Escrow Account and BTVG: How Austria Protects Investors in New-Build Properties

Purchasing an apartment in a new development is an important and financially responsible decision. In Austria, this process is regulated by a special law aimed at protecting the interests of buyers — the Bauträgervertragsgesetz (BTVG), or the Real Estate Developer Contract Act. This law establishes strict requirements for developers (Bauträger), regulates the procedure for financial settlements, and ensures the security of buyers’ investments during the construction phase.

This article outlines the key provisions of the BTVG, explains how the trust account (Treuhandkonto) works, and highlights what buyers should pay attention to when investing in a new building.

What is the BTVG and when does it apply?

The BTVG (Bauträgervertragsgesetz) is a law governing contracts with property developers. It came into force in 1997 and applies throughout Austria. Its main goal is to protect the buyer who invests in a real estate property that has not yet been built or completed.

The law applies in the following cases:

• when the buyer acquires ownership rights (Eigentum), building rights (Baurecht), or condominium rights (Wohnungseigentum);
• when the object is not yet fully completed;
• and when the buyer makes advance payments before the property is fully transferred.

In other words, the BTVG applies in almost all cases involving new developments or properties that are still under construction.

Key Principles and Guarantees of the BTVG

The BTVG guarantees that:

• the buyer will not lose money if the developer goes bankrupt or fails to complete the property;
• the buyer receives clear and transparent information about the contract, payment schedule, deadlines, warranties, and property transfer mechanism;
• there is a protected payment system through a trust account (Treuhandkonto). This means that the developer cannot demand advance payments without completing the corresponding construction stage;
• the developer is required to provide mandatory insurance or a bank guarantee if the Treuhandkonto model is not used (although this is rare);
• sanctions will be applied to the developer in case of BTVG violations.

What Should a Buyer Pay Attention to When Purchasing an Apartment in a New Building in Austria?

• Verify whether the BTVG applies to the selected project.
• Carefully read the purchase agreement — it must clearly define the buyer protection mechanisms.
• Find out who is the appointed trustee (lawyer or notary) and how the Treuhandkonto is handled.
• Ensure that funds are transferred only to a protected account, not directly to the developer.
• Clarify which guarantees are provided by the developer and which costs are included in the total price (land register entry, taxes, lawyer’s fees, etc.).
• Request detailed explanations regarding the payment schedule and confirmation of each construction stage.

Typical Steps When Buying an Apartment in a New Building under the BTVG

1. Conclusion of the Purchase Agreement (Kaufvertrag) — the contract must clearly state:
   1. that the BTVG applies;
   1. who the trustee is;
   1. the payment procedure;
   1. the property transfer scheme;
   1. deadlines.
2. Opening of the Treuhandkonto — this account can only be opened by a lawyer or notary who holds a special license. Banks do not open Treuhandkonto directly for private or legal individuals without trustee status.
3. Staged Payment — according to the model payment schedule set by the BTVG, payments to the developer are made in accordance with construction milestones (see below). No funds are paid in advance — the developer only receives money after the progress is confirmed. Even in the case of the developer’s bankruptcy, the buyer’s funds remain in the Treuhandkonto and cannot be seized by the developer’s creditors.
4. Transfer of Ownership — after construction is completed, the trustee finalizes the transfer of ownership, including registration in the land register (Grundbuch).

Model Payment Schedule under the BTVG

The BTVG sets out a clear payment scale — each construction stage corresponds to a specific percentage of the total purchase price. A typical schedule looks like this:

Construction Stage	% of Total Price
After signing the contract and obtaining a building permit	10%
After completion of the foundation	30%
After completion of the building shell	20%
After installation of windows and roof	12%
After installation of internal systems	17%
After completion of construction	11%

These payments are not transferred directly to the developer, but are released by the trustee only after confirmation of each completed construction stage.

Opening and Functioning of the Treuhandkonto

As noted above, in Austria, a Treuhandkonto (trust/protective account) is not opened by the buyer directly, but rather in the name of a lawyer (Rechtsanwalt) or notary (Notar), who acts as a Treuhänder (trustee) — a trusted person responsible for monitoring and legally accompanying the transaction in accordance with the BTVG.

Which Banks in Austria Open Treuhandkonto?

Treuhandkonten are typically opened with large commercial banks that collaborate with notaries and lawyers. These include:

1. Erste Bank / Sparkasse
2. Raiffeisen Bankengruppe
3. BAWAG P.S.K.
4. Bank Austria (UniCredit Group)
5. Volksbank
6. HYPO NOE, HYPO Tirol, HYPO Vorarlberg (regional HYPO banks)
7. Oberbank, RLB OÖ, Kärntner Sparkasse — depending on the region
8. Notartreuhandbank AG — a bank operating under the supervision of the Austrian Federal Chamber of Notaries (Österreichische Notariatskammer) and serving only notaries who act as Treuhänder in real estate transactions.

What Documents Are Required to Open a Treuhandkonto?

Since the account is opened in the name of a lawyer or notary, the buyer provides the trustee with the following documents:

For natural persons:

• Passport or ID card (must be valid and with a photo)
• Proof of residence (Meldezettel or address confirmation)
• Purchase agreement (Kaufvertrag)
• Source of funds declaration
• In some cases – income statements or bank account statements

For legal entities:

• Excerpt from the Commercial Register (Firmenbuchauszug)
• Incorporation documents (Statutes, Articles of Association)
• Documents confirming the representative’s authority (power of attorney, ID)
• Ultimate Beneficial Owner Declaration (UBO-Deklaration)
• Explanation of the source of funds

All documents must be current and, if necessary, translated into German (or sometimes English, depending on the bank’s policy). In some cases, notarized translations may be required.

What Else Should Buyers Know About the Treuhandkonto?

• The buyer cannot manage or access the Treuhandkonto directly — all transactions are controlled by the lawyer or notary.
• The Treuhandkonto is protected by law (BTVG) and additionally by insurance or a bank guarantee.
• The transaction is registered in the attorney/notary register, including registration in the Treuhandregister (Trust Agreement Register).
• Funds are transferred to the account only after the contract is signed and preliminarily registered in the Grundbuch.

Conclusion
The BTVG Act is one of the most effective investor protection mechanisms in Europe. Thanks to the mandatory use of trust accounts and the stage-based payment system, buyers in Austria can be confident that their funds are securely protected and that the developer will receive payment only for actual, completed construction milestones.
Before signing the contract, it is highly recommended to consult an independent lawyer who will review the agreement for compliance with BTVG regulations and provide professional support throughout the entire transaction.