The construction industry in Vienna is currently flourishing, attics are being converted, new homes are being built or existing houses are being completely renovated.

In the case of a planned letting, the question arises for renovating building owners in particular as to whether the rent restrictions of the MRG (in particular the guideline rent) also apply to the building after the renovation. The Supreme Court has now clearly answered this question in its decision of 13.06.2019, 5 Ob 70/19h.

If the MRG does not apply in full (=area of full application), landlords are entitled to demand a “reasonable rent” for a rental property. If the guideline rent system is applied, the landlord must make statutory increases and reductions compared to the rental property when setting the rent based on the so-called “standard apartment”. Tenants of a standard rent apartment have the option of having the prescribed rent reviewed.

The aforementioned decision of the Supreme Court concerned a building in Vienna that had been extensively renovated (including thermally). After the refurbishment, the landlord demanded a monthly rent of approximately € 614.00 from a tenant. The tenant had the rent reviewed and the first and second instance courts agreed that the prescribed rent was approximately € 264.50 too high.

The landlord subsequently lodged an extraordinary appeal with the Supreme Court. The Supreme Court agreed with the opinion of the lower courts and justified it as follows:

An exception to the MRG requires that a building has been newly constructed (Section 1 (4) MRG) or that there has been a new creation or new construction of a rental object due to a conversion, extension or addition to an existing building (Section 16 (1) no. 2 MRG). However, the Supreme Court took the view that the renovation work initiated by the landlord was not so extensive that it could be assumed that the entire building had been newly constructed.

The Supreme Court was not convinced by the landlord’s argument that the applicability of the guideline rent to refurbished apartments was disproportionate and inappropriate, nor by the calculations presented by the landlord, according to which less than 50% of the rent achievable on the market could be charged in buildings with a guideline rent.

When determining the guideline rent, it is not the landlord’s actual investment costs that matter, but deviations from the standard apartment that increase or decrease the value. The actual residential value for the tenant must be taken into account.

The guideline value system has long been criticized and means a – not insignificant – restriction of free rent formation for landlords. For tenants, this decision is quite positive, as it means a renewed confirmation of the guideline value system of the MRG.