DORDA Rechtsanwälte GmbH | View firm profile
Pursuant to the Austrian Broker Act
(Maklergesetz), a broker has to fairly and diligently protect their principal's
interest. Until a very recent judgment of the Austrian Supreme Court (Oberster
Gerichtshof), courts have taken a very lenient stance on the liability of real
estate agents. The judgment of the Supreme Court of 24 Jan 2017, however, might
permanently divert existing case law.
Under
Austrian Law, real estate agents represent both sides in the deal and therefore
need to respond to the seller's and the purchaser's needs. Due to this double
function, real estate agents cannot fully take sides but, in line with the
existing case law, only need to provide for a balancing of interests. A negligible
risk of liability claims against real estate agents is the consequence of this
stance.
In January,
the Supreme Court was presented with a case in which the real estate agent had
failed to provide the purchasers with information that the property was
situated in an area with a high risk of flooding. The purchasers asserted that
they had to bear higher costs in relation to the construction of their home
which they wanted to reclaim from the real estate agent. It was undisputed that
the purchasers would not have bought the property, had they known that the
property was in such high risk area.
The Supreme
Court followed its previous case law and held that real estate agents were
liable for wrong representations of fact and that they were obliged to
reimburse costs which accrued in reliance on such wrong representation (Vertrauensschaden).
For the
first time, however, the Supreme Court compared the liability of real estate
agents to the liability of investment advisors where the Court had already
confirmed the restitution in kind, ie advisors who make wrong representations
may be forced to take back the financial product (eg shares) and pay the full
purchase price to their customer; with far-reaching consequences for advisors.
While the
Supreme Court has only made this comparison obiter dicta, there is a high risk
that the Court extends this ruling to future cases and that it confirms the
restitution in kind for real estate agents.
Agents are
well-advised to prepare for this moment.
Author:
Klaus
Pfeiffer
Attorney at Law, DORDA Attorneys at Law, Expert
on Real Estate and Construction Law