Austrian OGH on Price Reductions in Real Estate Purchases

Mar 21, 2025 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, OGH) has ruled on a claim for price reduction in a real estate transaction.

In the case at hand, the plaintiffs had been the purchasers of the defendants’ basement premises in a 1915 building for the price of EUR 188,000. The defendants had bought the premises, which had originally been licensed as a workshop, at a low price and then done some extensive renovation work.

After the plaintiffs, who had wanted to use the property as a dwelling (which was illegal) had moved in, damp patches began to appear on the walls. The costs for repair would have been approximately EUR 85,000 if the premises had been completely renovated at the time the contract was signed. At the time of the signing of the purchase contract, the market value of the premises, excluding price reduction due to the damp areas, was approximately EUR 182,000. Considering the damp damages and the fact that a decision to have them repaired would have to be obtained from the owners’ association, the value of the premises at the time of the purchase agreement was approximately EUR 87,500.

The plaintiffs’ claim was for a price reduction of EUR 70,000.

The first instance court granted part of the claim and dismissed the remaining costs claimed. However, the court of appeal upheld the plaintiffs’ appeal and granted the claim in its entirety.

The OGH has now come to the following conclusion in its judgment:

The reduction in price shall be determined in accordance with the relative method of calculation, according to which the reduction in performance shall be in the same proportion as the value of the premises in a defect-free condition would have been at the time of the conclusion of the contract to the value of the defective premises. The reduced price of the premises is therefore in the same proportion to the agreed price as the value of the premises with a defect would be to the value without a defect.

A price reduction is not the same as valuing the costs of repair. Rather, the calculation is based on the objective value proportion. However, this does not exclude the inclusion of renovation costs in the determination of a value proportion if expert witnesses would consider this pertinent for a correct valuation.

OGH 9 Ob 29/24s (13 February 2025)