When does rent arrears justify termination of the lease? In its decision of July 31, 2026 (9 Ob 56/26i), the Austrian Supreme Court (OGH) clarified that qualified rent arrears under Section 1118, second case, of the Austrian Civil Code (ABGB) only exist if the tenant also allows the first rent payment date to pass after the expiry of a reasonable grace period. At the same time, the OGH specified the requirements for proving the absence of gross negligence under the Austrian Tenancy Act (MRG).
The tenant of an apartment initially failed to pay the rent and operating costs due on November 5 and December 5, 2024. As of December 5, the arrears totaled €1,643.19. The landlord sent a reminder on December 27, 2024, and granted a grace period until January 10, 2025. When full payment was not received, she filed a lawsuit for unpaid rent and eviction on January 28, 2025, and declared the lease terminated pursuant to Section 1118 of the Austrian Civil Code (ABGB). The tenant paid part of the arrears immediately after the lawsuit was served. The remaining amount was paid during the proceedings. The rent due on March 5, 2025, also initially went unpaid. After the lawsuit was expanded, the tenant paid the arrears in installments and finally settled them in full before the conclusion of the first-instance hearing.
According to Section 1118, second case, of the Austrian Civil Code (ABGB), termination of a lease due to rent arrears requires that the tenant is objectively in default with payments due – including operating costs – that the landlord demands payment of the arrears, setting a reasonable grace period, and that the tenant still fails to pay in full. The qualified arrears must generally still exist at the time the notice of termination is served. The decisive question was which interest payment date after the demand for payment is relevant. The Supreme Court clarified: It is not the first interest payment date after receipt of the demand for payment that matters, but rather the first interest payment date after the expiry of the grace period. Only then are the requirements of Section 1118, second case, of the ABGB met. In the specific case, qualified arrears arose on both February 5th and April 5th, 2025. However, since the tenant had fully settled the arrears before the conclusion of the negotiations, Section 33, paragraph 2, in conjunction with paragraph 3, second case, of the Austrian Tenancy Act (MRG) also had to be examined. The termination of the lease can become ineffective if payment is made on time and the tenant is not grossly negligent. The tenant must specifically allege and prove the absence of gross negligence. Merely citing a "financial shortfall" and temporarily lower income is insufficient.
With its decision, the Supreme Court (OGH) clarifies the relevant point in time for qualified rent arrears: the decisive factor is the first rent payment date after the expiry of a reasonable grace period. Furthermore, a subsequent payment does not automatically eliminate the consequences of the arrears under the Austrian Tenancy Act (MRG). Rather, the tenant must specifically demonstrate and prove that they are not grossly negligent. Since this was not sufficiently clarified in the present proceedings, the Supreme Court overturned the decisions of the lower courts and remanded the case to the court of first instance for further proceedings.
Supreme Court 31.07.2026, 9 Ob 56/26i