OGH Reiterates Ruling on Property Division

Feb 17, 2023 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) has maintained its recent ruling on how to assess diminution in value in the case of gavelkind property division. Rather than using the property’s nominal market value free and clear of encumbrances, the property’s market value under consideration of co-ownership shall be used as the base value for calculation.

In the original case, the parties to the dispute were each half owners of a property including a residential building. Division through the creation of residential ownership of two flats based on the proposal of the defendant was theoretically possible. It was disputed, however, whether such a division would lead to a considerable reduction in the value of the common property.

Hence, the plaintiff requested selling the property and splitting the proceeds.

The lower courts upheld the action. The fictitious market value of the property without encumbrances of EUR 344,000 was compared to the fictitious market value after division of EUR 266,000. In addition, the costs incurred in order to prepare for the establishment of condominium ownership amounted to approximately EUR 10,000, which meant a total reduction in value of almost 26%.

However, the OGH overturned both decisions.

A real division is possible if the property can be divided without a significant reduction in value and there are no legal obstacles. The OGH has already established the relevant principles for the assessment of depreciation in value in 5 Ob 114/22h (available in USANCEN), to which the court has adhered. 

The value before the division is to be based on simple co-ownership and the existing ownership structure (i.e., the sum of the co-ownership shares), but not on the market value of the notionally sole-owned property. In the case of division through the creation of apartment ownership, the reduction in value therefore applies to the relationship between the previously simple co-ownership shares and future apartment ownerships. This is not intended to result in a considerable reduction in the value of the previous co-ownership shares. 

In the original case, it was therefore necessary to supplement the expert opinion in order to obtain an accurate basis for decision-making.

OGH 5 Ob 167/22b (24.11.2022)