Private client

Stefan Artner, Partner and Head of the Real Estate Practice Group, and real estate attorney Klaus Pfeiffer of DORDA advised Austrian Real Estate Development GmbH (ARE, a subsidiary of Bundesimmobilien-Gesellschaft, the Austrian privatization agency) on the acquisition of the Denk Drei office properties from IC Development. The successful closing of the forward purchase transaction took place on April 30, 2018. The parties have agreed not to disclose the purchase price. "Our team has already handled several transactions in the "Viertel Zwei" quarter. The new Vienna district remains attractive for domestic and international investors," says Stefan Artner. “We are pleased that we were also called to serve in this project being part of the further expansion of the quarter. Viertel Zwei marks one of Vienna's most successful urban development projects where the quality of work and of life complement each other perfectly". Denk Drei office buildings by French architects Chaix&Morel consist of three structures. The 6-storey main building being in the middle, the two other buildings being connected over several floors and with terraces and balconies. The award-winning architectural property, which had been completed as early as 2017, is located in Viertel Zwei near the Prater and the Vienna University of Business and offers 21,000 sqm office space and 2,000 sqm retail space. Almost 90 percent of the property is now let. One third of the space was sourced from BIG/ARE. On the side of the buyer ARE, the DORDA team advised under the lead of Stefan Artner (Partner, Head of the Real Estate Practice Group). He was supported by Klaus Pfeiffer (lawyer, real estate), Marie-Luise Pugl and Oliver Mandl (both real estate). DORDA is a leading law firm in Austria, advising in all areas of business law. Last year, the firm advised on the sale of OMV Headquarter in Viertel Zwei and on the takeover of A1 Headquarters in Oberer Donaustrasse. The Real Estate team was also in charge of CORESTATE's acquisition of the UBM Micro Living project in the Belvedere Central Quarter (BCQ). In addition to real estate and tenancy law, M&A, banking and capital markets law, the firm also specialises in corporate law, insolvency law and restructuring, tax law, competition law, employment law, public commercial law, IP/IT, data protection and media law.

The Constitutional Court has recently provided two judgments on 28 June 2017 on the rent control legislation in Austria ruling that the current system for flats complies with Austrian Constitutional Law and the European Convention on Human Rights. The Constitutional Court visibly failed to take the opportunity to initiate a change to the current legislation. Further appeals to the Constitutional Court are likely and worthwhile with the Austrian parties currently involved in their campaigns for the general election in October 2017. Background The Tenancy Act (Mietrechtsgesetz) contains a range of restrictions for leases depending on whether the Tenancy Act applies in full (mainly for buildings with construction permits dated prior to 30 June 1953; "old buildings"), in part (construction permits dated after 30 June 1953) or not at all. Depending on the degree of applicability, the following types of rent can currently be agreed on in Austria: Free Rent: no restrictions on the amount of rent apart from general limitations under the Civil Code; free rent applies if the Tenancy Act applies in part or not at all. Adequate Rent: rent needs to reflect the market and is under review by the District Courts; free rent applies if the Tenancy Act applies in full under certain conditions. Standard Rent: rent must be equal to the amounts set out in the Standard Rent Act (Richtwertgesetz) with certain increases and decreases being possible depending on the position, condition, facilities, etc of the property; standard rent applies if the Tenancy Act applies in full. Austrian courts and – in major cities – some public authorities have the right to review adequate and standard rent and, if necessary, to adjust it. The major cities in Austria, in particular its capital Vienna, consist of an abundant number of old buildings which contribute to the cities' fascinating architectural charm protected by UNESCO. The refurbishment of the buildings requires capital which investors are loath to give if the return on investment is not sufficient. Due to strict rent control legislations, some historic buildings may soon crumble and vanish. Some landlords did not accept this fate and launched appeals to the Constitutional Court in order to fight the standard rent system and to achieve a more flexible system for investors. Judgments of the Constitutional Court The Constitutional Court referred to previous case law, in particular the Mellacher judgment by the European Court of Human Rights, and held that the standard rent system was in line with the Austrian constitution including the European Convention on Human Rights. The Court also confirmed the lawfulness of the low standard rent for Vienna (currently EUR 5.39) compared to other regions (Vorarlberg: EUR 8.28; Salzburg: EUR 7.45), despite the fact that Vienna was the capital creating more than a quarter of the national GDP. While appreciating that the current system interferes with constitutional laws, the Court held that such interference was not strong enough to require the Constitutional Court to intervene in legislation. The appeals were rejected. >Comments Austria's standard rent is very restrictive not allowing to adequately raise rent if the landlord makes investments to the property. Many investors have been deterred from necessary refurbishments. It would have been most welcome if the Constitutional Court had accepted that the system (dating back to 1981) was outdated and set aside some of the provisions for standard rent. With the general elections to be held in October 2017, the Constitutional Court feared that there was no government to fill the legislative void (the Constitutional Court can only set aside laws but not enact new ones). Under the current legislation, owners of new (but shabby) buildings could contract freely while owners of old (but refurbished) buildings are restricted under the standard rent with very low ceilings applying. A flexible system would be the fairest and most efficient solution to this discrimination as it would allow increases in rent for new leases if the landlord proved refurbishment. The only way to make this leap forward is to prepare new appeals to the Constitutional Court to review other provisions of the Tenancy Act. The current system is simply not acceptable. Author: Klaus Pfeiffer, Attorney / Expert on Real Estate and Construction Law  / DORDA Attorneys at Law

Buy-to-let schemes reached the Austrian market several years ago and have gained increased popularity in the scenic alpine regions of Tyrol, Vorarlberg or Salzburg. Investors acquire condominium ownership in newly constructed hotel facilities and rent out the properties to hotel operators at – ideally – attractive rates. While buy-to-let-schemes can be very lucrative investments, they also raise complex legal and tax questions. With the economic and financial crisis falling into oblivion, investors, however, have become more and more willing to sail these waters. Acquisition of Land While the acquisition of land for buy-to-let schemes does not pose particular problems per se, developers need to assess the legal framework in the regions and towns before investing and developing the hotel project. The regional zoning laws may restrict the use of real estate for particular purposes, in particular hotel projects (eg zoning may only allow private use, not letting or hotel operations). In addition, all 9 regions in Austria enacted to some extent restrictions (i) for the transfer of land to foreign (non-EU) nationals, (ii) for the transfer of agricultural land and (iii) for the creation of secondary homes. While the regions in the East of Austria are generally more liberal, the alpine regions (which are more attractive for buy-to-let schemes) restrict the acquisition more widely. Foreign (non-EU) developers may have to apply for a permit and secondary homes may be fully illegal, therefore making it impossible for the investors to use its on real estate. While EU citizens (currently still including British nationals and companies) are fully equal to Austrians, citizens from outside the EU are generally deemed foreigners. Exceptions apply to certain nationals due to bilateral treaties (in particular: Switzerland, Iran, United States, etc). Renting Out The Austrian Tenancy Act (Mietrechtsgesetz) contains mandatory restrictions for important aspects of leases, most of which are to the tenant's advantage. While buildings with a building permit dated before 30 June 1953 are fully protected under the Tenancy Act, there are exceptions for newer buildings. Refurbished old buildings may qualify as old or new buildings depending on the extent of the refurbishment. Leases can only be terminated for important reasons, in particular default or grossly detrimental use of the leased premises. Landlords, hence, prefer to execute fixed-term leases as they may otherwise be bound forever. Pursuant to sec 29 of the Tenancy Act, a fixed term must be agreed in writing (ie signed by all parties; emails not sufficient); if the formal requirement is not met, the fixed term is void and the lease is deemed to be executed for an indefinite term. Landlord and Tenant can agree on the distribution of service charge and the obligations to maintain, repair and renew the leased premises subject to general limitations under the Austrian Civil Code and mandatory additional limitations for buildings with permits dated before 30 June 1953. As there is no clear regime for these matters, it is very important to prepare the respective clauses with care in order to comply with the applicable laws and to prevent future disputes. Both parties need to be able to rely on the provisions of the leases as both parties invest money and rely on the calculated profitability. Taxes Acquisition (Developer/Investor): The acquisition of real estate is subject to land transfer tax of 3.5% and registration fee of 1.1%, both based on the purchase price (including VAT, see below). Securitisation (Developer/Investor): The registration of a mortgage triggers an additional registration fee of 1.2% of the secured amount. Value Added Tax (Developer/Investor): According to the Austrian VAT Act, the acquisition of real estate is generally exempted from VAT with the right to make an opt-in. Developers and investors generally acquire with VAT in buy-to-let schemes as they can reclaim their paid VAT by input tax deduction. Investors need to prove to the tax authorities that they will rent out the acquired premises, providing the lease agreement between investor and hotel operator. Stamp Duty (Investor): sec 33 subsec 5 of the Austrian Fees and Duties Act imposes a fee of 1% upon execution of a written lease or equivalent written contract. In case of an indefinite term, the calculation base is the rent for the initial 3 years; in case of a definite term, the calculation base is the rent for the entire term capped with 18 years. While stamp duty is freely negotiable, it is usually the tenant to pay it. In case of buy-to-let schemes, very often investors (landlords) need to bear the burden. As stamp duty is only triggered by a written agreement, the parties may prefer to execute an oral agreement. However, pursuant to the Tenancy Act, a term would then not be legally binding. In general, buy-to-let models have proven to be a highly profitable investment opportunity in the past despite the various limitations and tax issues. A truly successful project, for developer and investor, will require profound knowledge of the relevant federal and regional laws including taxes (in particular VAT). Author: Klaus Pfeiffer Attorney / Expert on Real Estate and Construction Law, DORDA Attorneys at Law

On 1 January 2017 the Austrian Wage and Social Dumping Prevention Act (Lohn- und Sozialdumping-Bekämpfungsgesetz – abbreviated to "LSD-BG") came into effect. An enhanced liability regime for the principal shall reduce and ultimately eliminate the undercutting of wages, in particular in the construction sector. The last six months have shown increased awareness of potential liabilities by principals and workers. The Wage and Social Dumping Prevention Act has national and international roots with provisions deriving from former Austrian legislation and from directive 2014/67/EU, in particular article 12 on the subcontracting liability. The following scenarios are covered by section 8-10 of the new Act: Liability of the principal for wages of posted workers from non-EU countries (sec 8); Liability of the principal for wages of posted or assigned workers for construction services (sec 9), mainly based on art 12 of the EU directive; Liability of the contractor for wages of workers of the subcontractor from EU countries (sec 10). All three provisions are mandatory and cannot be opted out. While section 8 and 10 had already been in effect in a similar form, section 9 is entirely new. Construction companies have been facing challenges with the new section 9 with case law about to develop in the next months. The following shall provide a brief summary of this liability and ideas on how to tackle the new issues in general contractor agreements in Austria. Section 9 requires a tripartite relationship: (i) the principal agrees on services with (ii) the constructor who employs (iii) workers for the provision of the services. The workers have the right to claim from the principal the wages as set out under Austrian laws, regulations or collective bargaining agreements (legally, the principal acts as surety provider with immediate recourse – Bürger und Zahler). The principal is only liable if they either knew or should have known about the undercutting of wages. While knowledge is likely to be the exception and hard to prove in court, the alternative may be easily triggered, especially if the price for the services is comparatively low (in particular compared to Austrian contractors). Courts, however, should be reluctant to apply section 9 too easily as this would put principals under massive constraints in negotiations forcing them to request more information before contracting and also increasing transaction costs. Right of Recourse: If section 9 applies, the principal has the right to deduct any monies paid to the worker from the remuneration agreed on in the contracting agreement. If the remuneration has been fully paid, the principal can also reclaim the monies from the contractor.    Procedures: Workers must approach the Office for Leave and Severance Payments of Construction Workers (Bauarbeiter-Urlaubs- und Abfertigungskasse) which decides by informal letter sent to the principal. If the principal refuses payment, the worker must file a lawsuit against the principal within nine months in order not to lose his claim. Contracting agreements should contain clauses covering the potential liability under the Wage and Social Dumping Prevention Act, in particular on the question what the principal can do if a claim is asserted. In addition, agreements should cover the construction stage with continuing obligations of the contractors to regularly provide information on their workers on the site (name, address, social security number, etc). Such information allows the principal to act fast and eliminate risks immediately. Principals and contractors are well-advised to address the new liability regime in their contractor agreements in order to reduce the risk of liability. Lengthy proceedings may otherwise be the consequence. Author: Klaus Pfeiffer Attorney / Expert on Real Estate and Construction Law at DORDA Attorneys at Law

What previously was impossible and not foreseen by local legislation is now possible. Starting 1 January 2017, the Tax Code of Moldova (the "Tax Code") was amended by Law 281/2016 to include a separate norm (Art. 136¹) on individual tax rulings ("ITR") for the benefit of entrepreneurs. Within the limits of its scope and in respect of a concrete beneficiary, an issued ITR is binding on the State Tax Service (the "STS"). The Government and the Ministry of Finance are expected to approve the secondary legislation to regulate the details of the procedure. read more...