OGH: Property Managers Not Liable for Lost Rental Income

Jul 26, 2024 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) has ruled that property managers are not liable to apartment owners for loss of rental income if the latter are unable to rent out the apartment as a result of water damage to the apartment.

The plaintiff in the case at hand is a property co-owner as well as owner of an apartment in a property in Salzburg, and the defendant is the property manager appointed by the owners’ association. In the proceedings, the plaintiff sought to recover lost rental income for a certain time period.

Due to penetration of moisture under the plaintiff’s apartment, the floor in the apartment had to be opened for (an unsuccessful) investigation of the causes and has not been closed back up since.

The defendant was in breach of their duty to have the water damage repaired in a professional manner. Had the defendant been in compliance with their obligations, the repairs would have been completed by November 2019 at the latest and the apartment would have been available for renting out again.

The defendant argued in favour of being in a contractual relationship only with the owners’ association and maintained being innocent of any fault.

The OGH agreed with the lower court that the case should be dismissed.

In principle, property managers have a contractual relationship only with owners’ associations, but individual apartment owners may fall within the manager’s scope of protection as third parties not party to the contract. However, this presupposes that the third party has a legitimate interest in protection. Such an interest is to be denied if the third party has a congruent claim against one of the two contracting parties on the basis of their own particular legal relationship with one of the contracting parties. Such a congruent claim by the apartment owner exists between the owner and the owners’ association according to Section 16(7) of the Austrian Condominium Act (Wohnungseigentumsgesetz, hereinafter WEG).

However, no liability can arise from an infringement of the absolutely protected right of co-ownership and the right to own residential property, because the individual residential property owners have a duty to tolerate the use of the apartment for the maintenance of the common parts of the property or for the repair of serious damage to the building, pursuant to Section 16(7) of the WEG. Therefore, there is no case of unlawful infringement.

 OGH 5 Ob 160/23z (28 May 2024)