Update: New Rent Indexation Regime in Austria as of 1 January 2026 – What Landlords Need to Know

As a follow-up to our earlier article on the validity of indexation clauses in consumer leases, this update addresses the most significant legislative reform of Austrian tenancy law in recent years. On 1 January 2026, the 5th Tenancy Law Inflation Mitigation Act (5. Mietrechtliches Inflationslinderungsgesetz, 5. MILG, BGBl I 2025/114) and the Rent Value Security Act (Mieten-Wertsicherungsgesetz, MieWeG) entered into force. The reform fundamentally restructures how landlords may pass on inflation to residential tenants.

The new regime applies not only to new leases but also to the vast majority of existing contracts concluded before 1 January 2026. Landlords and property managers must adapt their indexation practice accordingly.

Scope of Application

The MieWeG applies to all residential lease agreements within the full and partial scope of the Austrian Tenancy Act (MRG). For the first time, this includes freely agreed rents (§ 1 para 4 MRG in conjunction with § 16 MRG) in newer buildings that were previously unregulated with regard to indexation.

Excluded from the scope remain:

Commercial leases (with a limited exception for § 2 MieWeG on indexation clauses in non-residential space);
One- and two-family houses outside the MRG;
Holiday and secondary residences;
Cooperative housing under the WGG (with specific exceptions).

The following observations focus on residential leases in the partial scope of the MRG and on freely agreed rents, which are the constellations primarily addressed by our earlier article. Separate rules apply within the price-regulated full scope of the MRG and are not discussed here in detail.

Key Changes for Landlords

1. Uniform Valorisation Date: 1 April

Indexation adjustments may now take effect only once per year, on 1 April — irrespective of what the lease contract provides. If a contract stipulates a different reference month (e.g., January, June, or the anniversary of the contract), the adjustment must nonetheless be deferred to the following 1 April. Inflation accruing between the contractual reference date and the following 1 April cannot be recovered.

2. Cap on Indexation: The 3 % Half Rule

The core mechanism of § 1 para 2 MieWeG is a damping rule applied to the annual average change of the CPI 2020 (VPI 2020):

Where the average annual inflation is ≤ 3 %, the full change is applied;
Where it exceeds 3 %, only half of the portion above 3 % may be passed on.

Example: An average annual inflation of 5 % results in a permissible rent increase of 4 % (3 % + 50 % of 2 %).

3. Mandatory Parallel Calculation for Existing Leases

The MieWeG does not replace the contractual indexation clause. Instead, it caps its effect. For every indexation event after 1 January 2026, landlords must carry out a parallel calculation:

Track 1: the increase under the contractual indexation clause (e.g., CPI-based, with or without threshold trigger);
Track 2: the cumulative cap under § 1 para 2 MieWeG, calculated year by year on the annual average of the CPI 2020.

Only the lower of the two amounts may be charged. The contractual calculation continues to run independently over the lease term, so that in years where inflation falls below the MieWeG cap, the contractual figure may again become the binding ceiling.

4. "Onboarding" Aliquotation for Existing Contracts

For existing leases, the month of the last effective indexation is deemed to be the moment of contract conclusion for the purposes of the MieWeG (§ 4 para 2 MieWeG). For the calendar year in which that last indexation occurred, the annual average change is taken into account only pro rata temporis — i.e., in proportion to the full months remaining in that year (§ 1 para 2 Z 2 MieWeG).

Example: If the last contractual indexation was based on the CPI 2020 for February 2024, ten full months of 2024 remain (March–December). The 2024 annual average change (2.90939 %) is therefore applied only at 10/12, i.e., 2.42449 %.

5. Statutory Reference Model for New Contracts

For leases concluded from 1 January 2026 onwards, § 2 MieWeG offers landlords the option of directly adopting the statutory indexation model as the contractual clause. A reference to the statutory model — "wertgesichert gemäß § 1 Abs 2 MieWeG" — suffices as a valid indexation clause and obviates the need for a parallel calculation.

This approach has the further advantage of being immunised against the strict transparency and content review under § 6 para 1 Z 5 KSchG and § 879 para 3 ABGB. Whether it is preferable to the continued use of a bespoke CPI-based clause is ultimately a commercial judgement: the statutory model ties the landlord permanently to the 3 % half rule, whereas a compliant contractual clause preserves flexibility in low-inflation years while still being subject to the MieWeG cap. Both approaches have legitimate applications, and the choice should be made in light of the specific portfolio and letting strategy.

6. Restitution Claims Limited to Five Years

For existing contracts, § 4 para 3 MieWeG limits restitution claims based on invalid indexation clauses to payments made in the last five years before the end of the lease or before the tenant's knowledge of the invalidity. The three-year limitation period from knowledge remains unchanged. Exception: where the clause is invalid due to abusiveness under the EU Unfair Terms Directive, this five-year cap does not apply — a significant carve-out given the OGH's consistently strict jurisprudence in consumer matters (see our earlier article).

7. Minimum Fixed-Term Duration Extended to Five Years

Under the amended § 29 MRG, the minimum fixed-term period for residential leases in the scope of the MRG is raised from three to five years, provided the landlord is an entrepreneur within the meaning of the KSchG. This applies equally to new leases and to renewals. For non-entrepreneur landlords, the three-year minimum remains available.

Practical Implications

The reform fundamentally reshapes day-to-day indexation practice:

Parallel calculations must be integrated into property management workflows. Software updates and template revisions are essential.
Existing indexation notifications issued before 1 January 2026 remain valid for their respective reference dates, but any future adjustment must observe the new 1 April rule and the MieWeG cap.
Threshold-trigger clauses (e.g., 3 %, 5 %, or 10 % thresholds) remain contractually valid, but once triggered, the increase is deferred to the following 1 April and capped by the MieWeG parallel calculation.
New lease templates should be revisited in light of § 2 MieWeG, with a deliberate choice between the statutory reference model and a bespoke CPI-based clause.
Restitution exposure remains substantial where clauses may be deemed abusive, as the five-year limitation does not apply in such cases.

Interaction with the OGH Case Law Summarised in Our Earlier Article

The reform does not override the consumer protection jurisprudence of the Supreme Court discussed in our earlier article. Indexation clauses that are invalid for lack of transparency, for linking to the Baukostenindex, or for permitting increases within the first two months of the contract remain invalid — and the statutory reference model under § 2 MieWeG is not available to repair pre-existing clauses. Contract review therefore remains the single most important practical step for landlords operating under legacy templates.

What Landlords Should Do Now

✅ Review all existing indexation clauses for validity under the OGH's criteria (transparency, index choice, timing).
✅ Implement the parallel calculation for all indexation events after 1 January 2026.
✅ Consider the statutory reference model under § 2 MieWeG for new leases — weighing its benefits (no parallel calculation, immunity under KSchG/ABGB scrutiny) against its constraints.
✅ Observe the 1 April rule strictly, even where the contract specifies a different reference month.
❌ Do not rely on pre-2026 clauses without a compatibility check against the new regime.
❌ Do not overlook the restitution carve-out for abusive clauses — the five-year limitation is not a safe harbour.

Indexation Clauses in Residential Lease Agreements: What Austrian Landlords Need to Know — the OGH case law background to this update
Do I have to accept my tenant's termination via email? in German
Minimum contract duration according to § 29 MRG – backdating the contract start date is permissible. in German

Disclaimer

The numerical examples used in this article are illustrative only. They are intended to demonstrate the methodology of the parallel calculation under the MieWeG and do not constitute binding figures for any specific lease. Any actual indexation calculation must be based on the current and final index values published by Statistik Austria and applied to the specific contractual situation.

As the MieWeG and the 5. MILG only entered into force on 1 January 2026, there is at present no settled case law on their interpretation. Several of the questions discussed above — in particular the interplay between the statutory damping mechanism, contractual threshold triggers, and the onboarding aliquotation — may be subject to clarification by the Austrian Supreme Court in the coming years. The analysis in this article reflects the prevailing view in the legal literature as of the date of publication.

This article provides general information only and does not constitute legal advice. For advice on a specific lease or indexation notification, please contact us directly.

About Sabadello Legal

Sabadello Legal provides strategic and practical support to landlords in all aspects of Austrian tenancy law. We advise on the legally compliant drafting and review of lease agreements, enforcement of claims against defaulting tenants, and the termination of leases — even in complex cases.

Our real estate law team represents commercial and residential landlords across Austria. With extensive experience in advising operators of shopping centres, retail parks, office properties, and residential complexes, we assist our clients in negotiations, ongoing tenancy management, and legal disputes.

RA Mag. Andreas Sabadello
+43 1 9971037
office@sabadello.legal