The term "real estate" includes the following:
- Land
- Any buildings or structures on it
All cantons maintain a public land titles registration system − land registry − where ownership can be verified and through which interests in land are registered.
The federal government is responsible for the supervision of the land register system. However, there is no central land register for the whole of Switzerland. The cantons are responsible for the establishment of the land registry offices, the circumscription of the land register districts and the maintenance of the land register.
The following rights have to be registered to be valid:
- Transfers
- Mortgages
- Easements
- Real estate charges
The following rights can be registered to have an effect propter rem against a third party:
- Lease
- Rights of first refusal
- Option to purchase
- Right of repurchase
Registered records are available to the public online, but not in every canton. The financial information (price of acquisition, mortgages, etc.) are, in particular, not publicly available and are subject to a justified interest.
The acquisition of Swiss real estate by foreigners is governed by the Federal Law on the Acquisition of Real Estate by Persons Abroad of 16 December 1983 (“FL”), better known as the “Lex Koller”.
The FL restricts the acquisition of real estate in Switzerland by persons abroad. Generally, to acquire real estate, permission has to be obtained from the appropriate cantonal authority. Whether or not a legal transaction is subject to authorization depends on three cumulative conditions:
- The person acquiring the real estate is a person abroad within the meaning of the FL. Foreign citizens who do not hold a valid Swiss residence permit (the so-called B or C permit) are regarded as a “person abroad” and therefore they are required to obtain authorization before acquiring any private real estate property located in Switzerland. EU or EFTA citizens domiciled in Switzerland are not subject to any restriction and thus have exactly the same rights as Swiss nationals regarding any acquisition of real estate in Switzerland.
- The object of the transaction is real estate for which authorization is required. The acquisition of real estate for business purposes is generally allowed (there are, however, some restrictions specially in case of unbuilt land) whereas foreigners are restricted from acquiring residential properties. There are some exemptions (such as main residence) or permissions that can be obtained specially for holiday homes in specific areas (the number of authorizations being limited by quotas).
- The transaction is an “acquisition” within the meaning of the FL. The notion of “acquisition” encompasses not only entries of real estate ownership at the land registry but also any transaction that grants to a non-resident actual control over Swiss real estate for which prior authorization is required.
A transaction concerning real estate for which authorization is required can be entered in the land registry only if the buyer has obtained permission. A transaction for which an authorization could not be obtained or is revoked becomes invalid.
Even if these three conditions are met, there are certain exemptions that allow, in principle, an acquisition of real estate without authorization (for legal heirs, notably close relatives, co-owners, condominium exchanges, secondary residences for cross-border commuters).
Property can be expropriated by government or third parties to whom the right of expropriation has been transferred, but only under very strict requirements, and full compensation must be paid.
Generally, an interest is held by the following:
- Ownership (sole ownership, co-ownership, condominium ownership, joint ownership)
- Leasehold
- Usufruct
- Right of residence
- Corporations and partnerships (including limited partnerships for collective investment )
- Real estate funds
- Public-private partnership
Most real estate financing is arranged through institutional lenders such as banks, pension funds and insurance companies. Interest rates are generally fixed for a specified period of time or are variable. Loans with variable interest rates are the most common form of loans secured by mortgages. The mortgage interest rate is determined by the leading Swiss banks. Swiss banks typically only request loans for residential properties to be amortized down to a LTV of approx. 60% and for commercial properties down to a LTC of approx. 50%.
Typically, it is the borrower’s responsibility to pay for all of the lender’s legal and other costs, such as commitment and processing fees, in arranging property financing.
Lending institutions typically take both primary and collateral security in real property and sometimes related assets. Typical primary security includes a mortgage or charge and, in some cases where the buyer is a corporation, the pledge and assignment of the shares. Collateral security often includes assignments of leases and rent and personal guarantees.
Banks and other lending companies are regulated under federal legislation with special provisions applying to foreign financial institutions.
In share deals, generally the seller’s lawyer will prepare the initial draft of the share purchase agreement. In asset deals, the buyer’s notary usually prepares the purchase agreement, which is reviewed by lawyers.
For properties held as freehold, authorities can require the owner to clean up contamination (even if the owner did not cause it), or pay certain outstanding taxes.
For properties held as leasehold, tenants are not held liable for environmental damage caused by a previous tenant.
A seller can retain liabilities relating to the real estate even after it has disposed of it. The seller may be liable for any contamination it caused during its ownership and for any indebtedness (for instance, taxes unpaid by the previous owner) secured by a mortgage placed on the real estate.
For properties held in leasehold, the tenant is not held liable for a previous tenant’s obligations.