OGH: Lease-Purchase Model for Apartments Under Scrutiny!

In its ruling on July 9, 2024, case number 10 Ob 29/24y, the Supreme Court (OGH) examined the applicability of the Property Developer Contract Act (BTVG) to lease-purchase models for apartments. The key question was whether a paid option contract aimed at acquiring apartment ownership qualifies as a property developer contract under § 2 (1) BTVG. This ruling has significant implications, as an option fee paid before the completion of the contractual object may be subject to the security requirement under § 7 (1) BTVG. Lease-purchase models are particularly popular in the current environment of challenging financing conditions, which makes this ruling particularly relevant.

In the case at hand, the parties entered into two separate contracts in 2020: a lease agreement and an option contract. The option contract granted the plaintiffs, as future owners, the right to purchase the apartment at a specified price after ten years from the start of the lease. The plaintiffs paid an option fee before the apartment's completion, which exceeded the amount specified in § 1 (1) BTVG. This fee was to be credited towards the purchase price in the event of exercising the purchase option. However, no security was provided for the option fee or the planned acquisition of apartment ownership in accordance with the BTVG's security models. Consequently, the plaintiffs demanded the return of the option fee, arguing that it was not due without the required security according to the BTVG models.

The defendant property developer argued that the BTVG was not applicable because the option contract was not a direct contract for acquiring ownership but merely granted the possibility of a future acquisition. Furthermore, the security obligation had ended with the handover of the apartment. The first instance court dismissed the lawsuit and denied the applicability of the BTVG to option contracts. The appellate court, however, viewed the option contract as a property developer contract under the BTVG, thereby obligating the developer to refund the option fee.

The Supreme Court upheld the appellate court's decision and dismissed the developer's appeal. It found that, although the option contract and the subsequent purchase contract to be concluded by exercising the option were separate legal transactions, the option contract also aimed at acquiring apartment ownership. At the time of the agreement, the apartment had not yet been constructed, and the BTVG aims to mitigate the risk of advance payments. This protective provision also applies to the option holder, who could acquire a right under § 2 (1) BTVG and makes an advance payment in the form of an option fee before the completion of the object.

The Supreme Court emphasized that the formal structure of the contracts is irrelevant; otherwise, the mandatory protective provisions of the BTVG could be easily circumvented through clever contract designs. A claim by the developer only becomes due when the securities provided by the BTVG for the purchaser of an unfinished object are actually provided. The obligation to provide security ends only when the completed contractual object has been handed over and the agreed legal position of the purchaser is secured.

Since both the option contract and the dependent purchase contract ultimately aim at acquiring apartment ownership, the security obligation could not end before securing this legal position. Thus, the option fee was paid contrary to the provisions of the BTVG and was not subsequently due, entitling the plaintiffs to a refund claim under § 14 BTVG.

The Supreme Court clarifies with this ruling that lease-purchase models for unfinished objects also fall under the provisions of the BTVG. This decision is logical and consistent, as an option – the possibility to acquire an apartment through a declaratory statement – cannot exclude the applicability of the BTVG. Upon closer examination, there is no difference between an option and the offering of an apartment by the developer: In both cases, the buyer can freely choose whether to purchase the apartment. In the case of an option, they exercise their right, while with the developer's offer, the buyer decides to acquire the apartment, usually by submitting a purchase offer. There is no basis to treat these two cases differently under the BTVG framework.