Tenants sometimes refuse to vacate a leased premise after the expiry of their contract in the hopes of extending their lease, getting the landlord to pay them off instead of undertaking the cumbersome eviction process or for other reasons.
The Supreme Court recently demonstrated that such tactics are not without risk, as tenants may face direct damage claims by successors.
The defendant leased a buffet-style restaurant in a large public institution. The defendant's lease agreement expired at the end of February. However, he refused to vacate the premises for several reasons.
The plaintiff had rented the premises from March onwards. For this purpose, the plaintiff had already hired staff and incurred various other expenditures which were lost because he could not take possession of the premises. The landlord refused to reimburse these costs, but agreed to transfer any damages claims against the defendant to the plaintiff in this regard. The plaintiff thus filed an action against the defendant in order to recover these costs, based both on his own claims and those which were transferred to him by the landlord.
The Supreme Court upheld the plaintiff's own claims, but dismissed the claims which were transferred to him by the landlord.
Plaintiff's claims
Under Austrian law, a damages claim concerning pure financial loss can be based on a violation of contractual obligations and other limited reasons. In the case at hand, the defendant and plaintiff had no contractual relationship.
A claim for a pure financial loss can also be based on a deliberate violation of another person's contractual position. This is typically the case where a third party induces one of the contracting parties to breach its contract. In these cases the other contracting party can raise a direct claim against the third party, provided that the third party was aware of the contract and intentionally inflicted the damage.
The case at hand differs from previous case law because the defendant did not induce the landlord to breach the contractual obligations arising out of the new lease agreement with the plaintiff. The landlord intended to fulfil these obligations and even instituted eviction proceedings against the defendant. The Supreme Court nevertheless applied the same principles and ruled that the plaintiff's direct claim against the defendant for financial loss was permissible, provided that the defendant was aware that:
- his lease had expired;
- the plaintiff had concluded a new lease; and
- the plaintiff would suffer a loss if he did not vacate the premises.
Claims transferred to plaintiff
The Supreme Court dismissed the claims which were transferred to the plaintiff by the landlord, holding that the landlord's claims would be viable only if he was liable for the financial loss incurred by the plaintiff, as only then could he recover costs from the defendant. Further, the landlord would be liable for such costs only in case of actual fault. In the case at hand, the landlord had exercised his best efforts to remove the tenant and therefore was not liable for the costs incurred. As he was not liable, he could not recover any expenses from the defendant and thus could not transfer any such claim to the plaintiff.
The case was referred to the first-instance court in order to establish additional facts.
This decision may prove to be an effective means of motivating a tenant to vacate the premises once his or her lease expires. In order to make use of this judgment, the tenant of the new lease agreement must inform the previous tenant of the situation and of any costs incurred which will be lost if the premises are not vacated on the specified date.
For further information on this topic please contact Martin Foerster at Graf & Pitkowitz by telephone (+43 1 401 17 0) or email ([email protected]). The Graf & Pitkowitz website can be accessed at www.gpp.at.
