The Austrian Property Development Contract Act – an Overview
By Raffaela Lödl and Mario Kapp, KAPP & PARTNER
The Austrian Property Development Contract Act (Bauträgervertrags- gesetz: BTVG; dating back to 1977) applies to real estate contracts in which the buyer makes payments of more than EUR 150,00 per square meter of floor space before the completion. The outstanding construction constitutes the main difference to a general pur- chase of an exisiting property. Due to possible risks of those transaction, the Austrian legislator created a special law, which seeks to protect buyers of properties under-construction from the loss of their advanced payments.
This situation can occur if a construction company faces bankruptcy or generally fails to complete the project. The treaty regards to the aquisition of property, building law, established rights and the right of use and leasing.
In ‘Buying under-construction’- transactions the purchase agreement is subject to the Austrian Property Development Contract Act (BTVG). The lawyer/trustee needs to draft a special contract, which is governed by the regulations of the BTVG (mandatory for so called ’B2C-transactions’). The compulsory minimum content of the contract is regulated in § 4 BTVG, i.e. designation of the purchase object, construction schedule, the security model and plans, construction and equipment descriptions.
Refraining from drafting a mandatory contract underlying the provisions of the BTVG will cause penalties (for the constructor).
The developer has to fulfil special security obligation’s. 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 suffcient.
The ‘land registry security model’
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).
The procedure in general
The developer appoints a trustee, which usually also drafts the contract. After the signing of the contract the buyer transfers the purchase price to an escrow agent. The escrow agent makes payments to the developer according to the payment schedule laid down in § 10 BTVG, that means payment is made according to the progress of the construction works; ie payment schedule ’B’:
- rate: 10% – Start of construction;
- rate: 30% – Completion of shell and roof;
- rate: 20% – Completion of rough installations;
- rate: 12 % – Completion of the facade and windows;
- rate: 17 % – Completion and handover of the i.e appartement;
- rate: 9 % – Completion of the entire housing complex;
- rate: 3 % – Three years from handover (secure for warranty claims!).
Completion of the respective construction phases is determined by a court-certified expert from the field of architecture/a civil engineer with expertise in structural engineering. The surveyor is directly liable to the buyer. If the constructor provides construction service in a way that conforms to the contract and the law in general the escrow agent will in exchange fulfil the payment towards him.
Insolvency of the constructor
In case of an insolvency of the constructor several consequences are feasible. There could be an entry of the liquidator in accordance to the contract or the aquirer takes over the completion of the contract. Furthermore a withdrawal of the contract is plausible.
Our law firm implements various construction projects within the meaning of the Austrian Property Development Contract Act (BTVG) with construction developers. We are drafting all the conctracts, acting as trustee under the BTVG and supervising the whole project (’interface function‘). Since our law firm also specialises in insolvency law we are a perfect partner especially for developers, buyers and the involved banks. Join us!
Mario KappKAPP & PARTNER Rechtsanwälte GmbH, Graz, Austria
T: +43 316 22 59 55
Published: May 2018 l Photo: photo 5000 - Fotolia.com