “new for old”: Danzl in KBB5 § 1323 paragraph 19.
56 See OGH 1 Ob 14/05y and P. Bydlinski in KBB5 § 932 paragraph 18.
57 In addition to the fact that, in the event of an action by the seller that is close to malice, his appeal to the warranty period, which is contractually reduced to 6 months, is contrary to good faith, see Supreme Court 2 Ob 2140/96m ecolex 1996, 910 (911).
58 See § 924 ABGB.
59 See J. Reich-Rohrwig, Unclear contract clauses in real estate purchase contracts, NZ 2016, 41, 43 with reference to OGH 25.1.2000, 5 Ob 104/99a, WoBL 2000/199 (but also with reference to contrary case law FN 6).
60 Supreme Court 8 Ob 9/19k; 4 Ob 197/16y.
61 Evidence from J. Reich-Rohrwig, disclaimer for real estate purchase contracts, NZ 2015, 441.
62 Section 69 (1) VersVG.
63 Section 69 (2) VersVG.
64 RS0080665; 7 Ob 74/17h; 7 Ob 18/82 RIS Justice RS0011278, according to which the right of termination of the acquirer of the insured property set out in Section 70 (2) VersVG can only be exercised by the acquirer of the insured property after delivery of the decision to incorporate his right of ownership.
65 See Section 71 (2) VersVG in more detail.
66 Section 71 (1) VersVG.
67 Section 70 VersVG; see Schauer, NZ 1992, 4 ff; Palten in Fenyves/Schauer, commentary on VersVG § 70 paragraph 18.
68 On the question of the admissibility of recovery, see RS0126072; 7 Ob 211/12y; 7 Ob 81/17p: A clause which provides for the reimbursement of a permanent discount in the event of early termination of the contract must in principle be designed in such a way that the amounts recoverable from the insurer develop in a strictly degressive manner.
69 Supreme Court 3 Ob 462/59, SZ 32/151 = JBL 1960, 295 (election).
70 Supreme Court 7 Ob 74/17h; 7 Ob 18/82 RIS Justice RS0011278, according to which the right of termination by the acquirer of the insured property referred to in Section 70 (2) VersVG can only be exercised by the insured property after the decision to incorporate its ownership rights has been served.
71 Palten in Fenyves/Schauer, VersVG § 70 Rz 21.
72 H.B. Wachter, NZ 1991, 196f.
73 Supreme Court 3 Ob 221/55, SZ 28/130 = JBL 1955, 451 (branch of honor); 7 Ob 297/99y, verse 1862.
74 Palten in Fenyves/Schauer, VersVg § 69 Rz 25 utta OGH 7 Ob 297/99y, Verse 1862; 7 Ob 148/00s, VerSe 1892; 7 Ob 258/07b, RdW 2008/488; 7 Ob 108/08w, RdW 2009/36 = VR 2009/826.
75 Palten in Fenyves/Schauer, VersVG § 69 Rz 25.
76 Supreme Court 7 Ob 176/12a; Palten, op cit § 69 Rz 30.
77 Supreme Court 7 Ob 258/07b RdW 2008/488; 7 Ob 108/08w RdW 2009/36 = VR 2009/826; Palten, op cit, § 70 Rz 46 f.
78 Supreme Court 7 Ob 297/99y, VerSE 1862; 7 Ob 148/00s, VerSE 1892; 7 Ob RdW 2008/488; 7 Ob 108/08w RdW 2009/36 = VR 2009/826.
79 Supreme Court 7 Ob 297/99y, VerSE 1862; 7 Ob 258/07b RdW 2008/488; 7 Ob 108/08w RdW 2009/36 = VR 2009/826.
80 Section 12 (10) UStG.
