A specter is haunting, not only in Europe – the specter of inflation.

Moreover, the cannons are cracking. One is reminded of Rothschild’s motto: “Buy when the cannons thunder, sell when the violins play.” – But what if one has already bought enough stocks or considers this investment too risky after all. Then the only effective hedge against inflation for the time being is probably real estate. Salzburg is a nice and good, profit-promising ground for this. The transaction volume of real estate transactions in Salzburg has (according to relevant market analyses) increased by almost 20% already in 2021 (compared to the previous year), and building land prices have even risen by approx. 35.7%. Austria as a whole is also a safe haven in this respect.

Honsig & Küenburg is a commercial law firm, but in particular has been dealing with all questions concerning real estate for decades. This takes the form of discreet and successful bringing together of buyers and sellers, the handling of the actual property transaction (including the requirements of the land transfer authorities), but also in the form of sustainable management / leasing or passing on to the next generation.

The legal issues in this context, which we successfully handle on a daily basis, are very diverse and range from tax issues or optimization to the question of rent reduction in connection with the current Covid-19 pandemic. This is not yet over.

Starting in the fall, there may be further lockdowns and/or other government restrictions. Until recently, there was still a high degree of legal uncertainty regarding the question of whether or not a tenant had to pay rent for the period of a hard lockdown. The highest court in Austria, the OGH, has meanwhile ruled that an entry ban due to the Covid 19 pandemic can lead to a rent exemption if the rental property is unusable for the contractually agreed purpose, such as customer traffic during the lockdown. However, this legal consequence – and this is important for (institutional) landlords of (large) retail and commercial properties – is not set in stone, but quite dependent on the individual case.

Thus, the Supreme Court has recently (OGH 25.01.2022, 8 Ob 131/21 d; OGH 29.04.2022, 7 Ob 207/21 y) also confirmed its line of jurisprudence, according to which a rent exemption or reduction and its extent depends above all on whether (based on an objective standard) there was a corresponding unusability of the rental object (for any other comparable tenant) with regard to the agreed business purpose or the tenant had the objectively existing possibility, e.g. to offer a delivery or pick-up service, Click & Collect, etc.

In other words, according to the „case law“ of the Austrian Supreme Court, in the event of a hard lockdown/entry ban, there is not automatically a complete unusability of the leased property. The unusability of the rented business premises or the loss of sales by the tenant must be a direct consequence of the Covid 19 pandemic or the ban on entering the premises / shops and must not merely be part of the general entrepreneurial risk, which in itself does not entitle the tenant to a reduction in rent.

In the end, it depends on the individual case and – since the „case law“ of the Supreme Court in this respect is not yet sufficiently established – in particular on the negotiating skills and experience of the intervening legal representatives. Negotiating skills are also required if the tenants oppose the index adjustment of the rents agreed in the lease agreement, arguing that the consumer price index (CPI), which is usually used for this purpose, is already no longer representative due to high inflation. Negotiating these matters is our daily business at Honsig & Küenburg, as legal representatives on both sides, both (institutional) landlords and tenants of (commercial) real estate (e.g. shopping centers).

A (legal) political question, which in the future in this context may still really concern us in its effects, is how the state will possibly try to obtain its financial resources, which it is currently using to a particularly high extent to cope with the Covid-19 pandemic, inflation and the consequences of the war in Ukraine, through an (additional) taxation of assets and real estate. However, we at Honsig & Küenburg are also highly alert in this regard and follow the (legal) political intentions of the legislator very closely in order to be able to react as quickly as possible and find the best possible solutions for our clients.