Rent no longer affordable - what now?

New Covid 19 legislative package with tenant-friendly regulations

A new Covid 19 legislative package provides for tenant-friendly regulations in the event of non-payment of residential rent due to financial difficulties of tenants as a result of Covid 19.

Due to the effects of the coronavirus on the economy, we are currently posting negative record figures for unemployment and short-time work. Many people have lost their jobs and thus more or less, a large part of their regular income. Monthly rent payments for the apartment often quickly come to a standstill in a situation like this. But what are the consequences?

Loss of rent and COVID-19: Deferment of termination for residential leases

Previous regulation

Under the previous legal situation, a landlord could file a lawsuit requesting eviction if the tenant defaulted in payment of the rent. If, under such circumstances, the tenant could not pay the outstanding rent on time and provides sufficient justification that he is not grossly at fault for the delay in payment, eviction would have been the result: the tenant loses his apartment and has to pay the rent including interest and legal costs.

What's the legal situation currently?

In order to prevent tenants from losing their homes in these already difficult times, the National Council passed a legislative package (including 2 COVID-19 accompanying laws) on 3 April 2020, which is intended to relieve tenants of some burden they currently face. According to this package, the landlord may not terminate the lease agreement due to a total or partial default of payment of a rent due between 1 April 2020 and 30 June 2020. However, this only applies if the tenant can prove that
(a) as a result of the COVID-19 pandemic...
(b) …his economic capabilities…
(c) ….have been significantly impaired.

Such an impairment of economic capabilities is likely to be present at any rate in the case of a complete loss of income due to the COVID 19 pandemic, but can also be argued in the case of partial loss of income, for example in the context of short-time working. Since the legislator is focusing here on economic performance in its entirety and not only on income from work, other sources of income of the tenant or the COVID-19-related loss of the same (e.g. alimony claims, income from renting or leasing) may also be relevant. In particular, it is still unclear at what point a "significant" loss of income occurs, for example, whether it is (i) a question of falling below the subsistence level or (ii) "only" a comparison of the income and household expenditure situation before COVID-19 and afterwards.

What can I do if I am affected as a tenant?

First of all, you need to know that there is no automatic payment deferral or eviction stop for tenants. Rather, in the event of a dispute, the tenant must prove the collective existence of the conditions described above. Especially in the case of (for instance indefinite) old rental agreements for apartments with a favourable net rent, the landlord could take advantage of a possible default of payment by the tenant, make use of his right of termination and then let it depend on whether the tenant succeeds in proving the requirements in court. If the tenant does not succeed, he loses the apartment in the worst case; in the best case he "only" has to pay the legal costs. It is therefore not advisable to withhold payment of the agreed rent, except in an emergency situation - i.e. if the necessary living costs cannot be covered otherwise. For this purpose, the tenant should collect appropriate receipts and keep a household account in order to be able to present the COVID-19-related loss of income completely and impressively in case of dispute. In any case, we recommend that you first try to reach an agreement with your landlord and document this and seek legal advice.

Judicial assertion or set-off of deposit with rent arrears

Furthermore, the landlord is not allowed to claim the outstanding rent from the above-mentioned period in court until the end of 2020 or to use any security deposit. However, according to the wording of the law, this will only apply if the above-mentioned reasons for the default of payment are present. In any case, interest on arrears will accrue at the statutory rate of 4%, unless a more favourable interest rate for the tenant is contractually agreed.

More flexible renewal options for fixed-term leases

Furthermore, a facilitation was created for the extension of temporary rent contracts that expire after 30.03.2020 and before 01.07.2020. It should now also be possible to extend them for a shorter period than the three-year minimum term. Until now, this was only possible for a period of at least three years; if this minimum extension period was not reached, the lease was generally automatically converted into a lease for an indefinite period. For this reason, many landlords often did not agree to a shorter extension than three years. In the present case, this would result in tenants losing their apartments, but - due to the general curfew and contact restrictions - also not being able to inspect or rent other apartments. Consequently, tenants would be exposed to eviction by the landlord and threatened with homelessness. In order to counteract this, the new legislation now allows, in deviation from the previous regulation, extension agreements to be made for a shorter period than three years, but at most until the end of 31.12.2020. This should motivate landlords to agree to a shorter time limit and alleviate the individual threat of housing shortages.

Postponement of the eviction execution

Finally, tenants who are currently affected by an eviction order may apply for a postponement of the enforcement of an eviction decision if the apartment is indispensable for the tenant and the persons living with him/her in the common household to satisfy the urgent housing needs. Deferment must be granted in principle, provided that the eviction is not indispensable to avert serious personal or economic disadvantages for the landlord. The landlord is therefore entitled to a file a submission if a tenant makes such an application.

According to Minister of Justice, Dr. Alma Zadic, the arrangements made in the statute serve primarily to relieve tenants in this already tense situation of the additional fear of losing their homes.

In a specific individual case, a variety of other circumstances can be decisive for the result of a legal examination. Due to the currently very dynamic legislative activity, the current status of the information contained herein cannot be guaranteed despite our best efforts. For this reason, an individual examination of the legal situation for each individual case is essential. For these reasons in particular, we accept no liability for the information presented here.

For further information on the legal framework in connection with the coronavirus, please visit our homepage www.corona-recht.at.