Class actions for consumer protection in Austria: development from a civil law to a case law jurisdiction

Klaus Pfeiffer
Weber & Co, Vienna
k.pfeiffer@weber.co.at

Introduction

Companies use general terms and conditions in which some provisions may be held illegal. Consumers can assert the illegality of these clauses in individual cases, in particular relying on general mechanisms against unfair clauses or on the Consumer Protection Act (Konsumentenschutzgesetz). Individual lawsuits do not have a general binding effect and companies may continue to use the contested clauses in their general terms and conditions.

Certain entities have the right to request from companies in class actions to desist from using unfair clauses in their terms and conditions (omission) and to publish the court decision or judgment in public newspapers (prevention). Damage claims cannot be raised in such general lawsuits.

Up to July 2024, only a limited number of Austrian entities – ie, the Federal Chamber of Commerce, the Federal Chamber of Labour, the Federal Chamber of Agricultural Workers, the Presidents’ Conference of the Chambers of Agriculture, the Trade Union, the Association for Consumer Information and the Senior Citizens’ Council – could file class actions under the Consumer Protection Act.

Certain foreign entities, as set out under Article 5 of Directive 2020/1828/EU,^[1] have been added in July 2024 provided that they pursue the protection of general consumer interests. At the same time, Austria enacted the Qualified Entities Act (Qualifizierte-Einrichtungen-Gesetz) which gives private companies the right to be registered as a qualified entity which can also act in the interest of consumers and request companies to desist from using unfair clauses in their consumer contracts.

While class actions under the Consumer Protection Act were very common against banks, insurance companies and energy providers, landlords initially were not targeted.

The Austrian Federal Chamber of Labour, however, initiated several class actions against companies in the real estate sector based on unfair clauses in leases. The Supreme Court ultimately decided on 20 of these class actions, declaring hundreds of clauses as unfair. In particular, the Supreme Court examined clauses on rent, operating costs, indexation and maintenance and repair and adopted a more consumer-friendly (tenant-friendly) stance to leases.

The judgments should be observed when drafting or assessing leases even though court decisions do not constitute legal precedents (authorities) under Austrian law and even though the Supreme Court applies a different (more consumer-friendly) test in class actions.

In any event, Austria has made some steps towards a case law jurisdiction.

Example: indexation

Indexation clauses are very common in Austria and rent is usually linked to one of the indexes published by Statistics Austria. In the last two years, the Supreme Court has held that:

• indexation must be excluded for the first two months in consumer contracts;
• indexation cannot be linked to the Austrian Construction Price Index (instead of the Consumer Price Index), mainly because it developed faster (differently);
• indexation must not be retroactive (using a base month prior to the contract date); and
• references to subsequent indexes must be clear and transparent.

Several typical indexation clauses were held illegal, potentially affecting hundreds of thousands of leases in Austria (including leases for public housing by the City of Vienna). If parts of a contractual clause are illegal, the entire clause is deemed void (not just the affected parts). It is usually not possible in consumer contracts to reduce the clause to its legal parts by means of interpretation.

Some tenants have already filed individual lawsuits requesting repayment of any amounts paid under index clauses. Real estate companies may have to make provisions in their financial statements, in particular as the statutory limitation period is 30 years. The new Austrian government plans to address this issue in the upcoming months.

Example: maintenance and repair

Under the Austrian Civil Code, landlords and tenants can allocate maintenance and repair obligations freely apart from certain core obligations that must remain with the landlord. Under the Austrian Tenancy Act (Mietrechtsgesetz), landlords have enhanced obligations provided that the Act applies in full (ie, old buildings with building permits before 1945/1953).

Leases usually contain clauses that allocate a maximum of maintenance and repair obligations to tenants. The Supreme Court held that such a transfer of obligations constituted (i) a deviation from the general (dispositive) rules under Austrian law; and (ii) an additional financial burden for the tenant. The transfer of obligations, thus, must be legally justified. The Supreme Court concluded that a general transfer of maintenance and repair obligations is illegal.

Final remarks

The case law for leases has evolved very quickly in the last 20 years even though the laws have not changed substantially. Landlords should adapt their leases (general terms and conditions) on a regular basis in order to avoid class actions or individual lawsuits. For the legal profession, this means that lease law has become a much more specialised field where expert knowledge is required.