Buying Property in Austria

Legal Corner

Columns | Julia Abermann, Katharina Grossbauer | July / August 2009

Buying real estate in Austria can be a complex process – and an expensive one. And professional legal assistance is not only advisable, but often essential to navigate the vagaries of the Austrian system, particularly the ins and outs that apply to foreigners.

The process often begins with a preliminary contract, in which you lay the ground work for the final agreement. Here you need to include all the relevant points of the final contract, including the terms of the offer, details of the financing arrangement and an agreed date for the ultimate signing, which completes the contract.  Any other relevant aspects (e.g. state of repair, encumbrances, etc.) must also be laid out in the preliminary contract; this makes it easier for you to withdraw should agreements not materialize or should the seller make false promises. For example, when your offer is contingent on your obtaining financing, this needs to be stipulated. As a preliminary contract is binding on the buyer, it is also advisable to set a time limit on the offer, so that it does not remain binding indefinitely. This signing must fall within this time period  to preserve the initial agreement terms.

Next you need to research the property, reviewing the land register (Grundbuch) and all relevant documents before concluding a preliminary contract or signing an offer to buy. These records must be examined very carefully, for example, as in some cases there may be prior claims, or preemption rights entered, which can muddy title to the property. From this review, you can establish if it is possible to obtain a building permit, or if the property is contaminated in any way. N.B.: you must get the approval of the Austrian authorities for the right to purchase property or to use land for agricultural or forestry purposes, as well as for construction of any kind.

If all requirements are met, a lawyer or notary can draw up the purchase agreement. In addition to a detailed description of the real estate, the purchase agreement contains the pur-chase price, payment conditions and any further obligations between the buyer and vendor.

The Aufsandungserklärung – a key paragraph in the purchase contract – is also extremely important. This declaration allows the new owner to be entered into the land register, and records the seller’s explicit agreement to transfer the right of ownership. The contracting parties’ signatures must be certified by a notary.

In most cases, the vendor will request a prioritized order of disposal, which will, in effect, ‘hold one’s place’ in line for final contract authorization – even if the actual entry in the land register happens months later. The buyer can therefore be sure that no countervailing actions – e.g. a second buyer, double sale, a secondary lien or mortgage on the property – occur after the purchase takes place. The order of priority must be requested within one year and is handed over from the vendor to buyer once the contract is concluded.

In addition, a so-called ‘trusteeship’ (Treuhand) – a lawyer or notary to whom the pur-chase amount is paid – is often important to the purchase of property in Austria. The trustee holds the money in escrow and transfers the money to the seller after the agreed upon condi-tions have been met. This includes the tendering of all documents for the entry in the land reg-ister: the order of priority by the vendor, possible cancellations (right of attachment, etc.) or the fulfilling of any other actions or features that the buyer has been promised.

If a bank is involved in the process as a creditor, this lawyer or notary also acts as a trustee for the bank. He is responsible for the recording of the right to take title and the terms of the mortgage in the land register.

All these procedures cost money: In addition to fees for the notary or lawyer and the real estate broker (costs are normally also defined in the contract), a 3.5 per cent land transfer tax must be paid to the tax and revenue office (Finanzamt). Furthermore, a fee of one per cent of the purchase price for listing in the land register is required. The lawyer or notary often includes the registration fee and transfer tax in the clients’ accounts and will transfer the sum directly to the appropriate authorities. This speeds up the process of getting your purchase entered into the land register. For the right of attachment, a fee of 1.2 per cent of the purchase amount must be paid on top of the other fees.

So much for the normal procedures: But for foreigners from non-EU countries, there are a few obstacles more:

First, purchasing real estate is restricted for certain nationalities. (Because European law guarantees equal treatment for all citizens of EU-member states, only third country nationals – those not belonging to the EU and/or the EEA – have restricted access to property in Austria. EU-citizens only need a confirmation that no special requirements apply (Negativbestätigung).

Third country nationals, however, have to undergo a review by a competent authority (In Vienna, this institution carries the remarkable name of Ausländergrundverkerskommission, the Foreigners’ Trafficking in Property Commission!) in order to register as a property owner – of a flat, a house or other property – in the land register. The specifics of the law depend on the region of Austria in which the purchase takes place. It is therefore advisable to get in touch with appropriate authorities and to check the details of conditions in the applicable region. The application has to be filed at the relevant regional office, usually the state government or city administration office (Amt der Landesregierung, Bezirksverwaltungsbehörde) accompanied by a purchase contract or draft, a declaration of intended use; a copy of the entry in the land register; proof of citizenship; copy of a valid passport; and proof of income.

Typically, approval will be granted as long as the buyer’s intentions are cultural, social or economic, and there is no evidence of a political motive.

With a positive decision of the Ausländergrundverkehrskommission, you must then file the application for entry in the land registry at the county court of the region where the property is located.

With county court approval, the property is yours!

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    the vienna review July / August 2009