October 25, 2023

Indexation Clauses in Rental or Lease Agreements

An agreed rent or lease is per se not automatically indexed. In principle, the claiming of indexation requires a corresponding indexation agreement in the underlying rental or lease agreement. The increase of the rent or lease and its enforcement is then governed by the contractual indexation clause.

Outside the scope of the Austrian Tenancy Act (Mietrechtsgesetz, MRG), the rent can essentially be freely agreed between landlord and tenant. The free rate is only limited by general civil law restrictions (e.g. usury).

In general, however, the purpose of indexation agreements is not to increase the tenant's rent by adjusting the value, but to continue the original relationship if the nominal monetary value changes at a later point in time due to inflation or deflation.

In Austria, the basis for such value protection clauses is usually the consumer price index (Verbraucherpreisindex, VPI), which is published monthly by Statistik Austria and represents the current price development on the basis of a so-called basket of goods. Such an indexation clause is structured by means of monthly or annual averages, whereby on the one hand the amount is adjusted to a specific fixed month, or on the other hand to the average of an entire year.

If such a clause is part of the rental or lease agreement, the landlord or lessor has the contractually agreed right to increase the rent on the basis of the agreed index at specified times or if specified threshold values are exceeded.

It is therefore of utmost importance to have a close look at the rental or lease agreement and its clauses – this applies not only prior to the conclusion of the agreement, but also in the event of a possible extension and especially if use is made of an indexation clause, in order to be able to understand whether the indexation is carried out in accordance with the agreement. If the rent or lease payments become excessively onerous due to index adjustments in individual cases, agreement should be sought with the landlord or lessor as to whether it would be possible to amend the agreement by mutual consent. It should be noted that an adjustment of the contract during the term of the contract is possible in principle but only by mutual agreement.

Recently, the Austrian Supreme Court (Oberster Gerichtshof, OGH) also paid particular attention to a certain contractual indexation clause. In the decision issued in March 2023 on 2 Ob 37/23t, the Supreme Court stated that – in the contractual relationship with a consumer – it would remain completely unclear in the specific, assessed clause which value measure should replace the index of consumer prices published by the Austrian Central Statistical Office. The clause was therefore non-transparent pursuant to Section 6 (1) no. 5 Consumer Protection Act (Konsumentenschutzgesetz, KSchG). In addition, the Supreme Court stated that the clause violated § 6 (2) no. 4 of the Consumer Protection Act, because a change in charges could occur as early as the first two months after conclusion of the contract if the clause was interpreted in a manner that was most hostile to customers.

With this decision, the Austrian Supreme Court has again intensified the attention paid to indexation clauses that have been used for years in a large number of contracts. Which is why it is advisable – especially if renting and leasing represents an essential part of the business – to subject existing contracts to renewed scrutiny and, if necessary, to consider amendments to secure them. The experts at Brauneis Rechtsanwälte are happy to advise you in this regard.