The impact of new indexation decisions in Austria
In recent years, the Supreme Court has already passed numerous decisions with far‑reaching consequences for the real estate industry. However, several decisions from 2023 are stirring notable turmoil in the already tumultuous real estate market.
In decisions 2 Ob 36/23 t and 8 Ob 377/23 h, the Supreme Court examined indexation clauses, which are crucial for both landlords and tenants, especially in times of high inflation.
Indexation clauses are included in almost every lease agreement. In a 2019 decision, the Supreme Court held that they are justified by the landlord's legitimate interest in adjusting the rent - particularly in case of longer contract terms - in line with the currency devaluation to maintain some sort of equivalency.
In the 2023 decisions, however, the Supreme Court declared some – widely used – "index succession clauses", i.e. clauses that provide for a new index as the basis for indexation if the index stipulated when the lease agreement was concluded is no longer published, to be unlawful. It concluded that consumers are insufficiently protected against unexpected price (i.e. rent) increases, as the wording used in the specific case and in general fails to indicate which successor index is to be used.
The Supreme Court also found an indexation clause to be grossly discriminatory (gröblich benachteiligend) and therefore unlawful, because the basis for the indexation (in this case by reference to a statutory two-year indexation of statutory rents (Richtwertmietzins)) predated the conclusion of the lease agreement. The subsequent increase in the rent due to an increase in the price level that may have occurred before the lease agreement was concluded is not objectively justified.
It is impossible to predict the exact consequences of these Supreme Court decisions. They are the subject of – sometimes heated - debate among academics. Some authors assume that past rent increases based on these indexation clauses may be reclaimed for up to 30 years. Thus, the extent of the potential impact is certainly not negligible. According to media reports, class action lawsuits are already on the horizon.
Many landlords will (have to) adjust their lease agreements in light of these recent decisions. This is sure to keep us busy in the years ahead.