Real Estate 2023

Last Updated May 04, 2023


Law and Practice


Walder Wyss Ltd has specialised and established itself in Switzerland’s real estate sector over the course of many years. Its experienced and well-known real estate team of more than 30 lawyers and tax experts is one of the largest and most specialised in Switzerland, enabling it to handle highly complex real estate transactions, planning issues and real estate litigation efficiently and with an integrated perspective. Walder Wyss advises real estate players in all parts of Switzerland through its offices in Zurich, Geneva, Basel, Lugano, Bern and Lausanne, which also offer notarial services such as notarisations of sale and purchase agreements. The firm works with clients to develop solutions that generate added value and that are executed with interdisciplinary project teams where necessary.

The main sources of real estate law in Switzerland are the Swiss Civil Code and the Swiss Code of Obligations.

Real estate in Switzerland has come to the end of its current cycle, with prices declining in some market segments for the first time in many years. Accordingly, as there seem to be some doubts in the market as to the correct price level, the transaction volume started to decrease, and not all transactions could be closed successfully. However, there was still a good number of interesting transactions in Switzerland and, compared to other European countries, there was no credit crunch so financing is still available on a large scale.

The first transactions based on disruptive technologies have already been concluded in Switzerland. This trend is expected to continue, but this type of transaction is not expected to gain a significant market share.

There are currently no planned reforms that might have a significant impact on real estate in Switzerland on a federal level, but it has become obvious that ESG will have a significant impact on real estate in the coming years.

The categories of property rights that can be acquired are:

  • freehold;
  • leasehold;
  • co-ownership; and
  • storey-ownership.

Transfer of title is primarily regulated by the Swiss Civil Code and the Federal Ordinance of Land Registry. The transfer of residential real estate to any foreign person is generally restricted, according to the Federal Law on the Acquisition of Real Estate by Persons Abroad (the so-called Lex Koller). Moreover, tax issues have to be considered, although these differ from canton to canton.

The transfer of real estate is registered at the competent land registry. Any buyer of real estate acting in good faith is protected by the information contained in the land registry, so no title insurance is required in Switzerland.

As registration is conclusive, legal due diligence involves analysing the land register extract and its supporting documents, which shows all relevant property information. In addition, any existing leases must be examined, since these are transferred to the buyer as the new landlord upon the purchase of the property. Another aspect of due diligence relates to environmental law.

In addition to legal due diligence, prudent buyers also perform tax, technical and financial due diligence. If a foreign person buys property that includes real estate that is not commercial property or that provides for relevant land reserves, it must be verified that there is no infringement of the Lex Koller. This type of purchase can be deemed void, since the Lex Koller restricts foreign persons from buying residential and other non-commercial real estate in Switzerland. Financing transactions should be examined on a case-by-case basis.

The warranties typically given by a seller within a share deal include corporate warranties relating to the correct organisation and valid existence of the company, accurate presentation of the financial statements and title to shares. Other important warranties relate to the accuracy of rent rolls, and to the due diligence information being accurate, complete and up to date. Moreover, specific tax representations are usually contained in the purchase agreement. In both asset and share deals, the seller does not usually provide any warranty as to the substance of the building. The seller's other representations are often qualified by the seller's knowledge. Due to COVID-19, a new representation relating to waivers of rent claims in the past was typically included in real estate transactions relating to commercial premises.

In share deals, most of the seller's warranties are often capped at a certain amount – eg, 10% of the asset's price. However, such cap does not normally apply to the seller's title in the shares. If there is any misrepresentation, the seller is liable to compensate the buyer for any damage incurred. In share deals, part of the purchase price is often held in escrow for a limited period of time in order to protect the buyer.

Representation and warranty insurance are very unusual in real estate transactions.

Contract law, property law, building law, lease law and environmental law are the most important areas of law for an investor to consider when purchasing real estate.

Basically, the buyer of a real estate asset is responsible for soil pollution or environmental contamination of a property even if they did not cause the pollution or contamination, since the legal owner of the property is partly liable for contamination of the real estate, even if contamination took place pre-ownership. Moreover, a landlord can be held responsible for pollution caused by its tenant.

Based on the applicable building law, the buyer usually has some certainty regarding the permitted uses of a property. If there is any uncertainty, the issue can be discussed with the competent authority, which can also impose specific rules for a property or area.

Governmental taking of land, condemnation, expropriation and compulsory purchase are possible. The proceedings vary, depending on whether the expropriation is based on federal or cantonal law. However, the landlord has constitutional rights under all relevant proceedings, and is usually fully compensated.

In most cantons, cantonal and/or municipal real estate transfer taxes apply to the transfer of real estate. Generally, the buyer pays the tax, but the seller is jointly and severally liable for payment. The rates range between 1% and 3.3%. It is not uncommon for the parties to contractually agree to share the transfer tax. In some cantons, there is no real estate transfer tax in share deals. Also, corporate restructurings (including of real estate companies) do not generally trigger transfer taxes and similar charges. Further exceptions are regulated in Article 12(3) of the Federal Act on the Harmonisation of Direct Taxation at Cantonal and Communal Levels. Most cantons that impose real estate transfer tax can secure their corresponding tax receivables by a first-ranking legal lien on the real estate. In addition, the transfer of real estate is subject to cantonal and/or municipal land registry and notary fees.

Foreign ownership of residential real estate and – to some extent – land reserves is restricted by the Lex Koller. In the case of an infringement, the transaction can be deemed void, which can even lead to criminal sanctions. Transactions that have a similar effect to ownership should be examined on a case-by-case basis, as the Lex Koller governs not only the mere ownership of residential real estate, but also aspects such as financing, long leases, etc. Exceptions exist for holiday apartments, serviced apartments, inherited real estate, etc. If there is any doubt, rulings from the competent Lex Koller authorities are sought for confirmation and legal certainty.

While Swiss and foreign institutional investors (eg, pension funds, sovereign wealth funds and insurance companies) invest in and hold significant real estate portfolios that are financed without external financing, other investors typically finance through a mix of equity and external funding sources (secured term loans, sometimes revolving loans, development financings, etc). Traditionally, Swiss banks have held the lion's share of the domestic real estate financing market, but new refinancing methods may make it more attractive for foreign banking and non-banking lenders to re-enter the market – eg, following international investors. In particular, larger development financings and/or mezzanine type financings continue to be difficult to place in the Swiss domestic market only.

A typical security package would consist of a security interest in mortgage notes (Schuldbriefe), which can take the form of mortgage notes in paper form (Papierschuldbriefe) or registered mortgage notes (Registerschuldbriefe).

In addition, rent, insurance claims and other receivables are typically pledged or assigned for security purposes. Pledges over the shares of the borrower and security interest in bank accounts are customary.

There are no restrictions on granting security to foreign lenders with respect to Swiss commercial real estate financing transactions, nor are there any regulatory restrictions on cross-border lending in general. The financing of residential real estate by foreign lenders will have to be analysed carefully under the applicable Lex Koller legislation restricting the acquisition of residential real estate in Switzerland by foreigners.

However, the financing structures that are typical in the Swiss residential mortgage market (standard security package, standard terms of the loan agreement, LTV below 80%, etc) should not usually raise concerns. If there is any uncertainty, Lex Koller ruling confirmations are available from the competent cantonal authorities for individual cases; for formal reasons, the Swiss Federal Office of Justice no longer seems to be willing to issue general letter confirmations on covered bond programmes or the like, for example, but has not changed its general view on the permissibility of such structures. It would be desirable – de lege ferenda – for the legislature to exempt such financing transactions from the applicability of the Lex Koller legislation in the first place, to further enhance legal certainty for debt capital market transactions and novel origination structures that will involve lenders other than Swiss banks.

Small registration fees apply to the registration of holders of a mortgage note in the creditor register (Gläubigerregister) of the competent land registry. However, such registration is only a perfection requirement for the mortgage security in the case of a registered mortgage note (Registerschuldbrief). For a mortgage note in paper form (Papierschuldbrief), such registration serves only administrative purposes.

There are special withholding taxes on interest payments at both federal and cantonal levels, to the extent foreign lenders are involved. A refund of the Swiss source tax (or a reduction at source) will be subject to any applicable double taxation treaty protection. General federal withholding tax on interest payments may also have to be looked at, depending on the exact funding structure (banks, non-banks, double taxation treaties, etc). Depending on the location of the property, transfer taxes might apply to the direct and indirect transfer of a Swiss property. Real estate capital gains are taxed either by special real estate capital gain taxes (RCGT) or by ordinary income taxes (this varies from canton to canton). Ordinary notarial and land registry fees will apply. Finally, it is always recommended to keep an eye on Swiss VAT aspects as well (with respect to transfers of Swiss real estate but also with respect to deemed servicing fees, etc).

Under Swiss corporate and tax laws, financial assistance and corporate benefit rules will apply to any upstream or cross-stream security, guarantee or joint liability. The rules are rather detailed and complex but, in a nutshell, the value of any such “impaired” security will be limited to freely distributable reserves (that could be paid out as a dividend) of the Swiss company in question, subject to general Swiss federal withholding tax of 35%, if applicable.

The Swiss enforcement process is a court-guided process, the timing of which will very much depend on the behaviour of the borrower in question. However, in larger transactions, private sale mechanisms are often agreed contractually to avoid a lengthy process and a public auction with associated higher costs.

The subordination of existing debt to newly created debt is generally possible and frequently done, even though there are some residual uncertainties around the enforceability of such arrangements in the insolvency of the borrower. However, the general view of legal scholars is that Swiss insolvency administrators will be bound by such contractual arrangements as well.

Generally, lenders who merely financed a property will not become liable under environmental laws but the borrower may become liable, which may have an indirect effect on the financing and potential enforcement scenarios.

If a borrower becomes insolvent, security granted by a Swiss borrower will not become void automatically. It should be noted, however, that Swiss law knows the concept of avoidance actions, providing for hardening periods of one to five years. Upstream and cross-stream securities may also be limited in value. Enforcement actions may become the subject of official proceedings run by the court or insolvency administrator.

The Swiss National Bank, in co-operation with SIX Swiss Exchange, has developed CHF reference rates for the financial markets that are based on CHF repo interbank market data provided by SIX Repo Ltd. The CHF yield curve is now based on the Swiss Average Rate Overnight (SARON). The Swiss reference rates comprise the Swiss Average Rates (SAR) and the Swiss Current Rates (SCR), covering a term spectrum ranging from overnight (ON) to 12 months (12M). SIX Swiss Exchange is the Swiss reference rates administrator and is thus responsible for the daily calculation and publication thereof.

In Switzerland, regulatory responsibilities are shared among various authorities at the federal, cantonal and municipal level. Pursuant to Article 75 of the Swiss Constitution, the Confederation shall lay down principles on spatial planning, which are binding on the cantons. Except for some specific regulations at federal level, zoning and building regulations are enacted by the cantons and implemented by the municipal building authorities. Accordingly, there are 26 different cantonal zoning and building regimes. Any construction project and any change to an existing building or construction is subject to a building permit from the competent (typically local) authority.

Design, appearance and construction method requirements vary by zones. Typically, specific dimension and distance regulations apply. Buildings and land under cultural heritage protection are subject to particularly strict regulations, as are nature conservation areas.

Building permits must usually be obtained from the municipal authority where the project is located. The local authority co-ordinates with the cantonal authorities and further bodies involved in the granting of the building permit. Buildings located in non-construction zones require a cantonal building permit.

The following legislation applies:

  • the Federal Act on Spatial Planning (Raumplanungsgesetz – RPG);
  • cantonal planning and construction laws (Planungs- und Baugesetz); and
  • municipal zoning and construction laws (Bau- und Zonenordnungen).

Various other federal and cantonal laws also apply, such as the Environmental Protection Act (Umweltschutzgesetz), the Noise Control Act (Lärmschutzverordnung), the Clean Air Act (Luftreinhalteverordnung), the Water Protection Law (Gewässerschutzgesetz) and the Energy Law (Energiegesetz).

The building permit application must be filed with the competent authority (typically the municipal authority), which will publish it if all formal requirements are met. The building permit must be granted if the project complies with all applicable regulations.

Third parties that are affected by the project (eg, neighbours) and organisations entitled to appeal may object.

Applicants and third parties that have objected to the building permit have the right to appeal to the superior administrative authority against the relevant authority’s decision. The decision of the superior administrative authority may be appealed to the Administrative Court.

Formal agreements with the authorities are not permitted, with the exception of agreements regarding certain aspects of the project (eg, infrastructural requirements). However, informal, non-binding negotiations with the authorities often take place before the building permit application is filed.

The competent authority must monitor the realisation of the project, and the completed project is subject to formal acceptance proceedings. Violations of the permit are subject to sanctions, and the removal of illegal structures may be ordered.

Depending on the corporate structure of the buyer, including the ultimate beneficial owner or sponsor, newly established Swiss or foreign special purpose vehicles (SPVs) are used by investors to hold real estate assets. Foreign SPVs are primarily domiciled in countries that have entered into double taxation treaties with Switzerland, to avoid withholding tax and ease an exit by share deals. Foreign SPVs domiciled in offshore jurisdictions are also used. Real estate investment funds also commonly invest in Swiss real estate.

A company with limited liability may be established by natural persons or legal entities. This requires a declaration in front of a public notary that the founder(s) is (are) forming such company, laying down the articles of association therein and appointing the governing bodies. The company is entered in the commercial register of the place in which it has its seat, and acquires legal personality once it has been registered in the Commercial Registry.

The most commonly used investment vehicle is the company limited by shares, which must have a minimum share capital of CHF100,000, of which at least CHF50,000 must be paid in. Its little sister, the so-called partnership limited by shares, must have a minimum share capital of CHF20,000. For investment funds vehicles, the capital requirements are generally higher.

The governance requirements differ between investment vehicles that require approval from Switzerland’s Financial Market Supervisory Authority (FINMA) and investment vehicles that do not require any public approval. For the latter, general corporate governance rules apply. Authorisation for investment vehicles requiring FINMA approval is granted if the following requirements are met, amongst others:

  • the persons responsible for management and the business operations have a good reputation, guarantee proper management, and have the requisite specialist qualifications;
  • the significant shareholders have a good reputation and do not exert their influence to the detriment of prudent and sound business practice;
  • compliance with the duties is assured by internal regulations and an appropriate organisational structure; and
  • sufficient financial guarantees are available.

The annual entity maintenance and accounting compliance cost varies strongly depending on whether it is a regulated or non-regulated investment vehicle, and depending on the real estate assets and structure of the vehicle.

Basically, Swiss (private) law provides for two types of purely contractual arrangements (as opposed to rights in rem such as ownership and ground lease): the lease and the usufructuary lease. Public bodies may also grant public works constructions for certain infrastructure projects.

There are no different types of commercial leases.

Swiss tenancy law contains various mandatory provisions, typically in favour of the tenants.

Excessive rents are prohibited, and tenants have the right to challenge them in court as being abusive.

Typically, the lease term is not below five years (due to the requirement of a minimum term of five years for the rent to be subject to indexation). Frequently, the parties agree on the tenant's options to extend the lease. Lease terms may also be concluded for an indefinite period.

With the exception of minor repair works, all maintenance and repair costs must be borne by the landlord. Double-net and triple-net structures are valid, subject to certain conditions (eg, the tenant must confirm that the transfer of maintenance and repair obligations to them has been sufficiently reflected in the calculation of the rent).

As a result of COVID-19, parties to leases now often include force majeure clauses dealing with the handling of pandemic situations and responsibilities in this respect, amongst other issues.

Typically, rent is paid in advance, either monthly or quarterly.

The parties may agree on certain adaptations, subject to changes in the interest rate level and, alternatively for leases with a minimum term of five years, in the Swiss Consumer Price Index (so-called indexed rent).

The parties may also agree on staggered rents (although not in combination with indexed rents for the same period) and special types, such as turnover rents.

If the landlord makes value-adding investments in the leased premises, it has the right to unilaterally increase the rent, subject to certain statutory regulations.

Typically, Swiss tenancy law provides the framework for the calculation of any rent increases.

Pursuant to Article 21 paragraph 2 No 21 of the Swiss VAT Law, real estate rent is basically not subject to VAT (with certain exceptions). However, for commercial leases, the landlord may opt for the VAT taxation of the rent.

Typically, the lease agreement includes an obligation for the tenant to provide security for the payment of the rent before the handover of the leased premises (rent deposit, bank guarantee). If the tenant carries out the fit-out, it must obviously bear such costs.

Maintenance and repair costs for a building and its surroundings (landscaping) are included in the ancillary costs to be paid by the tenant. The costs related to the common areas are allocated to each tenant separately (typically based on its share of the leased premises).

Costs and charges arising solely from the business operations of the tenant are typically borne by the tenant, even if invoiced to the landlord. The costs related to the common services and infrastructure are allocated to each tenant separately (typically based on the share of its leased premises).

The owner must insure a building and pay such costs; insurance costs must not be included in the ancillary costs.

The parties are basically free to agree on limitations in relation to the use of leased premises; they can even agree on an obligation to use – eg, for tenants in shopping facilities.

In addition, a sublease by the tenant is subject to the landlord's approval, but such approval may only be withheld if:

  • the tenant refuses to disclose the terms of the sublease;
  • the terms of the sublease are abusive; or
  • the sublease has major disadvantages for the landlord.

If a tenant wants to alter or improve the rented property, the landlord’s written permission is required. The landlord’s consent may be subject to the obligation of the tenant to remove its alterations at the end of the lease and to waive any rights to be compensated for the added value of such works.

Swiss tenancy law differentiates between commercial and residential leases only. Certain mandatory provisions apply only to residential leases.

In the case of a tenant’s insolvency, all rent receivables due become assets in bankruptcy. However, the lease does not end automatically: the landlord can request security for future rents. If security is not provided within a grace period, the landlord is entitled to give extraordinary notice and immediately terminate the lease contract.

The following forms of security can be provided to a landlord to protect against a failure by the tenant to meet its obligations:

  • rent deposits;
  • bank guarantee/surety; and
  • the additional liability of a third party/affiliate.

Once a lease is terminated, the tenant has no right to further occupy the leased premises. However, tenants may request the extension of the lease within 30 days of the termination by the landlord or two months before the end of the fixed lease term, where termination of the lease would cause a degree of hardship for them or their family, which cannot be justified by the interests of the landlord.

Due to a tenant’s mandatory right to claim an extension of the lease, a landlord’s rights in relation to legal measures are rather limited, unless it becomes obvious that the tenant will not leave on the agreed (and court-ordered, respectively) date. Under these circumstances, it might be possible to evict the tenant on the date of termination.

Pursuant to mandatory tenancy law, the tenant may transfer the lease or sublease all or a portion of the leased premises, subject to certain conditions. The landlord may withhold consent only for good cause (transfer of lease) in the following circumstances:

  • if the tenant refuses to inform it of the terms of the sublease;
  • if the terms and conditions of the sublease are unfair in comparison to those of the principal lease; or
  • if the sublease gives rise to major disadvantages for the landlord.

Unless otherwise agreed, the notice period with regard to indefinite business leases is six months. Tenants are entitled to submit a request for an extension of the lease term to a judge if the termination would cause undue hardship that cannot be justified by the landlord's interests. The maximum extension for commercial leases is six years.

Default in the payment of rent entitles a landlord to terminate a lease. However, the landlord must first grant a deadline of a minimum of 30 days for payment, combined with the announcement of termination in case of further default, and may then terminate the lease with a notice period of another 30 days. The landlord may also terminate the lease if the tenant becomes insolvent (see 6.15 Effect of the Tenant's Insolvency).

A tenant may terminate a lease if the landlord does not hand over the leased premises at the time agreed upon, or if, at the handover, the premises have defects that significantly impair their suitability for the intended use. During the lease, the tenant may give notice with immediate effect if the landlord is notified about such a defect and fails to remedy it within an adequate period of time.

In addition, both a landlord and a tenant may terminate a lease for valid reasons that make it impossible to continue the lease.

There are no registration requirements and/or execution formalities. However, the parties to a lease may agree to have it entered under priority notice in the land register with the effect that every future owner must allow the property to be used in accordance with the lease. Typically, the fees relating to such registration do not exceed CHF1,000.

Tenants can be forced to leave. The duration of the process to enforce this depends on court instances, but can take several months or even years.

The government or other authorities may not terminate private leases.

As consideration for the services performed by the contractor, prices are usually agreed as unit prices (Einheitspreise) or lump sums (Globalpreise), or at a flat rate (Pauschalpreise). These prices are normally considered as fixed prices. Due to the war in Ukraine and increased inflation, total contractors have started to renegotiate fixed prices.

Unit prices determine the consideration for individual services that are listed as separate items in the schedule of services. They are defined for the individual units of quantity, so that the consideration owed for a service is computed after its completion. The quantities of services performed at unit prices are determined according to the terms of the contractor agreement, in accordance with their actual measure (by measurement, weighing or counting) or with their theoretical measure based on the underlying designs.

A lump sum of a fixed amount of money may be agreed for individual services, for part of the project or for the whole of the project carried out by the contractor. Agreements on lump sum payments should be made only on the basis of complete and clear documentation (ie, detailed project specifications, designs and the like).

Flat rate prices differ from lump sum payments solely in that they are not subject to price adjustment clauses.

General and total contractor models are often used.

In the general contractor model, the owner uses an architect and engineering team for the planning. The owner either enters into a single planning contract with a consortium of planners/designers (often in the form of a simple partnership) or concludes individual contracts with each architect or engineer involved. For the execution of the construction work, the owner enters into a contract with a contractor who, in turn, uses subcontractors.

In the total contractor model, the owner contracts with a single company that assumes full responsibility for the planning and realisation of a project.

The contractor is liable for ensuring that the project is carried out free of defects, and bears such liability regardless of the cause of the defect (eg, negligent workmanship, use of unfit materials, unauthorised deviation from designs and instructions of the construction manager) and independently of fault.

If defects occur, the owner is entitled to defect warranty rights, such as the right of remediation, deduction and/or rescission. Unless otherwise agreed, the owner is to notify defects immediately (ie, within seven days). However, the owner and contractors often agree on an extended notification period of two years.

The owner’s defect warranty rights are subject to a limitation period of five years following acceptance of the project or a certain part of a project, respectively.

Parties are allowed to agree that an owner is entitled to monetary compensation if certain milestones and completion dates are not achieved. Moreover, the parties often agree on a penalty to ensure that milestones and completion dates are complied with.

It is common for owners to seek additional forms of security, particularly guarantees or sureties of a Swiss bank or insurance company.

Contractors that have supplied labour and/or materials are permitted to a statutory lien, while designers/planners for the intellectual work (plans, designs, etc) are excluded from such lien. The lien is entered into the land register only if, inter alia, the claim has been acknowledged by the owner or confirmed in a court judgment, and may not be requested if the owner provides adequate security to the contractor.

An official inspection is carried out by the competent authority of the local community before a project can be inhabited or used for its intended purpose.

In general, the sale of real estate properties is exempt from VAT without credit of input VAT. However, with respect to commercial real estate properties, the landlord can opt to submit the rent to VAT and the seller can opt to submit the property sold to VAT. Accordingly, VAT applies to the sale, provided the buyer is (or will become) a taxable person and is registered for Swiss VAT purposes, and that the real estate property sold is not used exclusively for private purposes. In this case, the standard rate of 7.7% applies. Please note that all tasks relating to the construction of a new building for a landlord are subject to VAT. Accordingly, input VAT charges incurred on the construction can only be recovered if the landlord is exercising its option to submit the rent and the sale of the property to VAT.

Local transfer taxes and notary and/or land registry fees also apply. Each of the 26 cantons has specific laws and rules on these transfer taxes and fees. Depending on the location of the property transferred, these additional charges may be substantial, particularly as notary and land registry fees in some cantons are calculated based on the value of the property transferred. While a few cantons (such as the cantons of Zürich and Schwyz) have abolished the real estate transfer tax, all cantons levy land registry fees. In cantons where the real estate transfer tax is not known or has been abolished, notary and land registry fees may be substantial and can include a tax component as well, if computed based on the value of the property transferred.

While a change of control in a so-called real estate property company by the sale of (typically) a majority stake in the shares triggers the transfer tax in those cantons that have a separate real estate transfer tax, notary and land registry fees are only triggered if there is a change of title of the underlying property (and not by a sale of a majority stake in a real estate property company). With due regard to these local taxes, it may therefore be worth conducting a comparison between the tax consequences of an asset versus a share transaction. In a few instances, the overall charge of transfer taxes, notary and land registry fees may be lower in a share deal than in an asset deal.

The buyer is liable for the payment of real estate transfer tax in most of the cantons that have it. However, in a few cantons the seller is liable, or there is a 50:50 split between the seller and the buyer. In a corporate restructuring, an exemption from the transfer tax may be available, and in some cantons the notary and/or land registry fees are reduced and the tax should not hinder corporate restructurings. This also applies to real estate companies or a group of real estate companies contemplating an internal group restructuring. Real estate transfer taxes and notary and land registry fees are charged without regard to whether the seller is realising a gain or a loss. In most of the cantons, payment of the tax (or even payment of notary and/or land registry fees) is secured by a first-ranking legal lien on the property sold, and the seller and the buyer are often jointly liable for payment of the tax (or even payment of notary and/or land registry fees). Therefore, well-advised parties to a property sale and banks providing mortgage-secured funding to the buyer will take care to ensure that all taxes triggered – and all notary and land registry fees incurred – are paid in advance or put in escrow by the relevant party.

The pros and cons of an asset versus a share deal for the acquisition of a property portfolio need to be considered carefully. Beside the implications on the corporate income and/or real estate capital gains tax, transfer taxes and notary and land registry fees also need to be taken into account. The outcome of such analysis may vary depending on the location of the properties sold. Furthermore, the set-off of gains and losses, the extraction of future profits, security deposits for Swiss taxes (in particular VAT) to be made by foreign companies and approval requirements for a future exit by the competent Swiss tax authorities need to be carefully considered.

In a share deal, a debt pushdown into the target is hardly possible and, as limitations on upstream securities apply, the structure chosen needs to be discussed with the bank, and savings made with respect to notary and land registry fees may be lost due to less advantageous funding conditions by the banks or the loss of tax-efficient interest deductions and/or acquisition costs. Case-by-case analysis should be performed, and the location of the underlying properties has a crucial impact on the outcome of such analysis.

While a share deal does not trigger VAT, an asset deal might. However, if a portfolio of assets is sold, the notification procedure should generally be open, so there should be no cash leakage due to a time-consuming payment and refund procedure.

Some cantons and/or municipalities levy special taxes on the value of the real estate located in their territory, which have to be paid by the property owner.

Moreover, rental income is subject to federal, cantonal and municipal income tax in the canton/municipality where the property is located. While the federal corporate income tax rate is uniform in the whole country, the cantonal and municipal income tax rates may vary widely.

In general, rental income from investments in Swiss properties earned by corporate investors is subject to Swiss federal, cantonal and municipal corporate income tax in the canton and the municipality where the property is located. The aggregate corporate income tax rate varies depending on the location of the property. If the property held by an individual investor qualifies as a business asset (and not as a private asset), social security contributions may be triggered on top of this. The tax is assessed based on a tax return filed by the Swiss or foreign investor. No withholdings apply.

Interest accrued on debt funding is deductible, which is also true with respect to shareholder or other related party advances. However, thin capitalisation rules apply and the amount of the debt funding and the interest rate applied should remain within the safe harbour limits that are published periodically. Otherwise, a constructive distribution may be assumed that would not allow for an income tax-effective deduction and trigger the (dividend) withholding tax of 35%. Buildings may be depreciated over their useful lifetime, and the depreciation deductions may be deducted from taxable income. The straight line or the reducing balance depreciation method may be chosen freely.

Land cannot be depreciated, but a blended rate may be applied if land and building values are not split and do not have separate book entries. Safe harbour depreciation rates are available for the depreciation methods and the blended rate. In the event of a sale of the property, recaptured depreciation deductions are subject to corporate income tax. Accordingly, depreciation deductions taken that do not reflect real losses of value lead to a mere income tax deferral. In general and with due regard to the current negative interest rate environment, in a share deal scenario deferred income taxes are fully deducted from the purchase price as a deferred liability.

Interest paid on mortgage-secured funding advanced by a bank (or other lender) outside Switzerland to a Swiss borrower is subject to a local interest withholding, with the applicable rate depending on the location of the property securing the loan. The interest withholding is not levied if the investor is a resident of a benign treaty jurisdiction where the interest clause in the treaty excludes taxation in the source country.

The holding of a property in Switzerland is also subject to Swiss wealth tax (for individual investors) or capital tax (for corporate investors), the maximum rates for which vary significantly between the different cantons and municipalities.

Appreciation gains realised on the disposal of properties are subject to taxation. One of the following two systems applies, depending on the cantonal regime:

  • the so-called monistic system, where any appreciation gain, be it on a private or a business asset, is subject to a separate cantonal and municipal real estate capital gains tax – this system applies in the cantons of Zürich and Bern, amongst others; or
  • the so-called dualistic system, where any appreciation gain realised on the disposal of a business asset remains subject to corporate income tax (and no real estate capital gains tax is levied) – this system applies in the cantons of St Gallen and Zug, amongst others.

While corporate income tax is a flat tax that applies regardless of whether the property disposed of was held for a short or long period, progressive tax rates apply under real estate capital gains tax. If the holding period was less than one year, some cantons and municipalities levy a real estate capital gains tax of 60% (on top of the federal income tax). If a long holding period applies, the real estate capital gains tax may be 20%, or even less than that in some cantons. Accordingly, whether the gain realised by a corporate investor will be subject to corporate income tax or real estate capital gains tax may have quite some impact on the after-tax performance of an investment. Again, in the case of a corporate or group internal reorganisation, the tax may be deferred as it should not hinder such restructurings.

Dividends (and other distributions) paid by Swiss companies are subject to a withholding tax of 35%. The withholding has to be deducted from the dividend in advance and has to be paid by the debtor of the dividend – ie, the company paying the dividend (a reporting procedure is only available in the case of a Swiss parent company or a parent company in a benign double tax treaty state). For withholding tax purposes, it is therefore advantageous if the investor (a shareholder of the SPV) is domiciled in a country that has entered into a double taxation treaty with Switzerland. Unless this is the case, it is advantageous to use a foreign SPV to avoid withholding tax.

A corporate investor may apply income tax-effective interest and depreciation deductions. Furthermore, the costs for maintaining the property in good shape and fit for its purpose may be deducted from the income tax base, as may income and capital taxes accrued and provisioned. The same is true with respect to all expenses relating to the property management and letting.

Walder Wyss Ltd

Seefeldstrasse 123
P.O. Box
8034 Zürich

+41 58 658 58 58

+41 58 658 59 59
Author Business Card

Trends and Developments


Baker McKenzie has one of the largest real estate transaction practice groups in the Swiss market, with a strong focus on real estate M&A and private equity, tax-efficient restructurings, real estate investment schemes (funds), listings of real estate investment companies, real estate developments, and corporate real estate and hotel transactions. Led by highly experienced real estate lawyers, the firm's real estate practice is spread across two offices – Zurich and Geneva – and includes four partners and approximately 18 qualified lawyers. Clients in Switzerland include the largest publicly listed Swiss real estate companies, high-profile Swiss enterprises, some of the largest Swiss developers, hotel owners and operators, real estate asset managers, international investors and international corporate clients, as well as industrial companies, private clients and real estate investors. The real estate practice focuses on real estate M&A, including sale and lease back transactions; hotel and hospitality structures; portfolio optimisation; corporate real estate; development projects; real estate funds, including investment foundations; and club deal structures.

The Real Estate Market in Switzerland: an Overview

In general

The Swiss real estate market remained stable in 2022 despite various challenges, such as increases in interest rates and construction costs.

The most significant change compared to previous years was the increase in interest rates, both locally and on a global scale. For instance, the Swiss National Bank increased the key interest rate in Switzerland by 2.25 percentage points between June 2022 and March 2023, from -0.75% to 1.50%. Nevertheless, inflation remains persistent and is no longer a temporary phenomenon. This in turn has had an impact on the interest rate (and price) level in the real estate sector and other asset classes.

Stabilisation of energy prices

The worst-case scenarios for the winter season regarding energy shortages did not come true. At the beginning of 2022, the recovery of the economy and the drastic curtailment of gas supplies by Russia initially caused the price of gas to skyrocket, which also pushed up electricity prices as a consequence, as they develop mostly at the same pace due to the very flexible gas-fired power plants in Europe that are used to cover peaks in electricity demand. However, both prices have since dropped significantly, to pre-crisis levels; the same applies to diesel and petrol prices.

The focus will now be on the next critical winter, when Germany takes each of its nuclear power plants off the grid. The first floatable LNG terminal is in operation and the French nuclear power plants are up and running after a long-lasting maintenance period. Nevertheless, even a moderate increase in energy prices and, moreover, the lack of skilled personnel in the construction business are expected to have a negative effect on real estate investments and future project developments.

Real estate investments

According to a report published by JLL Switzerland, a total transaction volume of CHF3.9 billion was estimated for Swiss investment properties in 2022, indicating a decrease of almost one third compared to the previous year, but maintaining the average over the previous years since 2015 (JLL, Report: Büromarkt Schweiz – 2023). This was largely due to a reduction in large-scale transactions (such as Pictet's sale of its headquarters near Geneva for a record consideration in 2021). In addition, the record prices paid until spring 2022 are now a thing of the past, and are gradually giving way to more realistic levels.

Commercial properties

The nationwide availability rate for office space at the end of 2021 was 4.6%, but the five largest Swiss cities had a significantly lower rate of 3.1% on average. This contrasts sharply with the peripheral areas, which have an average availability rate of 8% (CBRE, Tendances du marché des bureaux en Suisse – 2022).

Office vacancies decreased slightly in 2022. The overall projected construction activities for the upcoming years are below average and, in the meantime, many projects will not be realised until 2024/2025. For example, in the Zurich area, the supply ratio fell from 5.1% to 4.5% compared to 2021 (JLL, Report: Büromarkt Schweiz – 2023). Other regions of Switzerland illustrate the same picture, with the exception of Basel, where a pharmaceutical company has moved into its second high-rise building and has therefore freed up many other sites in the city centre. Therefore, according to JLL, the supply of available office space in Basel increased substantially by 15,400 sq m and stood at 140,400 sq m during the year 2022. The office market in Geneva remains polarised, with the availability rate in the outskirts of Geneva (6%) continuing to increase while remaining stable in the city of Geneva, at low levels of 2.8% (JLL, Report: Büromarkt Schweiz – 2023).

Demand for centrally located, modern offices remains strong, supported by the ever-steady economic growth. Top rent net rates in the major city centres are holding steady at CHF975 per sq m per year for Zurich and CHF935 per sq m for Geneva, according to Wüest Partner. Across the regions, the level of rent has been maintained, and some increases were observed, mainly in the city centres of Switzerland. Conversions remain an option, but they are often more difficult to implement than is generally assumed.

Residential properties

Demand for residential property remained high in 2022, fuelled by high immigration, below-average construction activity and smaller household sizes. According to Fahrländer Partner AG, attractive financing conditions and the continuing trend toward home offices led to a 6.7% year-on-year increase. This surpasses the previous year's record. The 8.3% increase of the Swiss building price index, which is based on reports by local construction companies, is even more unusual.

The UBS Swiss Real Estate Bubble Index increased slightly in 2022, making a steady increase to 1.54 points after a sharp decline in 2021. The stable economy in 2022, a slowdown in the increase in mortgage debt and falling investment in construction prevented further bubble risks in the home ownership market. Low supply and a decline in construction activity make a price correction in the near future unlikely (UBS Swiss Real Estate Bubble Index 4Q 2022).

The shortage of rental apartments is coming to a head in Switzerland. Supply has continued to decline over the past year, partly due to the downturn in construction activity. This is particularly the case in touristic municipalities, which are feeling the collateral effects of the Lex Weber on restricting the construction of second homes (Wüest Partner, Property Market Switzerland 2023/1). The average insertion period was only 28 days. Given the current tightness of supply and inflation, Wüest Partner forecasts a 2% increase in rents for 2023. Currently, all major cities are seeing a decline in filed construction permits, with Geneva as an exception.

The market for owner-occupied property is also seeing a continuing decline in supply, with demand levelling off slightly, but remaining at a high level. Within a year, this has led to price rises of 5.2% for mid-sized privately owned apartments and 5.5% for mid-sized single-family houses. However, due to the increase in mortgage rates, for the first time in several quarters the price of a single-family house decreased by -0.2% in the last quarter of 2022. For the next year, prices are expected to increase only slightly. An average increase of 2.5% is expected for owner-occupied apartments across all sub-segments, while prices for single-family houses are expected to rise by 3% (Wüest Partner, Property Market Switzerland 2023/1).

In 2022, under pressure from foreign national banks, the Swiss National Bank increased its interest rates to battle inflation, but the gap of the other key indices widened again. For 2023, the bank forecasted a 2.4% inflation rate (status in December 2022), but this was already clearly exceeded in February 2023, reaching 3.4%. It should be noted that the Swiss National Bank does not expect inflation to fall below 2% before the end of 2025.

The key interest rate of the Swiss National Bank was further increased to 1.5% on 24 March 2023, and may be increased again going forward, which means that long-term interest rates may again surpass the highest level to date, which was 2.9% in October 2022. Interest costs for property owners are likely to continue to rise. However, this also leads to a higher reference interest rate in the longer term, which increases the yield on rental properties. Experts do not expect this first increase until autumn 2023 (Credit Suisse Immobilienstudie 2023).

The development of the SARON interest rate, which is based directly on the Swiss National Bank's key interest rate, is also noteworthy. The lowest margin for a SARON mortgage on the comparison platforms was 0.53 percentage points, which means that the lowest interest costs were around 1.5%. Due to the latest increase in March 2023, this level is increasing and the interest costs for SARON mortgage borrowers will rise to just about 2.5% in 2023, according to experts. Those who previously had a SARON mortgage now have the opportunity to take out a five-year or even ten-year fixed-rate mortgage at a relatively low premium. Closings with ten-year fixed-rate mortgages are still much less frequent than before. Many people opted for five-year or three-year fixed mortgages, or the SARON. The previous assumption of many was simply that interest rates would fall or remain the same (Finanzierungs- und Immobilien Update, January 2023).

COVID-19 trends: backlash?

The typical demand trends during the pandemic (in terms of “larger apartments, increased property ownership, less central accommodation”) have tended to weaken or even cause a potential trend reversal. For example, demand for small rental apartments in 2023 held up better than demand for large rental apartments. Furthermore, demand around the major centres has held up better than in the mid-sized centres of Switzerland. When analysing the search subscriptions on real estate platforms, it becomes clear that demanders are satisfied with less space, and that the willingness to pay for condominiums is decreasing. Of course, these developments are reinforced by businesses that limit remote working opportunities for regulatory or organisational reasons.

However, there are also places where a trend reversal is not yet evident. Of particular note are medium-sized municipalities with direct commute connections to major city centres. On a nationwide scale, these few exceptions remain. Therefore, as always with real estate, the decisive criterion was and remains the location of the property itself.

Legal Developments


General trends and developments in transaction structures

Compared to 2021, real estate investors remained cautious about very substantial transactions in 2022; planned capital increases were postponed, and many of the major players applied the brakes. Instead of new acquisitions, they increasingly invested in their portfolios; others used what was probably the last opportunity to clean up their portfolios. In addition to a few properties in A locations, many properties in B and C locations came onto the market. Listed investors primarily disposed of properties that did not meet sustainability requirements and where energy refurbishment would have too great an impact on profitability (CSL, Immobilienmarktbericht 2023).

Increasingly complex legal structures

A clear trend in larger Swiss real estate transactions is an increase in legal and structural complexity. Several elements contribute to this trend.

The trend of the sophisticated M&A market practice to penetrate real estate transactions, both for share deals and for regular asset deals, is accelerating. For example, detailed warranty limitation concepts with de minimis amounts, thresholds and liability caps are becoming more widely used. At the same time, buyers are pushing for extended warranty catalogues.

Companies still find it beneficial to sell real estate in order to generate cash and clean up their balance sheets. A recent standout example was the sale by a large bank of a large commercial building in one of the most sought-after locations in Geneva to the Turidomus investment foundation in a sale-and-leaseback transaction. Such sale-and-leaseback transactions are regularly carried out in connection with or following (private) M&A transactions. For instance, private equity-owned Variosystems AG sold its global headquarters in Steinach, in the Canton of St Gall, to UBS Anlagestiftung.

In addition, there have been numerous transactions involving development projects, such as Zug Estates Holding AG's acquisition of a CHF110 million real estate portfolio consisting of 12 properties, including an excellent development area in Rotkreuz.

Complexity is further added when entire portfolios are being sold. When the seller is a Swiss legal entity, portfolio transactions are typically done by way of an “asset transfer” under the Swiss Merger Act (Vermögensübertragung). This differs from a regular asset deal, in that an asset transfer allows for the transfer of an entire real estate portfolio, even if located in different cantons, in a single public deed. The transfer of the title is completed by registering the public deed in the commercial registry at the domicile of the seller. Subsequently, registration in the land registry is only made with declaratory effect. Depending on where the properties are located and where the seller is registered, substantial cost savings can be obtained compared to a regular asset deal.

Finally, hotel transactions continued to gain momentum in 2022. Investors from abroad still see Swiss luxury hotels as a safe investment; more than 40% of Switzerland's top hotels are already in foreign hands. In many cases, questions regarding the Lex Koller and the Secondary Residence Act must be clarified upfront. In a recent headline transaction, Dubai-based international hotel group Jumeirah acquired the Hotel Le Richemond in Geneva. The investor plans to reopen the hotel in 2025 after an extensive renovation of the building that dates back to 1875. Usually, such transactions are part of a refurbishment project, like the acquisition of Hotel Ascot in Zurich or several smaller hotels located in the Swiss Alps.

The logistics centre market in Switzerland

JLL has counted more than 1,200 buildings with logistics uses in Switzerland (JLL, Logistic Market Switzerland 2022), the majority of which are owner-occupied. Just under 300 logistics properties are owned by owners who rent out these buildings for investment purposes. The density of logistics buildings is highest along the A1 highway and around the major conurbations of Zurich, Geneva, Basel and Lausanne. In particular, many logistics properties are found in the Basel–Solothurn–Zurich triangle.

The demand for space from logistics companies has been increasing for several years. Drivers of this development include the more globally connected economy and the pandemic-related growth of online trade, which shows no signs of a potential reversal. The Swiss Post, for example, transported 202 million parcels in 2021 (+37% compared to 2019). JLL has been receiving significantly more inquiries for logistics properties for about a year and a half, and the need for advice is increasing among both users and owners.

Logistics properties can represent a welcome diversification within a real estate portfolio, as their value drivers are dependent on factors other than those of residential or office properties. Prime yields of between 3.5% and 4.0% are expected for modern logistics properties with established tenants and long-term leases. Recently, a slight increase in sale-and-leaseback transactions has been noted. However, supply cannot keep pace with the increased demand. Therefore, the lack of larger logistics areas and of buildable sites near highway connections and conurbations not only hinders the growth and further development of the logistics sector, but also means that companies often have to make compromises when deciding on locations. These compromises entail operational disadvantages and lead to higher transport costs and (associated) environmental pollution.


Since 1 October 2022, there has been a Switzerland-wide solar installation obligation for new buildings with a suitable building area of more than 300 sq m. This amendment to the Energy Act was made as part of the “Urgent Measures for the Short-Term Provision of a Secure Power Supply in Winter”. It is in force until 31 December 2025, or until a definitive change in the law applies. Numerous cantons already require solar installations in new buildings, but this regulation is now nationwide.

In addition, various cantons now stipulate that the installation of new fossil-fuel heating systems are not permitted in new buildings or during a refurbishment. The Federal Council subsequently amended various ordinances in the energy sector as of 1 January 2023. Among other things, this will facilitate the construction of large-scale photovoltaic systems and make the billing of solar power to tenants more attractive for building owners.

More clarity is to be created for developers when building in areas that are subject to noise pollution. In December 2022, the Federal Council published the dispatch on amendments to the Environmental Protection Act (EPA). The noise criteria for the granting of building permits are to be formulated more clearly, and are already described at the legislative level. Better co-ordination of noise protection and inward urban development is to be achieved, among other things, by the (re)introduction of the so-called “ventilation window practice”. This practice originated in the Canton of Zurich and made it possible to build new developments without expensive or unaesthetic construction measures, even along roads with heavy traffic. However, in the meantime, exceptional permits must always be applied for, which can easily be challenged by objectors. If implemented promptly, various construction projects could be relaunched, especially in inner cities. The law has yet to be discussed by the Parliament.

Other regulatory changes

On 19 October 2022, the Federal Council approved its dispatch regarding the construction defect provisions in the Swiss Code of Obligations. This is intended to selectively improve the situation of builders as well as buyers of properties with newly constructed buildings. The rights of homeowners and condominium owners, but also of professional builders, are to be strengthened without noticeable disadvantages for building contractors and building tradespeople. The revision is limited to the new regulation of the notice of defects and to the waiver of the right to remedy defects, as well as the prerequisites for substitute security in the case of a construction lien. For example, according to the draft, the period for notifying defects in an immovable work will now be 60 days, for both obvious and hidden defects. This new period of notice will apply not only to contracts for work and services, but also to contracts for the sale of real estate. The provision is to be dispositive, so that the parties can deviate from it contractually.

It should also be noted that a new inheritance law applies in Switzerland as of 1 January 2023. It reduces the statutory compulsory portions and increases the freely available quota for the testator. Those who settle their inheritance with a will or an inheritance contact are able to freely dispose of at least half of their assets thanks to the revised inheritance law, which facilitates, in particular, a business succession or a transfer of large assets such as real estate.

Summary and Outlook

Switzerland's economic stability and reputation as a safe haven, as well as the positive development of user markets, protect real estate investments from a hard landing in the upcoming year. Listed real estate funds reacted sharply to the interest rate turnaround in 2022, ending the year with negative overall performance; capital markets transactions also experienced a sharp downturn. Following the correction, the market is now beginning to recalibrate itself and, thanks to more realistic valuations, new investment opportunities are opening up that should be taken. The scarcity of land in Switzerland is likely to become more pronounced, meaning that real estate will remain an important component in virtually every portfolio.

In larger transactions in particular, Swiss pension funds, life insurers and foreign institutional investors currently dominate the buyers' market. Swiss pension funds and life insurers are forced to invest in Swiss real estate to secure stable returns to satisfy the claims of their beneficiaries. Although real estate prices in Switzerland are high, and consequently returns are rather low for Swiss pension funds and life insurers, a Swiss real estate investment was still more attractive than depositing cash in Swiss banks with very low interest rates. There has also been a certain shift towards foreign investors, several of whom are investing for the first time in Swiss real estate. For many foreign investors, Switzerland's stable political and economic environment and the strong Swiss franc provide protection against uncertainties in other countries in challenging economic times.

The increased presence of foreign investors in the Swiss real estate arena has fostered more sophisticated and more complex transaction and real estate holding structures. In addition, while foreign investors appreciate the stability of Switzerland, they are typically looking for higher returns than the rather conservative Swiss investors. As it is now hardly possible to buy Swiss real estate at modest prices, higher returns can primarily be achieved through a more sophisticated legal and tax structuring of transactions, or by repositioning or redeveloping assets. As foreign investors are often used to complex transactions in their home countries, they are applying the same strategy when they invest in Switzerland, which helps to explain the increased complexity and sophistication of real estate transactions in Switzerland in recent years. There is little doubt that this development will continue.

Baker McKenzie

Holbeinstrasse 30
CH-8034 Zürich

+41 44 384 14 14

+41 44 384 12 84
Author Business Card

Law and Practice


Walder Wyss Ltd has specialised and established itself in Switzerland’s real estate sector over the course of many years. Its experienced and well-known real estate team of more than 30 lawyers and tax experts is one of the largest and most specialised in Switzerland, enabling it to handle highly complex real estate transactions, planning issues and real estate litigation efficiently and with an integrated perspective. Walder Wyss advises real estate players in all parts of Switzerland through its offices in Zurich, Geneva, Basel, Lugano, Bern and Lausanne, which also offer notarial services such as notarisations of sale and purchase agreements. The firm works with clients to develop solutions that generate added value and that are executed with interdisciplinary project teams where necessary.

Trends and Development


Baker McKenzie has one of the largest real estate transaction practice groups in the Swiss market, with a strong focus on real estate M&A and private equity, tax-efficient restructurings, real estate investment schemes (funds), listings of real estate investment companies, real estate developments, and corporate real estate and hotel transactions. Led by highly experienced real estate lawyers, the firm's real estate practice is spread across two offices – Zurich and Geneva – and includes four partners and approximately 18 qualified lawyers. Clients in Switzerland include the largest publicly listed Swiss real estate companies, high-profile Swiss enterprises, some of the largest Swiss developers, hotel owners and operators, real estate asset managers, international investors and international corporate clients, as well as industrial companies, private clients and real estate investors. The real estate practice focuses on real estate M&A, including sale and lease back transactions; hotel and hospitality structures; portfolio optimisation; corporate real estate; development projects; real estate funds, including investment foundations; and club deal structures.

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