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Details on Site Contribution
Site contribution
Date: December 2015
Prepared by:
Dr. iur. Thomas Wetzel
Louisa Galbraith M.A. HSG Law and Economics
Seestrasse 39
8700 Küsnacht-Zürich
Phone:   +41 43 222 38 00
Fax:   +41 43 222 38 01
E-Mail:   thomas.wetzel@wenger-plattner.ch
The following remarks aim to give a rough overview of the acquisition and the rental of real estate in Switzerland with respect to legal aspects. Due to the broad scope of the subject the article has to focus on a few important points:
  • Sale and purchase of real estate in general
  • Specific questions on the acquisition of real estate by persons abroad
  • Rental agreements
    Sale and purchase of real estate may entail various tax consequences. However, as the tax systems differ from canton to canton, this subject will not be treated in detail.
    Applicable Law
  • Swiss Civil Code (SR 210), Articles 641 to 712t, 730 to 883 and 919 to 977
  • Federal Ordinance on the Land Register of February 22, 1910 (SR 211.432.1)
  • Swiss Code of Obligations, Articles 253 to 274g (SR 220)
  • Federal Act on rent and lease of housing and office space of May 9, 1990 (SR 221.213.11)
  • Federal Act on agricultural land rights of October 4, 1991 (SR 211.412.11)
  • Federal Ordinance on agricultural land rights of October 4, 1993 (SR 211.412.110)
  • Federal Act on the Acquisition of real estate by persons abroad of December 16, 1983 (SR 211.412.41)
  • Federal Ordinance on the Acquisition of real estate by persons abroad of October 14, 1984 (SR 211.412.411)
    Detailed Information
    Swiss law restricts acquisition of real estate by persons abroad. The relevant provisions are constituted in the Federal Law on the Acquisition of Real Estate by Persons abroad of December 16, 1983 (hereinafter "FLA") and the Ordinance on the Acquisition of Real Estate by Persons abroad of October 16, 1984 (hereinafter "OA").
    The term "person abroad" applies to people who reside outside Switzerland and to people who reside in Switzerland and are neither citizen of an European Community (EC) country nor of an European Free Trade Association (EFTA) country nor hold a valid settlement permit ("Foreigner Permit C"). Legal entities are considered as persons abroad if they are incorporated abroad. Legal entities incorporated in Switzerland are regarded as persons abroad, if persons abroad have significant influence over the Swiss company by capital or by vote.
    An acquisition of real estate involves not only the transfer of ownership to a person abroad but also any transaction that gives a person abroad control over real estate. Thus, acquisitions of building lease, rights of residence (occupancy) or usufructs rights on real estate could be an acquisition of real estate in terms of the FLA as well as participation and investments in companies which own real estate in Switzerland.
    Persons abroad do not need an authorization to acquire real estate, if the real estate consists of a permanent business establishment. Permanent business establishments are factories, offices, shopping centres, doctors' practices etc. Acquisitions of such real estate and investments in companies owning such real estate are permitted. No authorization is needed either if a person abroad plans to establish his main residence in Switzerland. In addition the following persons are inter alia exempt from filling an authorization: legal heirs (e.g. children, spouse, nephews and nieces) under Swiss law in a case of acquisition by inheritance, relatives in line of ascent or descent from the person disposing of the property and his spouse.
    If the person abroad is bound to file an authorization, only few reasons justify an approval by authorities: Banks and insurance companies may acquire a real estate as a result of foreclosing a mortgage. An authorization may also be issued if the real estate is used to secure staff pension schemes in Swiss operations for personnel employed in Switzerland. Finally, based on cantonal provisions, an authorization may be issued to acquire apartments in holiday resorts within a given annual quota.
    The authorization will be refused if the person abroad is not able to appeal to an exemption in the FLA or a cantonal provision. Contempt of those rules leads to an invalidity of the contract over the real estate and a prison sentence or a fine.
    In 2010 there was a discussion about giving up the FLA and allowing the purchase of real estate in Switzerland without any restrictions. However, in 2013 the Federal Council decided to maintain the FLA in force. Currently, it is planned to revise the FLA. One principal idea is to require authorization for the purchase of real estate for permanent business establishment in the future as well as for the purchase of shares of residential real estate companies, even if they are listed.
    Sale and purchase of real estate is governed by the Swiss Civil Code (hereinafter "CC"; SR 210) and the Swiss Code of Obligation (hereinafter "CO"; SR 220). Conveyance of a real estate founded on a purchase agreement requires a written contract. In addition, the contract has to be authenticated by a notary in the form of public deed. In Switzerland a notary verifies the contract only with respect to formal faults and he states the party's will. The transfer of title is completed by the registration of the new owner in the Land Register. This act is executed by the Land Register Authority and requires the request of the actual owner of the real estate. The purchase of real estate by a person abroad which is not subjected to any restrictions can be recorded immediately. If an authorization is needed the appropriate authority has to confirm that the requirements of the permit are achieved before the title can be transferred. The entry in the Land Register inheres in being true and correct. Everybody relying on this entry will be protected if he or she appeals to the entry. The relevant file does not only state the ownership of the real estate but also contains all information about the relevant tract of land such as easements, preemption rights, priority notices, mortgages, order of priorities, etc. Excepted is the case where a company takes over a real estate in terms of the Federal Law on Merger, Demerger, Conversion and Transfer of Assets and Liabilities (SR 221.301). There it is possible that the recorded owner does not correlate with the true owner.
    It is common practice to process the payment transaction by means of a bank (irrevocable letter of credit). The payment is executed at the same time as the request of the seller to the Land Register Authority.
    The fees for a registry usually depend on the market value of the real estate and base on the purchase price. The amount varies between 0.1% and 0.3% of the market value for each transaction. Additionally, transfer of real estate may entail tax consequences which differ from canton to canton.
    The relevant provisions on rental agreements are stated in the CO. In a rental agreement, the landlord agrees to place commercial or residential property for a given or in-definite period of time at the lessee's disposal in return for a monthly or quarterly compensation. Even if a rental agreement has not to be in written form it is common to sign a contract. Further it is common to agree upon paying a deposit. The deposit has to be paid in an appropriate account on the name of the lessee. At the end of the rental agreement the money of the deposit will be used for the mending of damages. If no mending is necessary the deposit will be paid back.
    During the rent period the lessee is obliged to deal with minor repairs within the scope of regular maintenance, regardless of whether he or she is reliable for the damage or not. In case of larger repairs the tenant is entitled to ask the landlord for restoring it, for reducing the rent or for paying for the damage. If the owner of a real estate sells the building the purchaser has to take over the actual rental agreement and the relationship to the new owner basically remains the same as it was to the former owner. However, the new owner is entitled to give notice to the tenant if he proves an urgent need of the building by himself.
    The contract provides either an infinite or a finite term. To terminate an infinite contract either party has to give at least tree months notice. In addition "customary dates" have to be considered which confine a termination. In Zurich (as in most regions of Switzerland) termination is possible on 31 March and 30 September, partly also on 30 June.
    Frequently Asked Questions
  • What are common forms of property ownership?
    The most common form of property ownership is sole ownership. Other ways of ownership are joint-ownership, co-ownership or leaseholds. Whilst in case of joint-ownership the rights over the property results from the legal relationship between the owners (e.g. community among heirs, partnership) the co-owners own the property in equal share of property. Condominium is the ownership of an apartment or one floor in a building and is governed by special rules. Leasehold is the right to construct a building and dispose of it without owning the land on which the building is built. In return for this right the owner of the building usually pays a ground rent to the owner of the land.
  • What sorts of taxes are levied in case of an acquisition of real estate?
    Owners of property have to pay property tax on the real estate and income tax on revenues from the real estate (rents or rental value). Finally fees and a tax are levied for the transfer of a real estate (fees for the Notary, fees for the Registry Office and - in some cantons - a tax for the transfer of real estate). In addition, some cantons levy a property gain tax for the sale of real estate. The legal transfer tax and fees are usually shared between buyer and seller whereas the seller pays the property gain tax. In principle the profits derived from rentals are not subject to Value-Added Tax. However, the lessor has the possibility to voluntarily subject his income from the rental of business premises to Value-Added Tax. If the lessor does opt for Value-Added Tax he will be entitled to a deduction of input tax.
  • What are possible liabilities of a real estate owner?
    An owner of real estate is liable for damages to neighbours and other affected persons which result from a violation of the title of ownership. The owner is also responsible for the maintenance of the building and is liable for any damage caused by a result of insufficient maintenance or flawed construction. At last the owner is liable to recover his ground from ground-pollution. In conjunction with the problem of polluted areas it is important to know that Swiss civil law is applicable as well as Swiss public law. It is possible to assign the arising expenses to the polluter, if the polluter is known. Otherwise the owner of the polluted area is liable for the expenses, which are caused by the decontamination. This point especially has to be borne in mind by envisaging an acquisition of real estate if the ground was encumbered by former industrial activities (Map of polluted areas see the link below).
    Useful Links
  • Association of real estate owner (only German)
  • Association of tenants (only German)
  • Federal Legislation
  • Federal Office of Justice
    Guidelines for acquisition of real estate by persons abroad (English)
  • Land register authority in Zurich (only German)
  • ch.ch - The Swiss Portal
    Further information to rental agreements from ch.ch
  • Federal Office for the Environment (FOEN)
    Information about polluted areas
  • Federal Office for the Environment (FOEN) (only German)
    Cataster of contaminated sites