Buying property subject to lease or use: clarify third party use, termination, handover, payments and contract conditions before signing.
BRANDAUER Rechtsanwälte
Salzburg law firm for real estate, property and corporate law
Every matter is handled by a coordinated team of lawyers, legal staff and specialists. In property purchase matters we look at the contract, land register, escrow and tax consequences together.
Land may appear freely available even though another person uses part of it. The arrangement may be a lease, tenancy, loan for use or simple permission. That classification helps determine which documents the buyer needs and whether the use continues after the change of ownership.
Before the purchase, the buyer should identify the user, the area, access, duration, payment, deposit and outstanding obligations. An oral agreement or a right that is not visible in the land register cannot simply be treated as irrelevant.
This article explains how leases and other third party use rights should be addressed in the purchase contract. Section 1120 of the Austrian Civil Code shows that a change of ownership does not automatically end an existing tenancy or lease. Whether and to what extent that rule applies depends on the agreement, the type of use and the facts of the case.
Two questions show whether the legal basis, scope of use and purchase contract clause fit together.
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Lease, tenancy, loan for use, permission and a mere favour do not have the same legal effect. The agreement, plans and payment records should be reviewed together.
Request the agreement or other reliable evidence and record which person uses which area. Without that classification, it remains unclear whether an existing tenancy or lease continues, which payments are outstanding and how handover can take place.
A binding offer should not postpone these questions until after signing.
If the agreement, area description and payment record match, the starting position is better. Also check whether Section 1120 of the Austrian Civil Code and, for residential premises, the applicable provisions of the MRG are relevant, and which rights and duties are taken over in the purchase contract.
Continuation, termination, keys, payments and outstanding claims should be recorded expressly for handover.
If the draft remains general, it should state before signing whether the third party may continue or whether the area must be returned by a defined date. Depending on the case, a seller assurance, condition, purchase price retention or precise settlement clause may be appropriate.
The clause should identify the actual area and person involved so that settlement does not depend on an unclear general statement.
The first question is why the third party uses the area. An exchange-based lease must be treated differently from a tenancy, a loan for use or revocable permission. The label in a document is not decisive on its own. Its content, the actual use and the parties' agreement matter.
For a rented dwelling or building, the buyer should specifically examine whether Section 1120 of the Austrian Civil Code and the relevant MRG provisions apply. A change of ownership does not by itself end an existing tenancy. Use of a field, garden, storage area or access route may instead rest on another contractual basis.
An up-to-date land register extract remains important because certain rights may be recorded there. It does not replace questions to the seller, review of agreements and an on-site comparison. This article on buying a rented apartment provides a related perspective.
The documents must show which part of the property is affected. This may be a garden strip, parking space, access route, farm building or storage area. A plan or precise description prevents the buyer and user from later referring to different areas.
The parties should also establish the start and end of use, extensions, termination rights, payment, deposit, service charges and outstanding amounts. A lease may also involve income or fixtures connected with the use. A parking space or access route should not be confused with an easement without checking the legal basis.
The linked content on easements and rights of way concerns a different legal basis, but it illustrates why area and scope must be described precisely in the purchase contract.
The buyer and seller need a clear decision. If the third party may continue, the buyer needs the complete agreement, current payment status and a rule identifying who is the contractual party and recipient of payments from which date. If the area must be returned, termination, vacating and return should be coordinated with the user and reflected in the purchase contract.
A seller's bare assurance that the user will leave may not be enough for settlement. The contract should state which declaration or evidence must be provided, who bears the costs and what happens if handover is late or incomplete. The same applies where the use was agreed only orally.
For a related property-purchase issue, see this article on the property purchase process. It does not replace review of the individual use arrangement.
Payment processing should match the agreed handover condition. If an area is to be handed over vacant, evidence, keys, return and a recorded condition can be defined as requirements for maturity or escrow release. If the third party remains, payment, deposit, statements and original documents should be transferred in an orderly way.
Arrears and advance payments deserve particular attention. The contract should state who accounts up to which date, who receives outstanding claims and how a deposit is dealt with. A blanket assumption of all obligations may otherwise go further than intended.
For practical handover, this further reading on vacant handover provides a useful comparison. The contract, escrow arrangement, user and actual condition should all describe the same agreed position.
The overview identifies the details needed for a reliable purchase decision and handover.
| Point | Clarify before purchase | Risk without a rule |
|---|---|---|
| Legal basis Lease, tenancy, loan or permission evidenced | It is unclear whether an existing tenancy continues | |
| Area Plan, access and affected fixtures described | Buyer and user refer to different areas | |
| Term Start, end, extension and termination known | Vacant handover becomes disputed | |
| Payments Fee, deposit, arrears and accounting reviewed | Claims or obligations are overlooked | |
| Handover Continuation or return recorded with date and evidence | The price is paid while use remains unresolved |
The appropriate contract solution depends on the legal basis, area, documents and intended handover condition.
Careful: A property is not automatically free of use rights merely because no corresponding entry appears in the land register. Agreement, actual use, payments and handover must be brought together before signing.
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No. A change of ownership does not automatically dispose of an existing tenancy or lease. Section 1120 of the Austrian Civil Code is an important starting point, but the result depends on the type and content of the agreement, the property and, where relevant, the MRG.
Before signing, the parties should document the user, area, start, consideration and termination as far as possible. Payment records, plans and the seller's statements should also be compared with actual use.
The purchase contract should state expressly whether use continues or ends. Date, evidence, keys, accounting, costs and the consequences of a deviation can be linked to purchase price and escrow arrangements.
Which documents and continuing obligations should be reviewed when buying a rented apartment.
Why an easement must be distinguished from a simple use agreement.
Further questions that belong together before committing to a land purchase.
How the intended handover condition and a vacating obligation can be recorded.
When buying property, the contract and the land register decide. Call us directly or send an email, callback within one business day.
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