Prohibited key money when a tenant changes in an apartment building: section 27 MRG

A payment is sometimes requested when a tenant leaves an apartment building and a new tenant takes over. Signing such an arrangement does not make the payment lawful. Section 27 MRG prohibits several types of agreements and can give the person who paid a repayment claim.

The issue matters twice in an apartment-building transaction. An unlawful payment may be reclaimed between the former and new tenant, and it may also be an unresolved item in the property file. The key questions are what the payment was for, whether there was an equivalent counter-performance and how the arrangement is disclosed in the data room and purchase agreement.

What section 27 MRG prohibits when a tenant changes

Section 27(1)(1) MRG covers agreements under which the new tenant must pay because the former tenant gives up or otherwise transfers the premises, where there is no equivalent counter-performance. The label does not decide the issue. A private sale, transfer fee, entry payment or brokerage contribution can still be prohibited key money if, economically, it pays for access to the tenancy.

The provision also covers other prohibited arrangements, including payments for the landlord's waiver of a termination ground and an apparently excessive fee for arranging a tenancy. The whole contract chain therefore matters. Lease, nomination of the new tenant, consent, inventory and payment agreement should be read together.

The pressure is especially clear where the incoming tenant has no secure position until payment is made. In 1 Ob 62/26p of 27 May 2026, the Austrian Supreme Court examined a similar connection in a housing-association setting and stressed that equivalent counter-performance depends on objective value and the actual connection with the new tenancy.

When items and improvements can support a payment

Section 27 MRG does not prohibit every payment between former and incoming tenants. A genuine purchase or reimbursement can be lawful where a specific counter-performance is transferred and its value matches the payment. Examples include identified movable furnishings or a lasting improvement that the new tenant takes over and can use. The amount must reflect objective value, not merely the opportunity to obtain the desired tenancy.

Value depends on ownership, condition, age, useful life and actual handover. A general list is weak evidence where it is unclear who owns the fixtures or whether they have become part of the building. Invoices, photographs, prior consents and a detailed handover record help make the value reviewable. A private valuation does not replace the legal assessment.

Calling the amount investment reimbursement is not enough. If the incoming tenant also pays for selection, priority or the release of the apartment, that part must be examined separately. Dividing one payment into invoice headings does not automatically cure a prohibited overall arrangement.

Keep investment reimbursement under section 10 MRG separate

Statutory investment reimbursement under section 10 MRG follows its own rules. In the full scope of the MRG, substantial improvements by the main tenant may qualify if the statutory requirements are met. The type of improvement, its continuing usefulness, the time of construction, depreciation and the required notice to the landlord can all matter.

Section 27(1)(1) MRG excludes repayment of expenditure which the landlord must reimburse under section 10 MRG. That exception does not turn every payment from an incoming tenant into lawful key money. The file must show whether a specific valuable improvement is being taken over or whether the payment is actually for access to the tenancy.

Bring together the lease, landlord consent, invoices, notice under section 10(4) MRG and the agreement ending the former tenancy. The notice is subject to a statutory time limit. The existing article on tenant turnover and investment reimbursement explains the handover and claim documents in more detail.

How to prepare a repayment claim for prohibited key money

A payment made contrary to section 27(1) MRG can be reclaimed with statutory interest under section 27(3) MRG. A prior waiver of that repayment claim is not legally effective. For payments contrary to the prohibition in paragraph 1, the provision generally allows a ten-year limitation period. The exact calculation still requires review of payment dates, due dates and any proceedings that suspend or interrupt the period.

The review should include the written agreement, messages about the tenant change, the lease, payment evidence and a description of transferred items or works. For cash payments, receipts, witnesses and contemporaneous messages are particularly important. A partial payment may also have legal significance.

The repayment claim is directed against the person who received the prohibited payment. Other participants may matter depending on the facts. A blanket repayment demand without analysing the counter-performance can weaken the case. Reconstruct the payment logic first, then assess the legal consequences.

Secure evidence when a tenant changes in the building

The heading of the agreement rarely decides the dispute. The evidence chain does. Record when the premises were offered, when the incoming tenant was selected, when payment was first requested and which items were actually handed over. A dated file makes the connection visible.

Photographs and invoices do not by themselves prove objective value, but they help establish condition, ownership and use. The handover record should identify each item and distinguish movable property, built-in improvements and ordinary decoration. Items that were not transferred should not be counted as the counter-performance.

For several units, the property manager should allocate the agreement to the correct rent-roll line and tenant file. The article on the rent roll and data room explains why every material entry should be traceable to its source document.

Disclose key money in the data room and purchase agreement

When an apartment building is sold, it is not enough to provide the current main leases. Paid or outstanding key money, repayment threats, settlements and investment claims may affect valuation and seller warranties. A complete file distinguishes a proven claim, an allegation and a matter already resolved.

Buyers should check whether the seller knows of payments, whether the property manager recorded them and whether a former or incoming tenant has made a claim. Sellers should not conceal a known issue behind a general confirmation of the tenancy list. The article on data rooms, disclosure and guarantees in an apartment-building sale provides the wider transaction context.

The purchase agreement can address the matter through disclosure, a specific warranty, an indemnity or a purchase-price retention. The instrument must match the actual risk. A general retention is difficult to release if the payment and the release event are not precisely identified.

Treat complete subletting as a separate termination issue

Prohibited key money and complete subletting are separate questions. Section 30(2)(4) MRG may provide a termination ground where the tenant has completely transferred use of the premises and the statutory conditions are met. The existence of key money does not decide that question. Actual use, intention to return, rent and the contractual circumstances must be established separately.

A key-money agreement may nevertheless be evidence of actual transfer or economic purpose. It does not replace the assessment of the termination ground. The article on tenant correspondence and the data room also helps classify use-related information in a sale process.

Documents to have before making the next payment

Before making or confirming a payment, assemble the lease, amendments, communications about the tenant change and the exact payment purpose. For furniture or improvements, add proof of ownership, invoices, photographs, condition details and a realistic time-value assessment. In an apartment-building transaction, these documents should then be allocated to the rent roll and property file.

Owners and buyers should not treat a possible repayment claim as settled by a general release. Incoming tenants should not accept a blanket payment as a condition of entry without checking the counter-performance, value and connection with the tenancy. Early document review allows the parties to structure the agreement or secure the open risk in the purchase agreement.