Modifications within the Austrian Tenancy Act are required
Taking out commercial leases completely from the Austrian Tenancy Act
Regarding commercial leasing the combination of grandfathering and legal protection of tenants is unique. It is admitted throughout Europe that if two businessmen stipulate something this of course becomes valid. Only in Austria commercial leasing is still protected by tenancy law.
Today business premises are rented predominantly by large enterprises. It is incomprehensible to define these worthy of protection.
Those companies, f.i. local stores the policy defines worthy of protection for whatever reason, should be subsidized by other measures (f.i. by tax deductions) but not at the expense of individual private owners.
Unfair manipulation of the market through legally provided shortage of rentable space
Existing contracts for business premises, offices, surgery, storage places and suchlike that base on rent ceiling regulations (Friedenszinsregelung) reduce market‘s supply and therefore commercial leasing areas unnecessary „valuable“ for tenants but not for landlords!
Due to the legislation currently prevailing landlords are not able to let their premises at an adequate rental charge.
Legislative intent is hardly realizable, courts overstrained
Beginning in 1994 legislature has taken this circumstance at least a bit into account. In case of a majoritarian change of ownership the amount of rent (often stipulated in recent decades based on the „Friedenszins“) could be marked-up. (§ 12a MRG)
Legislation protects those having enough money to afford consultants for maintaining this tenancy-circumstance in the long term. As a result courts are overstrained by lawsuits mostly passing through all instances. A periodic review of the rental charge with adjustment for the market and /or definition of facts (f.e. the contribution into a trust or a foreign corporation) should at all events result in an increase of the rental charge.
Wealthy people get protected, young entrepreneurs disadvantaged
Those rated among the high-end of income distribution, such as lawyers, doctors, commercial chains, etc. get protected. In addition this group often sublets their cheap rental areas in whole or in part at horrendous charges. So as a consequence this group also makes profit out of the property of a third party. In no way these funds serve to preservate the property as in the normal case of generating an adequate rent.
Due to cheap rents entrepreneurs even operate their business despite it is not bringing in any revenue for a long time. That is a distortion of competition. Long-time tenants wait until they attain an one-off payment from a new tenant or the landlord. It is questionable whether this money ever gets declared fiscally.
Landlords are disadvantaged
Owners of older buildings with business premises such as salesrooms, storage places, offices, surgeries, law offices, etc. let on a long-term basis, are permanently confronted with legally provided inequality.
Dynamization of economy, economic stimulus
A supplementation of the MRG according to which landlords will be able to review the rental rate after a certain term of an open-ended tenancy agreement (of e.g. 10 years) would lead up to a dynamization of economy. If the rental rate is not reasonable, it should be subject to a potential increase to an appropriate level during a certain time period.
By this means, an economic stimulus would be set, such as faster renovation, which leads to a stimulation of the building industry, higher tax income and a decreased burden of courts.
The tenancy law dispute in general
- Communities are entitled to demand equal rent (reference value rent) in old flats, compared to private landlords – despite the fact, that they exclusively build with public funds and are not subject to paying taxes. To compare those with private landlords, who are subject to paying taxes and to generating returns, is therefore considered inadequate.
- A newly built and privately financed apartment in Aspern (area in the Vienna outskirts) may be rent out for EUR 7,50 per sqm, whereas a downtown flat, which is renovated according to highest standards, may only be rent out for EUR 5,16 – is that fair?
- To set a ceiling for rents, leads to shortage and worsening of rental apartments, and makes it even more challenging for those deprived to find appropriate accommodation.
- To set a ceiling for rents, leads to a situation, where investments in renovation would be running short, and urgently needed new housing projects would be discouraged.
- State regulated rents never and in no state have resulted into more affordable rents, but always led into a shortage of offers (OSCE study).
- In Vienna, 60 percent of all tenants (!) are living in community or social housing projects – which means, if those apartments were rent out following social balance and equality, there should be vast housing available for those deprived. But this is not happening, as individuals with a monthly net income of up to EUR 3,018 and couples with a net income of up to EUR 4,497 are eligible for community housing apartments! This is exactly the target group, which is likely to be entitled “wealthy”. So, why should those individuals be eligible for community housing, which is funded by public taxes?
- Peculiarities within the Austrian Tenancy Act (MRG)