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