Graz, Austria

Effects of Opening Insolvency Proceedings on Real Estate Purchase Agreements in Austria

By Mario Kapp and Raffaela Lödl-Klein, KAPP & PARTNER Rechtsanwälte GmbH

Real estate often represents a substantial part of the assets of a person or company. If insolvency proceedings are opened against the owner’s assets, naturally the insolvency administrator seeks to keep the property within the insolvency estate. However, if the current debtor has only recently concluded a purchase contract regarding the property, the question arises as to whether the property remains in the debtor’s assets.

Under Austrian law, the acquisition of ownership of property requires the new owner to be entered into the land register. Section 13 of the Insolvency Code (IO) states, in this respect, that entries in the land register may only be made if the relevant application is received by the land registry court before the insolvency proceedings are opened; after the opening of the insolvency proceedings, a comprehensive “land register-block” applies, thus preventing the risk of a reduction of the debtor’s assets.

Whether the buyer acquires ownership despite the opening of insolvency proceedings against the seller, depends primarily on the stage of the execution of the purchase contract. Section 21 IO states that a contract not yet fully performed by both parties entitles the insolvency administrator to either perform the contract or to withdraw from performance entirely. If the buyer has already paid the purchase price, his claim for restitution of the purchase price becomes an insolvency claim. Generally, he will only be reimbursed with a fraction of the purchase price.

The interposition of a trustee protects the buyer. After both parties have signed the purchase contract, the buyer transfers the purchase price to the trustee’s account. The trustee can successfully arrange for an entry after the opening of the insolvency proceedings if a notarially certified purchase agreement is signed before the opening of the insolvency proceedings.

Conclusion

The fiduciary execution of a property purchase contract protects the buyer even in the event of insolvency. If both parties have fulfilled their obligation with regard to the trustee as stated in the purchase contract, the insolvency administrator cannot prevent the sale of the property.


Mario Kapp

Mario Kapp

GGI member firm
KAPP & PARTNER Rechtsanwälte GmbH
Law Firm Services
Graz-Seiersberg, Austria
T: +43 316 22 59 55
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W: www.kapp.at

KAPP & PARTNER Rechtsanwälte GmbH has four partners and five associates and an outstanding reputation for bankruptcy and real estate law in Austria. The firm mainly focuses on bankruptcy law, reorganisation law, company restructuring, commercial law, banking law, real estate law, and international law.

Mario Kapp was the sole founder of the law firm in 2006. He is also the Managing Partner and specialises in bankruptcy law, corporate law, and business restructuring.
Raffaela Lödl-Klein

Raffaela Lödl-Klein

GGI member firm
KAPP & PARTNER Rechtsanwälte GmbH
Law Firm Services
Graz-Seiersberg, Austria
T: +43 316 22 59 55
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: www.kapp.at

Raffaela Lödl-Klein is Managing Partner of KAPP & PARTNER Rechtsanwälte GmbH, and specialises in real estate and corporate and insolvency law. She joined the firm in 2013.


Published: Real Estate Newsletter, No. 12, Autumn 2020 l Photo: mp_ictures - stock.adobe.com

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