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11 July 2014
Foreign investments in Swiss real estate are governed by a federal law known as the 'Lex Koller'(1) and additional cantonal rules. The law restricts the acquisition of certain real property by non-Swiss residents. This update summarises the relevant rules and deals with legal issues frequently seen in practice.
In 2005 the federal government proposed to repeal the Lex Koller. There were concerns that, as a result certain regions would suffer from the excessive construction of second homes and vacation properties. To avoid the negative effects thereof, the government proposed a number of accompanying measures in land-use planning, in particular limiting the number of second and vacation homes in certain regions.
While the repeal was not yet completed and the accompanying measures were still under discussion, the property market performed strongly, even with the Lex Koller in force and during the financial crisis. With regard to some hot spots, concerns of an overheated market were expressed. These concerns have been addressed by the government, which - at the request of the Swiss National Bank - in 2013 activated a 'countercyclical capital buffer'. The purpose of the capital buffer is to strengthen the resistance capabilities of Swiss banks and the whole Swiss economy against risks arising as a result of imbalances in the mortgage and real estate market.
On the Lex Koller side, during 2012 and 2013, and given the tendency of property markets to overheat, the prevailing view changed and the proposal to repeal the law was formally terminated. In addition, a parliamentary proposal was filed to tighten the regime. Both the federal government and the National Council approved the proposal. However, the Council of States rejected it in June 2014. Accordingly, the regime will continue and no substantial tightening is foreseeable.
As a response to this development, the government announced a revision of the Lex Koller in order to address certain enforcement problems and loopholes. The revision is unlikely to go as far as the rejected proposal. A popular initiative may follow to tighten the regime, but it would take several years before such changes to the law were legally effective.
As a basic rule, the Lex Koller restricts the acquisition of residential real property by non-Swiss residents. Non-Swiss investors are free to invest in any type of business premises, including offices, retail properties, warehouses, hotels, restaurants and hospitals. With limited exceptions, they may not invest in residential real estate. The purpose of excluding foreign investors from the residential property market is primarily to avoid speculation with these properties, so that purchase and rental prices remain affordable.
To avoid the circumvention of these restrictions, the law sets out strict and detailed rules. The key elements include the following:
Despite these strict rules, the Lex Koller provides for a number of exceptions, including the following:
In connection with business transactions, the following Lex Koller-related issues may arise:
The federal parliament recently rejected a proposal to considerably tighten the existing Lex Koller regime. A soft revision addressing certain enforcement problems and loopholes may be expected in the medium term.
In practice, business transactions frequently lead to Lex Koller-related uncertainties, in which case the competent cantonal Lex Koller authority should be contacted. This applies, for instance, if:
For further information on this topic, please contact Anne-C Imhoff or Michael Lips at Pestalozzi Attorneys at Law by telephone (+41 44 217 91 11), fax (+41 44 217 92 17) or email (email@example.com or firstname.lastname@example.org). The Pestalozzi Attorneys at Law website can be accessed at www.pestalozzilaw.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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