Rent arrears in property management: from reminder run to debt collection in Austria

When is rent in arrears?

Unless otherwise agreed, rent in Austria is due on the fifth of the month. Within the full scope of the Tenancy Act (MRG), it is payable in advance on the fifth of each calendar month, unless a later date has been agreed. For other leases of premises, the Austrian Civil Code (ABGB) also provides for the fifth of the month. If the tenant has not paid by then, they are in default; no reminder is needed. As a rule the rent must be credited on the due date; if the tenant is a consumer and the landlord a business, it is enough under the Consumer Protection Act (KSchG) for the tenant to give the transfer order by the fifth.

Under the MRG, rent includes not only the main rent but also the share of service charges (Betriebskosten), any special expenses, the fee for furniture let with the property and VAT. A missing service-charge instalment is therefore rent arrears just like the main rent itself. For the period of default, 4 per cent interest per year is due from private tenants. For commercial premises between businesses, the Commercial Code (UGB) provides for 9.2 percentage points above the base rate. Rent claims become time-barred after three years.

How to proceed: set a fixed cut-off date for reconciliation, for example the tenth. By then every payment has been credited, including one transferred on the fifth.

What does a clean reminder run in property management look like?

A reminder run that will stand up in court later is not a mass mailing. For each unit it states the arrears by month, the payments received and the account. Pay attention to the designation: if the tenant writes “rent March” in the payment reference, the payment counts for March. Without a clear designation, the ABGB allocates first to interest, then to capital, and among several months first to the amount already demanded or due. A wrongly allocated payment calls the entire proof of arrears into question.

The grace period of at least eight days is no coincidence. The MRG only allows termination for rent arrears if the tenant, despite a reminder after the due date, is at least eight days in arrears. Designing the reminder this way from the outset keeps later steps open. But never write in the reminder itself that the lease is being terminated. The Supreme Court (OGH) requires the sequence reminder, grace period, declaration of termination. How many reminders are usual in Austria is shown in the guide Payment reminders in Austria.

How to proceed: switch your reminder template to a monthly breakdown, a grace period with a calendar date and dispatch by registered mail.

What needs to be agreed with the owner?

The creditor of the rent is the landlord, not the property manager. The manager acts in the landlord’s name and needs a clear basis for doing so. Settle this once per owner rather than anew in each case:

• Does the management agreement or a power of attorney cover instructing a collection agency?
• From what amount or duration does the manager hand over without asking, for example from two months in arrears?
• Who approves court steps, and how quickly?
• Who decides whether eviction is pursued in addition to the money?
• Into which account do collected amounts flow, and who receives the statement?

In court there is a hard limit: if the landlord is represented, under the Code of Civil Procedure (ZPO) only lawyers are, as a rule, admitted as representatives where the amount in dispute exceeds 5,000 euros. The property manager can then no longer represent the owner. The owner files the claim personally, or a lawyer takes over.

How to proceed: record the approval rule for each owner in writing, ideally as an annex to the management agreement.

Rent arrears or service-charge back-payment: why you keep them apart

The monthly service-charge instalment is part of the rent and runs in the normal reminder cycle. The back-payment from the annual statement follows its own rules. Within the full scope of the MRG, the statement must be issued by 30 June of the following year, and tenants are entitled to inspect the receipts. A shortfall is payable on the rent date after next following the statement, so in July for a statement issued at the end of May.

That is why back-payments are disputed more often than current rent: tenants ask to inspect receipts, query the allocation key or individual items. A disputed item does not belong in the regular handover until the objection has been resolved. Outside the full scope of the MRG, the statement is governed by the lease.

How to proceed: keep back-payments in the rent account as a separate item with the statement date and due date. Hand them over only once due and with the statement attached.

Why you should not offset the deposit too early

The temptation is strong: the tenant is two months in arrears and the deposit sits in a savings account. But the MRG intends the deposit for future claims under the lease. After the lease ends, it must be returned with interest without delay, unless it is used for justified claims of the landlord. The deposit is therefore meant for the end of the tenancy.

If you offset the arrears while the tenancy is still running, there are three consequences. The arrears are paid off, so termination for rent arrears is off the table. The security for damage and the final service-charge statement is used up. And the tenant learns that the deposit pays the rent.

How to proceed: pursue the arrears like any other claim and leave the deposit untouched. Once the tenant has moved out, settle the account and hand over only the difference the deposit does not cover.

An example from property management

Example: A Vienna property management company manages an apartment building within the full scope of the MRG. The tenant of unit 4 pays 780 euros a month, including service charges and VAT. March and April remain unpaid. On 22 April, 300 euros arrive with the payment reference “rent March”. This leaves 480 euros open for March and 780 euros for April, 1,260 euros in total. At 4 per cent interest per year, around 4.20 euros accrue each month.

Two further cases are due on the same cut-off date. This is how the manager decides:

How to proceed: on the cut-off date, assign each case to one of three tracks: hand over, clarify or consider eviction.

Many cases at once: which documents does the handover need?

A property manager rarely hands over a single case. A fixed monthly run is efficient: one case per tenancy, all with the same cut-off date, all with the same documents. The export from your property management software is sufficient if it shows the monthly debit and payments received.

• Lease including supplementary agreements and amendments.
• Rent account with monthly debits and payments booked according to their designation.
• The latest rent statement.
• Property, unit, full name and current postal address of the tenant.
• Management agreement or power of attorney and the owner’s approval.
• Reminders with date and proof of dispatch.
• For back-payments: the service-charge statement and proof of when it was issued.
• Known objections, such as an announced rent reduction, with your reply.
• Amount and form of the deposit; on move-out, the handover report.

How to proceed: turn this list into an export template in your software, and the monthly run will take minutes instead of days.

When debt collection is no longer enough: claims for rent and eviction

If the tenant still does not pay after the out-of-court demand, there are two routes. If it is only about the money, a rent claim in the payment order procedure leads to a payment order (Zahlungsbefehl). If the tenant does not object within four weeks, it becomes an enforceable title. If the owner also wants the flat back, the tenancy must be ended and eviction enforced through the court; the direct route is a combined claim for rent and eviction (Mietzins- und Räumungsklage). The court then always schedules a hearing, and within the scope of the MRG the tenant can avert eviction by paying the arrears before the close of the hearing, provided they are not guilty of gross fault. The guide Tenant not paying rent: what landlords in Austria do now explains the exact procedure, and the service is described on Rent and eviction claims.

One thing is never allowed: changing the locks or clearing out the flat without an eviction title. Eviction is carried out by the court’s enforcement officer.

How to proceed: whenever arrears reach two months, actively ask the owner whether only the money or eviction as well should be pursued.

When is debt collection worthwhile for property managers, and how does it work?

Debt collection is worthwhile as soon as the grace period has expired and the arrears are undisputed. It relieves the manager of phone calls and individual reminders and keeps the tone between manager and tenant factual. Clarify disputed items such as a contested statement first. No reputable collection agency takes on disputed claims.

incaseof.law is a debt collection agency licensed in Austria and registered in Germany. It accepts due, undisputed claims with documented payment default, with no minimum volume. You hand over online in the client portal: register, enter the debtor, amount and due date, upload the lease, rent account and documents. For larger volumes there is a connector or a REST interface to your software, and a webhook reports the status of each case. The case team decides on the reminder stages. The case team recommends a payment-order claim (Mahnklage) where appropriate, but it is only filed after your approval. There are no automatic court filings. Tenants can apply for an instalment plan in the debtor portal, which is accepted according to fixed rules that are the same for everyone.

The owner receives 100 per cent of the rent. The defaulting tenant bears the costs of default within the limits permitted by law. In regular out-of-court collection there are no costs from incaseof.law, even if the debtor does not pay, and no success fee on your principal claim. Court fees and, in Austria, MANZ transmission fees only arise once you approve court proceedings. Collection and duration are not guaranteed.

How to proceed: start with your next monthly run via Debt collection for property managers and hand over all approved units together.