The purchase contract is the legal basis for the acquisition of real estate in Austria. The following article seeks to provide interested parties with an overview of some legal aspects that must be taken into account when purchasing a property.

Purchase offer as basis for the purchase contract

Often the buyer and the seller enter into a purchase offer or a preliminary contract on the purchase of the property in advance or are requested to sign such a purchase offer by the real estate agent that might be involved in the transaction. Depending on their form, purchase offers are usually already legally binding. Before signing of the purchase offer, numerous legal aspects must be considered (for more information on the purchase offer, see the following article in my blog). [Note MH: Please link the yellow writing to the article on the purchase offer]. If someone does not want to sign a purchase offer, but directly the purchase contract, the legal review mentioned in this article should be carried out analogously before signing the purchase agreement. Once legally binding provisions have been agreed in the purchase offer, they form the basis of the purchase contract and can no longer be unilaterally amended. Due to the legally binding nature of the purchase offer, the legal examination of the property should be carried out in any case before the purchase offer is signed. If a purchase offer or a preliminary contract already exists, then the mutual rights and obligations are set out in more detail in the purchase contract on this basis and the purchase contract is notarized and signed by the parties in order to enable the registration of the title in the land register. The notary’s task is to confirm the authenticity of the signatures, i.e. that the signatures actually stem from the signatories.

Content of the purchase agreement

The purchase agreement should contain a certain minimum content, such as the parties, an exact description of the object of purchase, how any encumbrances on the property are to be dealt with, the time of handing over the property and a declaration of conveyance. Furthermore, it is advisable to agree on the escrow settlement of the property purchase. The trusteeship ensures that the purchase price is not paid out to the seller until the buyer is registered in the land register. The seller, on the other hand, has the advantage that he actually receives the purchase price when he relinquishes his property. Thus, neither party has to make any advance payments. The involvement of the bar association ensures that the purchase price can only be paid out to the bank accounts approved in advance by the parties.

Subsidiary agreements to the purchase contract

The real estate purchase agreement also offers the possibility of including certain ancillary agreements between the parties.

For example, a right of first refusal in favor of the seller can be agreed in the purchase contract. In this way, the buyer undertakes to offer the apartment or house he has purchased for sale to the original seller as soon as he has received a binding offer to purchase the property from a third party. The original seller can then purchase the property within a certain period of time at those conditions at which the third party would purchase it. On the other hand, a right of repurchase gives the original seller the option to repurchase the property at his or her request.

A prohibition of encumbrance and sale can be used to ensure that the purchaser of the property can only use it as collateral or sell it with the consent of the respective entitled party. However, this only has an effect vis-à-vis third parties if it has been entered in the land register, which is only possible in favor of certain relatives. Under certain circumstances, the interests of third parties can instead be secured with a right of first refusal, as this informs them of a sale of the property and allows them to take appropriate countermeasures in this case.

If the purchase price for the apartment or the property is not to be paid immediately or only in part, a so-called life annuity can also be agreed, according to which the buyer must pay the seller a certain amount at regular intervals up to a certain point in time. This claim can also be secured in rem with a mortgage in the land register. In the event of non-payment, execution can be levied on the property.

Warranty claims under the purchase contract

Particular attention should be drawn to the warranty clauses in the purchase contract. The warranty in connection with the purchase of real estate is decisive for whether the seller of the apartment or house is liable, regardless of fault, for defects that were either already present or created when the property was handed over to the buyer. If the object of purchase is defective, then warranty law answers the question of whether the costs of remedying these defects are to be borne by the seller or by the buyer. The same applies to certain warranties given by the seller, such as the absence of encumbrances or the building condition of the property.

An exclusion of warranty between private parties is generally permissible. Buyers are often not even aware that so-called inspection clauses have the effect of excluding the warranty. However, if an entrepreneur acts as seller and the buyer is a consumer, a limitation of the consumer’s warranty rights and thus an exclusion of warranty is inadmissible according to the provisions of the Consumer Protection Act. This applies irrespective of the provisions of the purchase agreement on this subject.

In view of the relatively short warranty terms, the purchaser’s claims can be alternatively based on other legal grounds, such as damages or error. However, this is only possible if further preconditions are met. For example, the fault of the seller for the assertion of damages. In contrast, no fault on the part of the seller is required for the warranty. The applicability of these legal instruments can also be examined in the case of a fundamentally effective waiver of warranty.

It should also be noted that the seller has a certain duty of disclosure when selling a property, irrespective of any exclusion of warranty. Thus, if the seller is aware of defects, be they of a physical or legal nature, these should in any case be disclosed to the buyer from the outset and noted accordingly in the purchase agreement. Otherwise, the seller runs the risk of being exposed to subsequent claims for restitution by the buyer.

Against the background of the above-mentioned contractual structuring options for the warranty, increased attention should be paid to this point when drawing up the purchase contract. Often the purchase contract is drawn up by the seller’s lawyer, which usually provides for an exclusion of the warranty. Given the already high additional costs in connection with the real estate acquisition, the buyers might be inclined not to engage its own lawyer for reviewing the contract. Yet it is precisely these points that determine whether the buyers have to bear any costs for remedying defects in the property. Ideally, from the buyer’s point of view, it is already stated in the purchase offer that the warranty is not excluded. On the other hand, from the seller’s point of view it is desirable to exclude as far as possible any rights of the buyer, be it to warranty, damages or avoidance of mistake. By drafting the contract appropriately, years of costly litigation can often be avoided in advance.

Taxes and costs when acquiring real estate

When selling real estate, the provisions regarding real estate income tax, real estate transfer tax and court registration fees, among others, must be observed.

The real estate transfer tax and the registration fees are usually paid by the buyer and deposited together with the purchase price in an escrow account of the lawyer acting as trustee, who pays them directly to the tax office. The costs of drawing up the contract are usually also paid by the buyer. If real estate income tax is due, it is usually also paid by the trustee directly to the tax office from the purchase price.

The task of the lawyer in the purchase of real estate

The services of a lawyer in connection with the purchase of real estate include, in addition to the fiduciary handling of the purchase, the drafting and negotiation of the purchase agreement, ideally also legal advice in advance of the purchase offer, the performance of the self-calculation and payment of the taxes, a possible release of encumbrances of existing financing as well as the registration of the agreement in the land register. If the time and effort required in connection with the acquisition of the property can be estimated in advance, a lump sum is usually agreed for the lawyer’s services.

No liability is assumed for the correctness and up-to-dateness of the legal contents of this website. In particular, the presentation of the information does not constitute legal advice or is suitable to replace legal advice in case of concrete questions. If you have any questions, please do not hesitate to contact attorney MMag. Maximilian Höltl.