OGH: Tenant Claims-Assignation not Illegal

Apr 7, 2023 Benn-Ibler Rechtsanwälte GmbH

Client representation under Section 37(3)(9) of the Austrian Tenancy Act (Mietrechtsgesetz, hereinafter MRG) is permissible even if such activities are carried out on a professional or commercial basis. This does not constitute acting as a bogus solicitor.

The plaintiff is an organisation for the promotion of economic interests of entrepreneurs, in particular, Austrian lawyers. The defendant, on the other hand, is a litigation funder involved in tenancy proceedings whose activities consist of getting tenants to assign claims against their landlords to the organisation. In their advertisements, the litigation funders routinely claim that them representing tenants comes with no cost risk to the tenants and that no grounds for lease termination are created by rental-rate evaluations. The plaintiff, however, is seeking an injunction for the organisation to stop litigation funding and advertising as well as claiming that their activities come with no risk to the tenants. According to the plaintiff, such conduct constitutes puffery. The defendant objects that such assignations do not constitute circumvention of Section1 of the Austrian bogus lawyer regulations, hereinafter Winkelschreibereiverordnung.

While the court of first instance dismissed all claims, the court of appeal found the claim of violation of the Winkelschreiberverordnung to be justified.

The OGH considered as follows:

The defendant has not been advertising that they represent their clients themselves, but instead provide the information that lawyers or tenancy protection organisations are being funded by the organisation’s activities. The plaintiff's argument that rental-rate evaluations would have the effect that fixed-term tenancies would not be readily extended by landlords is untrue. Professional representation of parties under Section 37(3)(9) of the MRG is not an activity reserved for solicitors. The monopoly on representation by solicitors pursuant to Section 8 (2) of the Austrian Bar Code (Rechtsanwaltsordnung, RAO) does not preclude the right of individuals or organisations to legally represent parties on a limited basis. Disguised assignments can be assumed whenever it is clear from the frequency of assignments that the party intervening as plaintiff is not acting as a representative for the creditor, but is formally acting as plaintiff in their own name, thereby bypassing Austrian bogus solicitors regulations. However, since the defendant claims having acted on Section 37(3)(9) MRG, this situation did not exist according to the OGH, and the defendant was therefore to be upheld.

OGH 4 Ob 132/22y (31.01.2023)