VALUE PROTECTION CLAUSES IN RENTAL AGREEMENTS - Courts send shockwaves through the Austrian housing industry

In the course of the last two years, the Austrian Highest Court has issued a number of decisions declaring clauses in rental agreements of residential apartments indexing rental costs with general living costs as null and void.  This concerns general clauses allowing the housing industry to adjust rent costs as early as two months after execution of the rental agreement. 

In Austria, a greater number of the population is living in rented accommodation rather than in their own apartments.  Title of ownership in rental apartments are usually held by financial institutions, insurance companies, foundations, investment vehicles as well as other public or private investors. 

Worried by the recent court decisions, title owners appealed to the Austrian Constitutional Court, claiming that the loss of income of indexed rental costs violates the constitutional protection of property, like any other expropriation without compensation.  In its decision, published 11^th July 2025, the Constitutional Court took the side of the consumers, protecting their interest of fair treatment in rental contracts due to both, the bargaining power of owners and the shortages of the housing market.

The recent decision of the Constitutional Court is endangering the financial survival of some of the housing industry as consumers are now encouraged to demand repayment or compensation for index-based rent increments of up to the last 30 years.  Rental agreements are frequently for indefinite time, ensuring protection against premature termination by the landlord.

Rental agreements are often made according to standard precedents, all of which contain indexation clauses for rental payments.  As an exception, clauses negotiated individually between landlord and tenant will not be affected by the court judgments. However, any other unfair clause in a rental agreement may also result in its invalidation.  An amendment to the contract as repair or as remedy of the clause has expressly been excluded by the courts. 

Our law firm has many years of experience in matters of real estate with a particular focus on advising on rental agreements.  We advise the housing industry how to deal with the current crisis, either by

• defending claims lodged by consumers

• negotiating compromises about disputes

• redraft of rental contracts

• review of existing rental contracts

Contact us at offices@schwank.com for further advice and help.

Value protection clause in a rental agreement