Tourism in Austria is booming. The capital, Vienna, has reported a 9.9% increase of overnight stays, to 7.94 million, in the period from January to June 2019, a new record. Demand for common rental platforms, such as Airbnb, has increased even more. For several years now, Austria’s federal states, municipal administrations, legislators, and competitors (in particular the hotel industry) have been kept busy with the business model of commercial short-term rentals.
Airbnb was created in San Francisco in 2007, when – allegedly – all hotels were fully booked due to a design conference in the city. The three founders had the idea of inflating a couple of air mattresses in their flat and inviting potential guests on a website to “Airbed and Breakfast.” This business idea went around the world, and Airbnb now offers more than five million accommodations in 191 countries and 81,000 cities.
Austria’s Supreme Court first dealt with short-term rentals in residential buildings in 2011. Since then they have addressed the issue from various perspectives in several additional decisions. Austria aims to foster the protection of co-owners and co-tenants against commercial short-term rentals, which has far outgrown the occasional (sub)rental of private apartments to become a lucrative business model. Indeed, the majority of lessors listed on Airbnb offer considerably more than one apartment – in 2017, around 290 accommodations were offered by only ten lessors in Vienna.
Regarding residential property law, the Austrian Supreme Court ruled (in a 2014 decision), that the rental of a condominium via an online platform such as Airbnb constitutes a change in the designated use of the condominium, which – unless already covered in the condominium contract – requires the express consent of all other condominium owners in the building or complex. If the Airbnb lessor does not obtain this consent, the other condominium owners may be entitled to obtain an injunction against him or her.
As for apartments, where subletting is not excluded contractually and the lease agreement is subject to Austrian tenancy law, a tenant may sublet his or her apartment. In a recent decision from 2018, however, the Austrian Supreme Court ruled that a lease agreement may be terminated by the lessor for cause if the tenant sublets his or her apartment at a price significantly higher than the rent (based on short-term comparison).
Some Austrian city administrations have also taken action: In 2018, the Viennese state parliament amended the Viennese building regulations to stipulate that short-term rentals may only be made outside of “residential zones” – areas self-designated by local authorities to preserve urban structure, urban development, and diversity, as well as (permanent) urban living space. Living space, particularly in inner-city areas, shall be preserved for the general public and shall not be permanently withdrawn through lucrative short-term rentals.
Last but not least, the Austrian Administrative Court has confirmed that Austrian trade law applies to Airbnb lessors – especially if they explicitly address tourists on the platform. Where more than ten guest beds are offered or services such as cleaning or the supply of laundry are provided in addition to the mere renting of dwellings, the trade regulations apply, and thus various trade or operating permits may be required in order to meet the protection requirements of guests (e.g., fire protection, escape routes). Airbnb providers must also pay all applicable local taxes – in Vienna, for example, local taxes amount to 3.2% of the assessment basis per person and accommodation. In accordance with the Vienna Tourism Promotion Act, operators of online platforms have also been obliged to transmit the relevant data in Vienna since 2017. We expect that other municipalities in Austria will follow this example.
All trends in Austria point towards stronger regulation of short-term rentals. This will likely satisfy competitors in the hotel industry, who are at a considerable competitive disadvantage. It will also satisfy co-owners and co-tenants, who suffer from inappropriate noise, pollution, and damage caused by short-term tenants. It remains to be seen how the Airbnb business model will evolve in the future under increasingly stringent conditions.
By Arabella Eichinger, Partner, Schoenherr