These rules apply to all those who purchase property in Austria.
If the purchase agreement is paid through a loan provided by a bank, for example, which is secured by a registered right of pledge, the purchase is generally carried out through escrow arrangements with a notary (→ ÖNK)German text or a lawyer (→ ÖRAK)German text.
In this case, the financial institution does not transfer the purchase amount directly to the buyer or seller, but rather to a notary or a lawyer who takes the sum of money into his/her custody and holds it in an ‘escrow account’ in the capacity of trustee.
The sum will only be paid to the seller once all the conditions for proper settlement of the purchase agreement have been met (e.g. clearing the property of encumbrances and entering the buyer and associated rights of pledge or mortgages in the land register).
Acceptance of the position of trustee by a notary
If a notary (→ ÖNK)German text accepts such a position as trustee, he/she must record that acceptance in the Trust Register of the Austrian Chamber of Notaries at the latest before the first disposal of the trust property.
You may receive confirmation of registration from the notary upon request.
Acceptance of the position of trustee by a lawyer
The Austrian Bar Association ensures that all sums of money entrusted to its members are handled correctly through the use of established Trustee Books. The lawyer (→ ÖRAK)German text must register the commencement and conclusion of escrow arrangements in the relevant Trustee Book.
Account statements are to be sent to the trustor in duplicate. This means that they are covered by appropriate insurance.
Advantages of escrow arrangements
Escrow arrangements of this nature are, however, also beneficial in other cases involving settlement of a purchase agreement, in order to safeguard both contracting parties against economic risks.
- Protecting the seller
With the transfer of the registrable purchase agreement and registration clauseGerman text to the buyer, the latter has everything he/she needs to register the ownership titleGerman text and acquire the property. Registration of the new ownership title in the land register is subject to what is known as a registration clause, by means of which the seller expressly gives his/her consent to the buyer registering the ownership title. This registration clause is usually incorporated into the text of the purchase agreement. However, the seller has no protection whatsoever when it comes to the payment of the purchase price
- Protection for the buyer
If the purchase price was already paid prior to registrationGerman text of the ownership title or notation regarding the position of the intended sale, the seller is at risk of damage from entries that are registered in the meantime. The buyer could then find themselves in a position where the seller fraudulently sells or pledges the property again. Alternatively, an enforcementGerman text could be initiated against the seller before the buyer is able to register the ownership title and the enforcement measures would then be pursued against the buyer as a result of the principle of priorityGerman text in the land register.
The ‘notation on the intended sale’ represents another form of buyer protection. This can form the basis for allocating a specific position in the register to a subsequent sale.
For these reasons, it is quite common and even advisable in practice to appoint a trustee, who is responsible for both parties to the purchase agreement and is also liable for damages in the event of errors. The registrable purchase agreement, registration clause and purchase price will be sent to the trustee.
Both parties instruct the trustee to register the ownership title once he/she has received the purchase price in the escrow account and, once the registration has been carried out, to forward the purchase price on to the seller.
Generally speaking, you should carefully consider all of the steps to making a property purchase and make use of all available advisory services. However, you should always be wary of any offers that seem to be particularly good value and come with time constraints!
Responsible for the content: Austrian Chamber of Civil-Law Notaries