The latest ruling by Austria’s Constitutional Court (VfGH) on indexation clauses in rental contracts—and potential refunds to tenants—has unsettled the real estate sector. The federal government had already promised changes to rent indexation when taking office. Vice Chancellor Andreas Babler (SPÖ), who is responsible for housing, now aims to find a solution by autumn together with Justice Minister Anna Sporrer (also SPÖ) and coalition partners ÖVP and NEOS.
Indexation clauses in rental agreements have long been a matter of dispute between tenants, commercial landlords, and the courts. Two years ago, the Supreme Court (OGH) ruled that such clauses are invalid if the rental contract does not explicitly mention a two-month waiting period before rent increases. Recently, the Constitutional Court ruled that Austria’s Consumer Protection Act (KSchG) may prohibit certain indexation clauses in rental contracts. However, the Chamber of Labor warns this doesn’t mean affected tenants are automatically entitled to refunds—each case must be settled individually in court. The Tenants’ Association expects a rise in inquiries but notes many people are still hesitant, said its president Georg Niedermühlbichler on ORF radio’s Morning Journal.
Real Estate Industry Demands Quick Clarity
The real estate industry still sees many unresolved legal issues and is calling for swift legislative action. “Several key individual questions are still open, which the Supreme Court must rule on in individual proceedings,” said Anton Holzapfel, managing director of the Austrian Real Estate Association (ÖVI), in a statement on Tuesday. “Which limitation period applies? Are landlords required to pay back three or even thirty years’ worth of improperly collected indexation?”
“There’s still a sense of shock,” said Andreas Köttl, president of the Association of Austrian Project Developers (VÖPE), describing the mood in the sector to APA. Although “excessive consequences” had been looming for two years, “relatively little has been done to address them,” he criticized, warning of “retroactive interference.” Thomas Drozda, director at ARWAG Holding-AG, stressed the urgent need for political action. “It’s absolutely crucial to establish certainty, as the financial risk could amount to billions,” added ARGE Eigenheim’s national chairwoman Isabella Stickler.
The current government, in office since March, is aware of the legal challenges. The coalition agreement offers no concrete solution yet, only stating the goal of “establishing legal clarity regarding indexation clauses for all long-term obligations and limitation periods, including shortening the limitation period.”
Refund Rights to Be Restricted
According to Die Presse (Tuesday edition), a draft law on indexation clauses is already in the works but not yet public. It would amend both the Consumer Protection Act and the General Civil Code. Die Presse quotes: “Claims for repayment of unjustly collected amounts based on an invalid indexation clause expire three years after the tenant becomes aware of the invalidity and the claim, and no later than five years after payment.”
The Real Estate Association criticizes that the previous turquoise-green government failed to fix the legal gap after the OGH ruling two years ago. The economic consequences in a worst-case scenario would be “more than threatening,” the association warned. Rents could be frozen indefinitely, significantly reducing income and leading to massive devaluations in institutional investors’ property portfolios—such as those of banks and insurers. There would also be a lack of capital for energy-efficient renovations and decarbonization.
Babler: Reform and Rent Cap by Fall
On July 10, Vice Chancellor Babler told the National Council’s Q&A session that “his department, together with the Ministry of Justice, is working intensively on a solution,” according to the parliamentary press office. The goal is to pass legislation by autumn so that the planned rent cap takes full effect next year. The ministry told Die Presse it would revise limitation periods for rent refund claims retroactively. “This aims to strike a fair social balance for tenants while offering planning security for landlords,” it said. Consumer protection minister Korinna Schumann also announced summer negotiations on ZIB2 and said she hopes for an agreement by autumn.
NEOS also wants a resolution within the next few months. “The Constitutional Court ruling clearly shows how urgently we need legal certainty regarding indexation clauses,” said NEOS housing spokesperson Sophie Wotschke. It’s “crucial to Austria’s economic stability, especially the real estate sector,” which accounts for one-third of the country’s GDP.
The FPÖ is calling for a “swift and balanced reform.” “Indexation should not be banned across the board but must be fair and transparent,” said FPÖ housing spokesperson Michael Oberlechner. A “real balancing of interests” is needed.
From the Greens’ perspective, the tripartite coalition is “only looking out for large-scale landlords” and acting “non-transparently.” Tenants would not benefit from the proposed solution, said Green MP and housing spokesperson Nina Tomaselli in a statement to APA. “Even the SPÖ, supposedly a tenants’ party, wants to take away legally upheld claims from renters,” she said, referring to prior court rulings based on EU law. Any change that contradicts European consumer rights would likely be illegal under EU law.
