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Subject to authorization...

In Switzerland, the acquisition of real estate by non-Swiss persons living abroad is governed by the Federal Act on the Acquisition of Real Estate by Persons Abroad as well as, potentially, by various cantonal and communal laws which can stipulate further provisions. Under the Act, “persons abroad” can be both individuals and legal entities.

Individual persons abroad are those of a foreign nationality and domiciled outside Switzerland or, cumulatively, those de facto domiciled in Switzerland but who are neither the nationals of an EU/EFTA member state nor the holders of a valid settlement permit (so-called C permit). Legal entities are those with a registered office abroad or which are controlled by individual persons abroad.

The acquisition by persons abroad of single-family dwellings or apartment houses, owner-occupied flats and building land intended for constructing such accommodation is subject in principle to authorization requirements.

• Foreign nationals, whatever their nationality, who are domiciled in Switzerland and seek to purchase a dwelling in their actual place of residence, don’t need to get an authorization to be able to do so (art. 2 §2 let. B the Act). Such a buyer must acquire the dwelling in his own name and occupy the property himself. Renting it out, in whole or in part, is not allowed. Only one residential unit may be purchased. It must be underlined that, under this provision, “foreign nationals” are not those originating from UE/EFTA member States. Therefore, it only concerns the nationals of other foreign countries, who are legally domiciled in Switzerland (for instance, holders of a B permit).

Whilst generally there are no restrictions to such an acquisition in terms of size of the property, the Land Register does usually not record a transaction concerning an area of over 3000 m2 but refers the buyer to the authorization body. Then, the latter decides whether the acquisition can still be considered as exempt from authorization or whether it cannot be allowed on the grounds that it is purely for investment purposes.

• A second exception is the acquisition of secondary residences. Nationals of EU/EFTA member states who commute cross-border to work in Switzerland (for instance, holders of a G permit) can acquire a secondary residence in the area of their place of work without authorization. Such a buyer must occupy the residence him-herself as long as he/she works in the area as a cross-border commuter. Any renting out, in whole or in part, is forbidden.

The other considerations mentioned above (purchase in buyer’s own name, surface area of the property, etc.) also apply in principle in the case of an acquisition of a secondary residence.

• A third exception to the authorization rule is the acquisition of real estate for permanent business establishment purposes. In this case, it is immaterial whether the real estate is used for the buyer’s business or leased by a third party in order to pursue a commercial activity.

The Federal Act provides several exemptions where no prior authorization is required:

• Legal heirs under Swiss law (a definition that includes, for instance, in addition to the direct descendants, the beneficiaries under a Will who, as relatives of the deceased, may possibly qualify as legal heirs) are entitled to acquire real estate as part of an estate.

• Relatives in line of ascent or descent from the person disposing of the property, their spouse or registered partner may also acquire real estate in Switzerland without the need to obtain an authorization. On the contrary, this is not the case of transfers to collateral relatives (brothers or sisters), as this kind of transaction requires prior authorization.

Consequently, the sale of real estate by a child to its parents is in violation of the law and requires authorization if the latter sells it to another child shortly afterwards, although the individual transactions themselves do not require an authorization.

• Buyers who already hold an interest in the real estate in joint ownership or co-ownership are also exempted from obtaining prior authorization.

A person abroad must require an authorization in order to purchase a holiday home or a serviced flat. The property must be in a place designated by the cantonal authorities as a holiday resort (for instance, cantons of Grisons, Valais or Ticino). According to Geneva cantonal law, it is not possible for persons abroad to acquire a holiday home or a serviced flat in the canton of Geneva.

Except for a few particular situations, every authorization for the purchase of such property is deducted from the annual quota assigned to the cantons by the Confederation.

As a rule, the net floor space of a holiday home or of a serviced flat, which includes all livable rooms, and the surface area of the real estate itself, must not exceed 200 m2 and 1000 m2 respectively.

If the purchaser of such a property, his spouse, registered partner or child under the age of 18 years old, already own such a dwelling or a secondary dwelling in Switzerland, an authorization may only be granted provided that the latter dwelling is sold before the new purchase transaction is registered in the Land Register.

Holiday homes may not be let on an annual basis but only periodically. Indeed, the purchaser must be able to use his/her property at any time for its alleged purpose.

The authorization process

 

If the purchaser cannot immediately rule out the possibility that the transaction requires prior authorization, he must apply to the appropriate authority in order to seek appropriate authorization or a declaration that no authorization is required.

The cantonal authority within whose jurisdiction the real estate or the portion of real estate where the highest value is located is responsible for establishing whether prior authorization is required. In Geneva, the competent authority is the Department of Security and Employment.

If the Land Registry, the Commercial Registry Office or the Auctioneers’ Office (depending on which particular body is seized in an individual situation) cannot immediately rule out the possibility of a transaction requiring prior authorization, they refer the buyer to the authorizing body to which he will have to apply for a declaration that no such authorization is required or for the granting of an authorization. Generally, this had to be done within 30 days, or within 10 days if the acquisition is made through an auction.

The decision of the authorizing body can be challenged. Therefore, such a decision is legally valid only if no appeal has been made within 30 days after its notification.

Once the authorization is granted and is fully valid, it lapses if the real estate is not purchased within three years. Extensions to this period can be required, before this time limit expires, but only in exceptional cases.

A transaction-requiring authorization is invalid until legal authorization has been obtained, although the contractual partners are still bound by the undertaking.

 

The transaction becomes null and void with the refusal or the revocation of an authorization or with the rejection of the Land Register entry.

An authorization can be revoked if the conditions for obtaining it are not complied with, despite a reminder, or if the authorization has been obtained, for instance, under false pretenses with incorrect information.

In the event of nullity, promised performances cannot be claimed but performances received can, within one year. If parties do not act on their own, the cantonal competent authority can initiate proceedings to restore the original situation or for forced disposal of the real estate.

The Federal Act also include criminal provisions that aim to punish the circumvention of authorization requirements or the provision of incorrect or incomplete information in establishing the need for authorization or in the granting of authorization in respect of the appropriate authority.

The buying and selling process

 

Under Swiss law, purchase and sale contracts of real estate or properties need to be made in writing by a competent notary. All preliminary contracts, letters of intent or agreements according pre-emptive rights or purchase options must be drawn alike. Documents, which do not meet these requirements, are null and void, though unenforceable.

Notaries will establish purchase and sale contracts adapted to each individual transaction, on the basis of particular needs brought to his knowledge by the parties. Concretely, the notary will read the deed to the parties, who will then sign it personally or by proxy, in the presence of the notary. Afterwards, the notary will file the deed with the competent Land Register, which will proceed to the transfer. Ownership of the real estate is legally transferred only when the deed is registered.

If needed, the buyer can obtain a mortgage from a bank or from a financial institution to help him out for the acquisition of the real estate. Usually, up to 80% of the purchase price of the real estate may be mortgaged. In certain circumstances and subject to the pledge of additional securities (cash, pension funds, etc.), mortgages up to 100% may be obtained from such banks or financial institutions.

 

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This website aims to provide general information regarding Swiss law and should not be regarded as a legal opinion. For more specific advice, do not hesitate to contact us.