What are the usual steps to buy a real estate property in Austria?
Potential buyers should be careful to express possible uncertainties in their intention to purchase, as an oral contract – even concluding mere behaviour – can be binding.
A preliminary agreement is common in Austria only if a broker is involved, as an oral contract based on consensuality is already binding.
In order to officialise the purchase of a property in Austria, there are two steps. One is the buying contract, called “Titel”. The second part is the entry into the land register which is known as “Modus“. This is also the point when the payment for the transaction is usually done. Therefore, a written contract with verified signatures is necessary. Only for this you need the court or a notary, but if he or she also draws up the sales contract, he has to act on behalf of both parties, which is not always easy. If both parties want to achieve the best for themselves, they both need a lawyer to act only for them, which could be better for both, if the lawyers are able to “enlarge the cake”. It is advised for a foreign investor to hand over the payment to either a lawyer who is a member of the “Treuhandbuch” at the Austrian law-bar. The money will be handed over to the seller once the entry into the land registry has been made. Please note that the cancellation of a deal without any costs often is not possible in Austria. If investors need the option to redecide, this possibility of cancellation or precedent conditions should be included in the buying contract.
The whole purchase process may take several months until the property is legally transferred to the new owner.
What legal checks should be done before buying a property?
It is recommended that the buyer engages a lawyer to carry out due diligence in order to confirm that:
- The property complies with the urban planning regulations of the area.
- The vendor is the registered owner in the Land Registry.
- The property is free of charges in the Land Registry and up to date in the payment of the taxes and community fees.
Buying property through a company in Austria?
Legal entities registered in Austria have the right to purchase almost any type of property. However, 51% of the company’s ownership must belong to EU citizens or EU-registered legal entities, if you don’t want a complicated procedure.
In compliance with the Austrian Money Laundering Prevention Rules, lawyers, banks and notaries dealing with a real estate transaction are obliged to investigate the origin of funds to be invested in the purchase of the property. Failure to do so when money laundering is involved exposes these professionals to very serious penalties, both criminal and economic.
Most law firms follow a protocol which involves at least signing a form and providing documentary evidence of the data oft he client, proof of funds in bank account, tax declarations, etc.
If a suspicion of money laundering arises, a report must be reimbursed to the Austrian Money Laundering Registration Office at the Federal Ministry of the Interior.
What are the purchase costs and taxes?
Fees usually amount to 10,5% on top of the offer being made. This will all be detailed on the „Kostenaufstellung“ form which accompanies the offer document.
Currently fees are normally:
- Real estate transfer tax (RETT) 3,5% (if parties are spouses, registered partners, siblings, children, grandchildren or descendants): 0,5% on the first € 250,000, 2% on the next € 150,000 and 3,5% on the excess.
- Land Registry 1,1%
- Estate agent costs 3% + vat
- Lawyer‘s fees are on a scale set by law and you should allow from 2% + vat
- VAT is 20%, if enterprises are concerned
Fixtures and fittings/furniture can be split from the total purchase price, so that RETT etc is only levied on the actual price of the building.
What documentation must the buyer have in place before buying a property?
When signing the contract, the contracting parties need to bring an official photo-ID. The purchaser must also present an original proof of citizenship or a passport.
In individual cases, it may be necessary to submit further official documents, for example if a prohibition on sale and encumbrance is to be recorded in the land register.
What precautions have to be taken regarding off-plan purchases?
The developer has to fulfil special security obligations. The possible securities are laid down in §§ 8 ff BTVG. There are three main options to fulfil the necessaray coverage. The most common security model in Austria is the so called “land registriy security model” (for details see below). Nevertheless also guarantees in a manner of obligational law (deposit of a bank guarentee) or pledges are sufficient.
If the developer chooses the ‘land registry model’ the law states the compulsory election of a trustee (§ 12 BTVG) – either a laywer or a notary is permitted as an escrow agent. The trustee is obliged to provide the purchaser with legal information and a precise assessment regarding the project (especially towards effective safeguards). Furthermore the obligation contains the observation of the (necessary) notifications of the progress in construction. Pursuant to the legal requirements the two main ingredients of this security model are:
Record in the land register: The developer may only accept purchase price payments once a special annotation has been entered in the title register.
Payment schedule: Payments are made according to the progress of the construction and based on notifications of the progress in construction from a surveyor (court-certified expert).
Tips for clients looking to build their own property:
First of all you have to select and buy land, which is then entered in the land register. Select reliable construction company and plan the house with her. Have a submission plan and energy certificate drawn up.
With these documents and the building description the lawyer can get for you the application to the building office for planning permission and the country for funding. The subsidies are adjusted according to energy efficiency, income and general situation of the applicants, etc.
Annual running costs?
Property taxes („Grundsteuer“) in Austria are levied on the assessed value of real property, which is generally less than the prevailing market value.
It is levied at a basic federal rate, multiplied by a municipal coefficient. The basic federal rate is generally 2% and the municipal coefficients range up to 500%.
What minimum legal checks should be done when selling a property?
There are no statutory disclosure requirements for a seller. However, in the purchase and sale contract, the seller usually guarantees the correctness of any information disclosed and warrants that he did not withhold any relevant information.
Contracts frequently contain representations and warranties relating to possible statutory liabilities of the buyer and defective or faulty performance of the seller, including those relating to: encumbrances and third party rights; the dedicated use of the real estate according to zoning ordinances and building regulations; environmental issues; administrative and corporate approvals; and taxes. Usually the seller warrants his/her ownership of the property and warrants that there are no other encumbrances other than those registered in the land register or otherwise disclosed. The statutory warranty period for real estate is three years, unless otherwise agreed upon by the parties. Alternative warranty periods are common and depend on the warranty. The buyer must notify the seller of defects or defective performance within the relevant warranty period. If the seller does not accept liability for the defect, the buyer must sue to prevent the claim from becoming statutorily barred. In addition, a buyer can claim damages for negligent or wilful breach of contract.
Selling costs and taxes:
The seller must pay taxes, namely the so-called real estate income tax, called ImmoESt.
This amounts to 30% of the profit, which results from the difference between the acquisition costs and the proceeds of sale. It always calculates between the sale and the last purchase. Not tax-relevant is the gratuitous transfer of a property. Therefore, donations and inheritances do not attract ImmoESt.
But there are also exceptions:
“Home Builders Exemption“: if the seller has manufactured the building himself and has not used it to generate income (rental) in the last 10 years.
Primary residence exemption: if the house or condominium has served as the principal residence of the seller for at least two years from the date of purchase until the sale or for at least five of ten years prior to the sale, and is given up.
Acquisition costs include the purchase price at that time, the costs at that time, taxes and fees, the production and repair costs, if these are clearly assigned to the object, which must be proven by invoices.
Flat-rate payment for so-called “old property“: If the property was purchased for a consideration prior to 31.03.2002, the seller can also have ImmoESt flat-rate, namely 4.2% of the selling price or – if the sold property only after 31.12.1987 was redeveloped into building land (so-called reclassification) – in the amount of 18% of the selling price.