Value Adjustment Clauses in Rent Review Proceedings

On April 2, 2025, the Austrian Supreme Court (OGH) ruled in case 5 Ob 166/24h, providing essential clarification for real estate law practice. The key issue was when a value adjustment clause in a rental agreement is valid and how far the court’s competence extends in rent review proceedings.

Background: Value adjustment clauses allow landlords to adjust rent in line with economic developments—mainly inflation—typically based on the Consumer Price Index. The goal is to maintain the rent’s real value over time.

In this case, a tenant applied for a rent review under § 37 para 1 no 8 MRG, arguing that the rent, including indexation, exceeded the statutory cap. The landlord countered with objections of limitation and denied any overcharge.

The conciliation board partially upheld the tenant’s claim, finding the rent exceeded the limit from November 2011 to September 2021. The first-instance court largely agreed and ruled the rent agreement partially invalid for exceeding certain thresholds in specific periods, ordering the landlord to repay the overcharges.

The appellate court went further, declaring the entire value adjustment clause invalid as grossly disadvantageous and voiding all rent increases based on it.

However, the Supreme Court overturned this, restoring the first-instance ruling. It clarified that proceedings under § 37 para 1 no 8 MRG are limited to reviewing the rent’s compliance with legal limits, not the civil validity of contractual clauses, which must be resolved in separate litigation.

The OGH affirmed that value adjustment clauses under § 16 para 9 MRG are generally permissible if clearly agreed upon. In this case, the lease contract from 2008 explicitly provided such an indexation based on statutory guidelines.

The appellate court exceeded its authority by invalidating the entire clause since the tenant only challenged excessive rent, not the clause’s validity per se.

The OGH also referenced its earlier case 8 Ob 37/23h, where a similar clause was deemed grossly disadvantageous in a consumer protection action—a ruling irrelevant for rent review proceedings under tenancy law.

In conclusion: The rent, adjusted via the clause, complied with legal standards, and the first-instance decision was reinstated.

For practice: Value adjustment clauses remain valid if precisely and lawfully agreed. Civil invalidity or unfairness must be determined separately, e.g., in consumer protection litigation.