General information

The security deposit was not subject to any statutory regulation until 2009. With the 2009 amendment to housing law, the legislator implemented a provision in this regard for the first time, namely the provision of Section 16b MRG. In addition to the full scope of application, this legal standard also applies in the partial scope of application of Section 1 (4) MRG. Of course, this provision does not apply to “full exceptions”. Since the 2016 amendment to the WGG, the provisions of Section 16b MRG relating to security deposits also apply to the WGG. § Section 16b MRG applies to both residential and commercial leases and is applicable to both main tenancies and subleases.

The legal text of Section 16b MRG does not standardize a legal obligation to hand over a deposit. Pursuant to Section 16b (1) sentence 1 MRG, the handover of a deposit can be agreed to secure the landlord’s claims arising from the tenancy. A (rental) contractual agreement is therefore (still) required.

The assessment to be clearly distinguished from the landlord’s assets

With the provision of § 16b MRG, the legislator has now stipulated that, as of April 1, 2009, cash deposits must be secured in the form of savings books or investments offering an equivalent level of security (deposit guarantee) that can be clearly separated from the landlord’s assets. If the tenant does not hand over the deposit in the form of a savings book, but pays the deposit amount in cash or by bank transfer, the landlord has the legally binding obligation to make a fruitful, insolvency-proof investment. Tenancy agreement provisions to the contrary are invalid. The deposit should not become the property of the landlord. The landlord is therefore obliged to form a special fiduciary asset: The landlord must not only keep the deposit provided by the tenant separate from his assets, but must also invest it in a corresponding account as assets held in trust, which is recognizable to the outside world.

The tenant is entitled to the interest accrued, but the landlord is not obliged to ensure the best possible interest rate; instead, it is sufficient to invest at the standard savings interest rate for the sector.

For tenancy agreements that have been concluded for an indefinite period, an assessment with interest due at any time should be made. In the case of fixed-term tenancies, it is recommended that the deposit assessment be tied to the agreed duration of the tenancy in order to generate higher interest rates.

The amount of the deposit

In Austria, there are no legal regulations on the maximum amount of a tenant’s deposit. However, there is still a significant difference between partially exempt properties and properties within the full scope of application of the MRG with regard to the amount of the deposit. The amount of the deposit is determined by the gross monthly interest rate agreed by the tenant at the time of the deposit agreement. While in the area of the MRG the amount of the deposit was limited by case law to up to six gross months (three gross monthly rents are customary under normal circumstances) due to the lack of a special need for security, these considerations do not apply in the case of partially exempt properties due to the lack of a rent review option. However, Section 879 (3) ABGB must be taken into account. There must always be an adequate relationship between the landlord’s security interests and the amount of the deposit paid by the tenant. It must therefore be assessed on the basis of the specific circumstances in each individual case whether the agreement is legally permissible with regard to the amount of the deposit or whether it violates the prohibition of redemption under Section 27 (1) no. 1 MRG.

Replenishment of the deposit

If the landlord draws on the deposit to settle outstanding claims, he has no legal claim to replenishment of the deposit by the tenant to the agreed deposit amount in the absence of a contractual agreement to the contrary. At most, a legal obligation to replenish the deposit could be derived from § 458 ABGB, particularly in the case of a savings book deposit. However, an agreement in the tenancy agreement regarding the replenishment of the deposit is permissible.

Offsetting against the deposit by the tenant

During an ongoing tenancy, the tenant has no power of disposal over the deposit and no due repayment claim with which he could offset it. The tenant cannot “live off” the deposit before the end of the co-tenancy either, e.g. by ceasing ongoing rent payments in the last few months before the end of the tenancy agreement and referring to the deposit handed over to the landlord.

The security deposit provision

Section 16b (2) MRG contains the provision on the deposit reserve. According to this provision, the landlord must return the deposit to the tenant together with the interest earned on it immediately after the end of the tenancy agreement, unless it is used to settle justified claims of the landlord arising from the tenancy.

On the other hand, according to the legal materials, the obligation to immediately return the deposit is only triggered when the rented property is returned to the landlord. The landlord must therefore return the deposit immediately after restitution, whereby, according to case law, he must be granted a reasonable period of time to inspect the rented property for existing damage. In the case of pure ABGB rental agreements, the agreement between the parties is decisive. If there is no such agreement, the landlord is generally obliged to return the deposit when the rented property is returned.

According to the legal materials, the claim for repayment is subject to the inherent prerequisite of the nature of the deposit that the landlord is no longer entitled to any claims from the tenancy. The deposit serves to secure all claims of the landlord arising from the tenancy, i.e. also those between the termination of the tenancy agreement and the actual return of the rented property. This will primarily include rent and operating cost arrears as well as claims for damages due to damage to the rental property. However, claims not related to the rental agreement do not entitle the tenant to retain the deposit.

Prior to the introduction of Section 16b MRG, the landlord was only obliged to return the deposit if it was clear that a claim for which the deposit was to be liable no longer existed or could no longer arise. More recent case law, on the other hand, denies a right of retention for claims from the tenancy that have not yet been established. The prevailing view is that withholding the security deposit for claims that have not yet been established is not permitted due to the wording of the legal text.

Change of landlord and tenant

In the event of a change of tenant pursuant to §§ 12, 12a and 14 MRG or a transfer of the tenant’s position due to the exercise of a right to transfer, the tenancy is not terminated. The outgoing tenant or, in the event of death, the estate or heirs cannot assert any claims for repayment of the deposit against the landlord, as the return of the deposit is dependent on the termination of the tenancy. This amount benefits the new tenant as a pecuniary advantage. The former tenant (or in the case of § 14 MRG, the estate or heirs) are only entitled to compensation claims against the new tenant as their legal successor. According to literature and case law, the new tenant is obliged to pay compensation by way of analogy to § 1042 ABGB.

The obligation to repay a cash deposit does not lie with the (former) landlord who requested and received it, but with the respective contractual partner of the tenant. More precisely, the repayment of a deposit paid upon conclusion of the rental agreement is to be directed against the party who is the landlord at the due date (= return of the rental property).

Insolvency of the landlord

§ Section 16 b (3) MRG stipulates that in the event of the landlord’s insolvency, the tenant has a corresponding claim pursuant to Section 48 IO. This provision is intended to secure the security deposit against unauthorized access due to insolvency proceedings opened against the landlord. In the event of such insolvency, the insolvency administrator can only draw on the deposit in cases in which the landlord would also be entitled to do so, for example if the tenant is unjustifiably in arrears with the payment of rent. Under no circumstances may the deposit be used to satisfy claims unrelated to the purpose of the tenancy, i.e. claims that are not related to the tenancy.

If insolvency proceedings are opened against the landlord’s assets, a tenant whose tenancy ends immediately before the insolvency proceedings are opened or in the course of the same has the right to separate satisfaction from the deposit savings book with regard to the security provided by him, unless he is entitled to further rights anyway. According to general principles of insolvency law, however, the tenant as pledgee is entitled to a right to separate satisfaction pursuant to § 44 IO in the event of the landlord’s insolvency, so that the incomprehensibly standardized right to separate satisfaction should be obsolete.

Processual

Before the WRN 2009, the reclaiming of the deposit had to be carried out without dispute in contentious proceedings. Since the WRN 2009, the tenant has the option of obtaining a decision on the amount of the recoverable deposit before the non-contentious court pursuant to Section 37 (1) no. 8b MRG. However, the Vienna Regional Court added that only the determination of the amount of the recoverable deposit had been referred to non-contentious proceedings. The claim for repayment of the deposit as such can therefore still be asserted in the contentious proceedings. The 6th Senate of the Supreme Court rightly followed this. The tenant therefore has the right to choose whether to request a determination of the amount of the recoverable deposit in non-contentious proceedings or to sue for repayment immediately.

The deposit in the full exception area of the MRG

Within the framework of tenancy agreements in the full exception area of the MRG, it is regularly agreed that the tenant must provide a deposit – in cash, as a savings book or in the form of a bank guarantee. The landlord is entitled, but not obliged, to cover any arrears from the security deposit; if he refrains from doing so, the termination requirement of Section 1118 case 2 ABGB may be fulfilled despite sufficient security deposit cover.

_{Sources:
Daniel Lassingleithner, Practical problems with the deposit provision after termination of the tenancy, immolex 2017, 138
Prader, MRG5.02 § 16b (as of 1.7.2017, Manz Wohnrecht in rdb.at)
Schinnagl, GeKo Housing Law I § 16b MRG
Riss in Kletečka/Schauer, ABGB-ON1.02 § 1101 (as of 1.10.2016, rdb.at)}