OGH Comments on Loan Bill Draft Re Senior Citizens

Feb 10, 2023 Benn-Ibler Rechtsanwälte GmbH

Ministerial Bill Draft 236/ME XXVII GP is intended to amend the Hypothekar- und Immobilienkreditgesetz, hereinafter HIKrG (Mortgage and Real Estate Loans Act) with the intention to facilitate the provision of loans to senior citizens. In its current version, it seems unclear whether creditworthiness standards provided for in HIKrG would still allow granting loans to individuals if due to the age of a borrower it could be expected that the borrower will pass away during the term of the loan contract. Paragraph 5 in Section 9 HIKrG is intended to eliminate this problem as follows:

“Even if there are definite indications, for example, with regard to the age or health condition of the borrower, pointing at the fact that the borrower might pass away during the term of the contract, this eventuality can be ignored if

1. it is probable that the borrower will, during their lifetime, fulfil their respective obligations in connection with the loan agreement and

2. the value of the borrower’s immovable property, temporary property, or the value of any other assets owned by the borrower and serving as collateral offer sufficient guarantee to cover the debts related to the loan contract and any liquidation costs.”

According to the Austrian Supreme Court, it is not evident whether lawmakers are aiming at general or age-related rules for granting loans. According to the wording of the draft, however, this provision would also cover persons who are likely to pass away during the term of the contract, not because of their age, but because of illness. If Austrian lawmakers are seeking to establish rules on the grounds of age, then the Austrian Supreme Court proposes to phrase this fact accordingly. If, on the other hand, legislators wish to create a general rule, the reference concerning age would need to be deleted.

The Austrian Supreme Court also identified problems in the wording of the requirements for credit worthiness: According to the proposed wording of the bill, ‘sufficient guarantees’ are required to cover any debt associated with the loan agreement and any liquidation costs. However, the explanatory notes and brief information only provide for ‘guarantees’ or the mandatory provision of guarantees. The Austrian Supreme Court assumes that this could create a possibly undesirable room for discretion, which can be eliminated simply by referring to ‘guarantees’. According to the legal materials, this refers to ‘(outstanding) balances’. This choice of term is misleading according to the Austrian Supreme Court, since at issue is the assessment of creditworthiness prior to the granting of a loan, at which time, no outstanding balances exist.

The federal law is to come into force on 1 April 2023.

Austrian Supreme Court 509 Präs 87/22y (09.01.2023)