How to Buy & Sell Property in Switzerland

Disclaimer
Every effort has been made to offer information that is current, correct and clearly expressed. The information in this summary is intended to be no more than a general overview of the position and certain details have been deliberately omitted. The contents of this page should not be taken as an authoritative statement of Swiss law and practice. Neither the author nor the publisher are responsible for the results of actions taken on the basis of information contained in this summary, nor for any errors or omissions. This text is not intended to render legal, accounting or tax advice. Readers are encouraged to seek professional advice concerning specific matters before making any decision.

Acquisition of Real Estate by Foreigners

The acquisition of real estate by foreigners is regulated by the Federal Law on the Acquisition of Real Estate by Persons Abroad (originally called Lex Friedrich, today Lex Koller). The Lex Koller requires "persons abroad" to obtain a permit from the appropriate cantonal and federal authorities before buying real estate in Switzerland.

Scope of the Regulation: "Persons abroad" in the sense of the Lex Koller can be individuals as well as legal entities.

• The Lex Koller defines individual persons abroad as being either foreigners domiciled abroad, or foreigners that are in fact domiciled in Switzerland but are neither nationals of EU/EFTA member states nor holders of a valid settlement permit (autorisation d'etablissement/ Niederlassungsbewilligung or so-called C permit).
  
  This means that nationals of EU/EFTA member states domiciled in Switzerland (in particular EU/EFTA nationals with a residence permit EU-EFTA (autorisation de séjour/Aufenthaltsbewilligung or so called B permit) or a settlement permit EU-EFTA or, possibly, with a short residence permit EU-EFTA) as well as nationals of other foreign countries who are holders of a valid settlement permit (C permit) and are actually domiciled in Switzerland, are not subject to the "Lex Koller". With respect to the acquisition of real estate their position is equal to that of a Swiss citizen.
  
• Legal entities are considered "persons abroad" if they are either domiciled abroad or are controlled by persons abroad. Control of a legal entity by persons abroad is deemed where such persons abroad:
  • a) own more than one-third of the company's equity capital
  • b) dispose of more than one-third of the voting rights, whether directly or indirectly, in the shareholders' meeting of the company; or 
  • c) provide the company with repayable funds representing more than one half of the difference between the company's assets and its debts vis-à-vis persons that are not subject to the Lex Koller.

The term "acquisition of real estate" encompasses not only the direct purchase of real estate but also the acquisition of property rights (rights in rem) on the real estate as well as the procurement of a right of ownership or usufruct of a share of a legal entity with more than one-third of its total assets consisting of Swiss real estate, provided that persons abroad thereby obtain or reinforce a controlling position in such entity.

Permit Requirements

In general, every acquisition of real estate by persons abroad as defined above requires a permit unless the specific acquisition is subject to an exemption.

Real Estate for Permanent Business Establishments

No authorisation is needed to buy real estate for the purpose of creating a permanent establishment for a distribution, manufacturing or other type of commercial business, for a workshop or for the practice of a liberal profession (e.g. law offices, doctor's practice). 

It is also possible for the purchaser to acquire the property as a mere capital investment and to then rent or lease it to somebody else for the pursuit of an economic activity (in other words, use as a permanent business establishment). Moreover, the participation by foreign investors in business enterprises does not require permission, not even if the company premises of these enterprises consist of a considerable amount of land.

On the other hand, the acquisition of real estate for the purpose of building, renting or leasing housing accommodation or for the purpose of trading in such accommodation requires prior authorisation and is, in principal, excluded for lack of grounds for granting such authorisation. Living accommodation run on a hotel basis are, however, considered as permanent business establishments (see above) and may therefore be acquired or built without authorization.

In general, land reserves may be purchased without authorisation if they do not exceed one third of the total surface area. This means that about two thirds of the total surface area must be developed or should be developed in the near future, while approximately one third may remain unused as reserve land. The competent cantonal authorities will decide whether or not - in a specific case - land reserves of more than one third are allowed.

Main Residences

No permission is required for the acquisition of real estate for private residential purposes by an individual person abroad, provided that such property serves the purchaser as their main residence at the place of their rightful and actual residence, and provided that the purchaser actually lives there (renting out is not allowed). 

Consequently, such person must have an adequate permit to stay. If building land is acquired, construction work on the accommodation (their main residence) must start within one year. Furthermore, the surface area of the purchased lot may not be larger than required by its purpose. The competent cantonal authorities will decide on the admissibility of lots larger than 3,000 square meters. 

In the event that the buyer changes their place of residency, they may dispose of his dwelling as they sees fit: 

• sell it
• continue to use it as a secondary or holiday residence
• rent it to third parties. 

Even if a person buys a new home at the new place of residency, they are not forced to sell the old main residence.

As outlined above, nationals of EU and EFTA member states domiciled in Switzerland as well as holders of a valid settlement permit (C permit) are not qualified as "persons abroad" in the sense of the Lex Koller. Therefore, the above is only relevant for nationals of other foreign countries residing in Switzerland based on a residence permit (B permit).

Secondary Residence

Nationals of EU/EFTA member states working as cross-border commuters in Switzerland (while remaining domiciled in the respective neighbouring foreign country), may acquire a secondary residence in the area of their place of work without authorisation. For as long as the purchaser continues working in the area as a cross-border commuter, they must occupy the residency themselves.

The acquisition of a secondary residence by a foreigner domiciled abroad who is not a cross-border commuter is, however, not possible without authorisation. Still, there are a few Cantons that have introduced special provisions according to which a foreigner domiciled abroad who is not a cross-border commuter may be authorised to acquire a secondary residence in a place with which he has exceptionally close ties worthy of protection. 

To date, however neither the Canton of Vaud nor the Canton of Geneva has introduced such provisions.

Holiday Homes and Hotel Condominium Units

The Cantons may introduce provisions which authorise individual persons abroad to acquire holiday homes or hotel condominium units. 

In Cantons that did not introduce such provisions an acquisition of holiday homes/hotel condominium units by persons abroad is therefore not possible. Furthermore, the Federal law (Lex Koller) contains provisions regarding the amount (quotas) and the location (designated holiday resort areas) of such homes/units. As a result, the acquisition of such homes/units is only possible in certain municipalities. 

As a general rule, the net floor space in holiday homes and hotel condominium units must not exceed 200 square meters. In addition, the acquisition is subject to the condition that the home/unit is used for holiday purposes only and will be sold as soon as it is not used for such purpose anymore. However, holiday homes may be periodically rented out. Hotel condominium units must be made available to the hotel owner for hotel operations, especially during high season.

Further Exemptions from Prior Authorisation Requirements

As a general rule, the following are exempted from prior authorisation requirements:

• the legal heirs, as defined by Swiss law, when acquiring real estate as part of an estate either as sole owners or through division of the estate. The term "legal heirs" encompasses the spouse and all relatives that may possibly qualify as legal heirs (this includes appointed heirs and legatees);
• relatives in (straight) line of ascent or descent from the person disposing of the property, as well as his/her spouse;
• siblings of the person disposing of the property, provided they are already co-owners or joint owners of the real estate;
• condominium owners for the exchange of their apartments in the same building/housing development;
• the acquirer obtaining real estate as a real substitute in the course of an expropriation, land amalgamation or re-allotment of land;
• the acquirer obtaining real estate as a compensation for property transferred to a public law corporation or institution;
• the buyer acquiring a small area as a result of a rectification of boundary or, in the case of a condominium, of an increase in the value of property quotas.

Compulsory Reasons for Refusal

A permit, if required (see above for exemptions), is issued if there is no compelling reason for refusal. Such reasons for refusal include the acquirer's attempt to evade the law, the protection of national interests, and the prevention of mere capital investments. Furthermore, the acquisition of a secondary residence by non-cross-border commuters (which requires prior authorization; see above) as well as the acquisition of a holiday home or hotel condominium unit by persons requiring prior authorisation is refused if either the acquirer himself/herself or his/her spouse or children under the age of 20 already own such a home in Switzerland.

The Buying and Selling Process

Sale and Purchase Contracts

In Switzerland, purchase and sale contracts with regard to real estate need to be made in writing and need to be notarised. 

Preliminary contracts, letters of intent and agreements granting pre-emptive rights or purchase options need to be notarised alike. 

Contracts which do not meet the formal requirements are void and unenforceable. 

Notaries generally use standardised contracts which they adopt to the individual transaction. However, the parties may wish to include additional provisions with regard to the sale/purchase and should instruct the notary accordingly. 

For notarisation, the notary will read the deed to the parties who will then sign the document in the presence of the notary. Thereafter, the notary will authenticate the agreement. Instead of attending in person, either party may choose to appoint an attorney who will sign the document by proxy.

In Geneva and Vaud, notaries hold a law degree and are private practitioners entitled to draw up and notarise deeds with regard to, inter alia, real estate transactions in their respective canton. A list of notaries may be obtained on website Notaires.ch (in French). 

Usually, the purchaser decides which notary should be mandated. However, since the notary performs a public service, they are obliged to take a neutral position in the transaction and have a duty to inform any of the parties of unusual provisions in the contract. Notary's fees amount to of 0.25 (Vaud) or 0.5 (Geneva) to 70/00 of the value/purchase price of the property.

The notary will then file the deed with the land register of the respective Canton, and ownership in the real property is transferred only when the deed is registered. The buyer will receive an updated excerpt of the land register showing the transfer of ownership.

Means of Financing

As a general rule, up to 80% of the purchase price of a real property may be mortgaged. However, mortgages up to 100% of the purchase price may be obtained if there are additional securities such as cash value life insurance policies or pension funds. Any prospective buyer should invite financing offers from different banks at the place of the real property.

Transfer Taxes / Property Taxes

Both the Cantons of Geneva and Vaud tax the transfer of real estate. Transfer taxes have to be borne by the purchaser and amount to 22 to 300/00 of the purchase price.

Moreover, real estate capital gains taxes are due in Geneva and Vaud, the amount of which is assessed on (a) the profit made in connection with the sale of the real property and (b) the duration of ownership. Real estate capital gains taxes have to be borne by the seller.

Owners of real estate have to pay an annual real estate tax in the amount of 0.5 to 20/00 (Geneva) and 10/00 (Vaud), respectively, of the gross value of the property.

Further Information

• Information on proposed abolishment of the Lex Koller from Credit Suisse emagazine
• Information from the Swiss Federal Department of Justice and Police Land Register & Acquisition of real estate in Switzerland by non-residents 
• AngloINFO INFOrmation Page Buying a House or Property in France

Information supplied by Michael A Meer, Attorney at Law
Gruninger Hunziker Roth, Bern. Tel: +41 (0) 58 356 5050,
e-mail / web: www.ghr.ch
Copyright © 2006 Gruninger Hunziker Roth All Rights Reserved