When Escalation Clauses Are Invalid: What Tenants Need to Know

Following the recent Supreme Court ruling on value adjustment clauses in rental contracts, consumer protection advocates from the Chamber of Labor (AK) and the VSV have spoken out, emphasizing that the ruling does not mean that every value adjustment clause must be valid. There are still several reasons why reclaiming a rent increase could be successful - for example, in cases of non-transparent wording or backdating that results in a rent increase even before the contract begins.

Supreme Court Restricts Applicability of Consumer Protection Act

Last week, the 10th Senate of the Supreme Court ruled that Paragraph 6 Section 2 Item 4 of the Consumer Protection Act - which prohibits value adjustments within two months of contract conclusion between a company and a consumer if they were not individually negotiated - does not apply to rental contracts and other long-term obligations. According to the court, the paragraph only applies to contracts where the entrepreneur fully provides their services within two months.

According to legal experts, the Supreme Court has thus changed its jurisprudence, but clarity has not been achieved. Currently, many individual cases on the topic are still open, and another Senate of the Supreme Court could decide differently on the matter, said the chairwoman of the Consumer Protection Association (VSV), Daniela Holzinger-Vogtenhuber, on Monday in the "Ö1-Morgenjournal" of ORF.

Consumer Advocates: Reclaims Still Possible

The decision of the 10th Senate has in any case "simply eliminated the illegality of actions that have previously been frowned upon" and is at the expense of many consumers. The VSV chairwoman calls for the deployment of an expanded Senate, which should decide on a broad basis whether there should be a change in jurisprudence. The government is also called upon to create more legal certainty - also concerning other long-term obligations such as energy supply contracts or loan agreements. The federal government aims to find a solution by autumn.

Both the AK and the VSV pointed out on Monday that due to the decision, not every value adjustment clause must automatically be valid. There are still reasons why invalidity might be present. A value adjustment clause could, for example, be unclearly formulated or predated - meaning it is structured in such a way that it requires a rent increase even before the contract begins. A clause that only allows increases but no decreases is also illegal according to the AK.

Both organizations therefore want to continue fighting for consumers who want to reclaim rent increases. The AK is currently conducting several test cases to clarify which clauses are actually inadmissible. However, it does not expect decisions before next year. The VSV is also continuing its collective action for the time being and wants to wait for decisions in further individual cases.

Real Estate Industry Welcomes Legal Certainty

Representatives of the real estate industry expressed positive views on the ruling. The Association of Austrian Project Developers (VÖPE) welcomed the court decision and simultaneously promoted their housing cost index, which they presented a few weeks ago, as a proposal for calculating rent increases. This is a mixed index consisting of 70 percent core inflation, i.e., the consumer price index (CPI) excluding energy price increases and extreme fluctuations, and 30 percent construction cost index. This would better reflect the economic situation than pure inflation data and smooth out fluctuations.

The Vienna specialist group of real estate and asset trustees sees the court decision as "a signal for stability in Austria." "A different decision would have had serious consequences, not only for the commercial real estate industry but also for the municipal housing sector and ultimately for the overall economy," said the specialist group chairman Michael Pisecky. He assumes that the ruling will stand. The government must now anchor this legal certainty. The Lower Austrian specialist group also welcomed the OGH's ruling.

(APA/Red)

This article has been automatically translated, read the original article here.