Austrian OGH: No Compensation for Lake Property Lease

May 23, 2025 Benn-Ibler Rechtsanwälte

In the case at hand, compensation was sought by the claimant because an existing lease agreement for shared use rights to the property had been terminated by the buyer of a lake property. This lease agreement had originally been concluded in 1963 between the fathers of the current parties. The agreement stipulated that in exchange for a one-time payment and ongoing maintenance contributions, the tenants would be granted the right to share the use of the lakefront property. Termination by the landlord was not provided for in the contract.

The claimant argued that the contract was non-terminable de facto and that he had suffered a financial loss as a result of the termination. According to the claimant, the respondents, as sellers of the property, were contractually required to ensure that the lease would be taken over by the buyer and not terminated. The claimant asked for damages from the defendants’ failure to provide this information or ensure a contractual transfer.

The court of first instance dismissed the case. However, the court of appeals overturned the decision and awarded damages to the claimant. However, the Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) reinstated the initial judgment, dismissing the action.

The OGH ruled that, although the 1963 lease agreement had established a right to joint use, this right could not be considered legally non-terminable. While the agreement did not allow for regular termination, a provision that essentially creates a perpetual contractual obligation goes against public policy. According to Austrian civil law, an extraordinary termination option must be provided for in the case of continuing obligations.

Furthermore, the OGH could not identify any obligation for the respondent to transfer the lease to the buyer. According to Section 1120 of the Austrian General Civil Code (ABGB), when a property is purchased, the buyer automatically assumes any existing tenancy agreements. An express transfer is only necessary if the tenant has an in rem right, such as a corresponding entry in the land register. Since the claimant did not have such a right, the new owner was legally entitled to terminate the tenancy agreement.

Because the buyer lawfully terminated the lease and the respondent did not violate any duty of protection or disclosure, the claimant could not ask for damages. Therefore, there was no unlawful or culpable breach of duty on the part of the respondent.

4 Ob 45/24g (18 March 2025)