OGH: Bad Faith and Building on Third-Party Plots

Sept 8, 2023 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) has clarified its case law on the original acquisition of land under Section 418 sentence 3 of the Austrian Civil Code (Allgemeines Bürgerliches Gesetzbuch, hereinafter ABGB).

The plaintiff is the sole heir of her deceased great-aunt who owned a plot of land on which her husband (the builder) had built a detached house financed with his own funds. The current owner of the house is the construction manager’s great-nephew (i.e., the legatee). The plaintiff is now claiming to be the sole owner of the land as well as the house because no superaedificate situation was inexistence (which was undisputed in third instance). The defendant argued that the original landowner had promised the builder that she would gift him the property before construction began. As she had not kept her promise, the builder had also acquired ownership of the property pursuant to Section 418 sentence 3 ABGB.

The plaintiff challenged the first instance court’s finding that the promise of gift had not been honoured. However, the appellate court did not deal with the plaintiff’s objection to the evidence because in the court’s opinion it was not relevant to the question of the original acquisition of title under Section 418 sentence 3 ABGB. The OGH ruled that this was wrong. Here is why:

According to Section 418 Sentence 3 ABGB, a good-faith builder acquires ownership of a building site if the landowner is aware of the construction project and does not forbid it. The main objective here is the sanctioning of dishonest landowners. According to case law, this provision shall be excluded by a valid agreement on the use of the building site. However, the OGH has also applied Section 418 sentence 3 ABGB to cases in which a builder had been prevented from becoming the owner of the house and land due to the fact that the landowner had promised the land to the builder but subsequently prevented him from building. If the landowner is in breach of such a promise, the situation will be as if there had been no agreement.

In the case at hand, if there had been a promise to gift the land and the great-aunt had not kept it, then Section 418(3) ABGB would apply. If she had allowed the builder to construct the building, whereby he was to become the owner only of the superaedificate, the great-aunt could not be accused of having acted in bad faith. However, this would result in the fact that the preconditions for original acquisition of title under Section 418(3) ABGB would not be met.

OGH 1 Ob 58/23w (1 August 2023)