OGH: Depreciation of Partitioned Co-Owned Real Property

Nov 18, 2022 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, OGH) has clarified that the depreciation in value in the course of the partition of real estate is to be assessed on the basis of the actual co-ownership structure. 

In the case at hand, the plaintiff was a 50% co-owner and the two defendants were co-owners of a property with 49% and 1% respectively. The plaintiff requested the dissolution of co-ownership by establishing residential ownership.

The defendants argued that the partition of the real estate through apartment ownership was impossible or unfeasible, in particular because of the substantial depreciation in value.

The calculation of the depreciation was disputed. The court of first instance based its calculation on the hypothetical market value of the property and on the assumption that the property was in sole ownership. The court of appeal, on the other hand, was of the opinion that a calculation would require the total of the market values of the co-ownership shares (these would be about 20% lower than the property in sole ownership).

The Austrian Supreme Court expressed its opinion thus:

The partition of a property through the establishment of apartment ownership ( Section 3(1)(3) of the Condominium Act (Wohnungseigentumsgesetz, WEG) is a special form of property division, to which the principles established for property division pursuant to Section 843 of the Austrian Civil Code (Allgemeines Bürgerliches Gesetzbuch, ABGB) apply. Accordingly, property division is only possible and feasible if the property can be divided without a significant depreciation in value.

According to the Austrian Supreme Court, an assessment of significant depreciation is to be based on the specific facts of the case, i.e. including the specific co-ownership structure, and not on hypothetical sole ownership. This is also supported by the fact that the regulations on property valuation prohibit experts from including fictitious facts in their assessment. If one were to assume (fictitious) sole ownership, which would reflect the proceeds of sale in the partition by sale (which is subordinate to partition in kind), this would be in contradiction to the priority given to partition in kind. However, the law does not provide that the more economically favourable alternative of partition should enjoy priority.

OGH 5 Ob 114/22h (12 October 2022)