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LEXIKON
The suspended status of a stock relationship under Section 12c of the IO
In a recent decision (Jan. 27, 2026, 3 Ob 168/25i; www.ris.bka.gv.at/jus), the Austrian Supreme Court addressed outstanding questions regarding the so-called “limbo” status of lease agreements in restructuring proceedings.
Legal Background
The Austrian Insolvency Code (see § 12c IO) allows tenants who are insolvent but willing to undergo restructuring to continue using a leased property even after the lease has been terminated. An eviction order that has already been granted must be stayed upon the tenant’s request, and no security deposit is even required. Furthermore, it is even possible that a contract that has already been legally terminated may be reinstated. Until then, however, a legal gray area arises, referred to as a “state of limbo.” Although the lease agreement has been terminated, it remains unclear whether it will be reinstated or not.
Facts of the Case
In the case at hand, the landlord terminated the lease agreement and obtained a writ of eviction, which she subsequently enforced. The lease agreement was thus terminated, and the tenant, who operated a business premises in the leased property, was ordered to vacate the premises. Subsequently, however, the tenant filed a petition to open reorganization proceedings and offered her creditors a 20% repayment rate under the reorganization plan. She also filed a motion to stay the eviction enforcement that had already been approved (but not yet carried out).
Contractual Obligations
With the provision set forth in § 12c of the Insolvency Act (IO), the legislature aims to facilitate the reorganization of businesses. However, if an insolvent business were required to vacate the leased premises, the reorganization of the business would effectively be impossible. For example, a retailer would generally be unable to continue operating or restructure their business without retail space. For this reason, tenants willing to restructure their businesses are to be afforded extensive protection by allowing them to remain in the leased property.
If the tenant fulfills his or her prior obligations under the lease agreement and subsequently also complies with the restructuring plan in a timely and complete manner, the tenancy is deemed to have continued. The lease agreement is thus reinstated, with all its rights and obligations. The landlord is therefore once again bound by the contract and to his or her contractual partner, without being able to contest this.
It is crucial, however, that the tenant fulfills his or her previous contractual obligations as precisely as possible even during the period of suspension. If, however, the tenant fails to meet his or her payment obligations (on time), the landlord may, even during the “period of suspension,” resume eviction proceedings.
The so-called “special sacrifice” made by the landlord—who, against his will, must continue to allow the debtor to occupy the leased property—should not be further exacerbated by the tenant’s ability to breach his payment obligations during the suspension period. In this case, the eviction postponed under § 12c IO must be carried out immediately, and a revival of the lease agreement is precluded from the outset. The tenant has thus irrevocably lost the property.
Conclusion
In practice, this means that a tenant seeking restructuring who wishes to maintain their tenancy despite insolvency must take great care during the period of uncertainty to fulfill their obligations properly, completely, and in a timely manner. If they fail to do so, they risk losing the business premises permanently. This would generally result in the failure of the restructuring.
Although the now-established line of case law still leaves important details regarding the limbo period unanswered, it does show that special attention is required, especially since breaches of duty cannot be remedied. Even in times when the focus for insolvent debtors is often on raising the funds required for the reorganization plan, monthly payment obligations must not be neglected.
