Real Estate Consultancy

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Purchase of Real Estate in Switzerland by Foreigners: New Opportunities

The way for attractive real estate investment prospects in the territory of the Confederation for non-resident foreigners has been opened with the entry into force, in the Autumn of 1997, of important changes in the Federal Law on the Purchase of Real Estate in Switzerland by Non-Residents, LAFE (Legge Federale sull’acquisto di fondi da parte di persone all’estero).

Brief background-history: in 1961 a particularly rigid and restrictive legislation was introduced in Switzerland aiming at preventing the feared selling-off of national territory to foreigners (“Lex von Moos”, from the name of the federal councilor who promoted it). Over time, this law underwent several changes that did not modify its substance but instead made it even more restrictive (see “Lex Furgler” of 1973). The new “Lex Koller” – which became effective in 1997 – started a new phase involving the adaptation of our laws to those of other European countries, by limiting the scope of their application, and thus liberalizing the former regime.

Due to the complex legal rules and exceptions thereto and without pretending to exhaust the subject because the correct application of the law in force requires a precise examination of every single case, we present below a summary of the various opportunities offered by the current legislation:

Residential Real Estate

Real estate purchased as main residence by a natural person in his or her legal and effective place of residence is not subject to LAFE. The purchase of a residential property by a foreign citizen, who does not have legal and effective residence in Switzerland, is always subject to authorization by the authority in charge of applying LAFE. In principle, whether purchase permission is granted or not depends on the characteristic of the property and its location.

Income property

Authorization will not be granted when the building is entirely or mainly intended for residential use. Where in a building of mostly commercial, industrial or administrative nature there is an urban development plan act (which establishes a residential quota), the residential part thereof shall not be considered as such.

Property for own use (single family home, villa or condominium apartment)

The purchase of such property by a foreign citizen who does not have legal and effective residence in Switzerland is subject to the following set of rules.

At the Cantonal level: purchase is subject to a quota (i.e. maximum number of permits that can be granted during a year). Such quota varies from Canton to Canton and is part of a maximum number set for the entire country.

At the Municipal level: some municipalities have set a maximum quota of secondary residences (residences not occupied by persons legally and effectively domiciled in that town) by urban development zone or by property (building with more than one apartment unit). This allows the Municipalities to refuse authorization for the purchase of a property, should the maximum secondary residence quota be already exhausted.

In summary, the purchase of a property for personal residential use by a person residing abroad (person not having the right to establish residence in Switzerland) is possible given that:

  • only one property in Swiss territory is involved
  • the Cantonal quota for the year is not already exhausted
  • there aren’t any restrictions at municipal level or the purchase falls within the assigned quota.

In any case, the total surface area (land + net floor space) cannot be significantly larger than what is required for its use, and the purchase must be registered under the owner’s name (registration in the name of a legal entity is not possible).

Commercial, handcrafts, industrial and administrative real estate

Real estate property (building) which is used for commercial, industrial, professional or other economic purposes (so-called permanent establishments, e.g. manufacturing premises, offices, workshops, etc.) is not subject to LAFE. Thus it follows that either a natural person or a corporate body can buy such property without the need to apply for authorization.

Additionally we would like to recall – as already mentioned in the preceding section – that the presence of a residential quota imposed by an urban development act does not affect the non-applicability of the law. In spite of these legislative openings, regulations are still complex. Therefore, in order to insure their correct application we again recommend consulting professionals in this field for the necessary checks and inspections.