What are the usual steps to buy a real estate property?
The transfer of real estate property in Switzerland requires that the parties have agreed the essential purchase terms, such as the identification of the property and the price. This first phase is usually carried out through a real estate agent who draft a preliminary contract fixing the main contents of the agreement.
The second phase requires that the parties appear in front of a Public Notary (or directly before the Land Register Authority in some Cantons) in order to draft a purchase deed, in which all the details of the transaction are stated.
The deed is read by the Notary in front of all the parties, who must agree on all the clauses and undersign the deed.
The usual clauses are the following:
- Names and addresses of the parties
- Description of the property: address, cadastral number, floor area
- Agreement regarding any mortgage certificate
- Purchase price
- Payment of taxes and duties – in particular the payment of real estate gains tax must be clearly regulated
- For new objects: description of the construction; for older objects: state of the property on delivery
- Terms and conditions of payment
- Deadline for transfer
- Regulation of the continuation of existing insurances, e.g. building insurance
- Easements – must absolutely correspond to the data in the Land Register
- Documents that form an integral part of the contract, e.g. a description of the construction or the building contract, if present
- Regulation in the event that one of the two parties does not comply with the contract
The buyer usually pays the price on the bank account of the Notary, who provides to transfer it to the seller deducing taxes and costs after obtaining the transcription of the transfer of the property to the Cantonal land register, hereby completing the process.
It must be stressed that the Swiss legislation limits the possibility for foreigners without legal residence in Switzerland to buy real estate property and owning real estate property in Switzerland. That means that foreigners living abroad can buy real estate property but only with a special permission issued by the local Cantonal authority to do so. The authority designated by the Canton decides whether a transaction requires authorisation and whether an authorisation is granted. Authorisations may be granted only in the cases provided by the Swiss law. The ownership of real estate in Switzerland does not entitle a foreign national in any way to a residence permit.
What legal checks should be done before buying a property?
The legal due diligence is carried out by the Notary, who is chosen by the buyer. That means that the Notary has to state the legal condition of the property according to the Land Register and clarify whether there are any legal obstacle in transferring the property according to the Swiss law.
Buying through a company
Companies which have their registered office abroad can buy a property in Switzerland, too, although they are subject to the same limitations provided by the Swiss law concerning people living outside Switzerland.
Real estate which is used only for commercial purposes can be acquired without authorisation. In this case, it is immaterial whether the real estate is used for the buyer’s business or rented/leased by a third party in order to pursue a commercial activity.
Please take care that the company ownership may cause the double taxation for the ownership (at the company and at shareholder’s level).
Switzerland has a strict regulation in place to prevent money laundering and terrorist financing. The Federal Act on Combating Money Laundering and Terrorist Financing contains provisions detailing due diligence requirements, transaction reporting, identification procedures and record-keeping requirements for financial intermediaries when dealing with customers. Any cases of suspicions of money laundering have to be in any cases announced to the Money Laundering Report Office Switzerland.
What are the purchase costs and taxes?
The total purchase costs are usually in the area of 3% (including purchase tax, land Land Register fees & Notary’s fee) in most Cantons. All purchase costs are paid by the purchaser. Foreigners owning a property in Switzerland pay taxes to three bodies – the Federal Government, the Canton, and the Commune.
What precautions have to be taken regarding off-plan purchases?
It’s convenient to be assisted by a lawyer to perform at least the following checks:
- verify the developer is the registered owner of the land where the dwelling will be built;
- obtain a copy of the building authorisation to verify that it corresponds to the project.
The detailed description of the building constitutes an important part of the contract. The best thing is to have in advance the description of the construction and its plans from a neutral specialist, for example an architect or an independent construction consultant. If the buyer wants to play it safe, he should request that the construction plans are an integral part of the contract of buying and selling. If the seller is not willing to include in the contract of sale the description of the construction or the plans, it is a signal that the purchase should be given up.
Tips for clients looking to build own property.
The currently low mortgage interest rates and wide range of financing options in Switzerland are making it possible for many prospective buyers to build their own home.
Of course the client will need to buy the land, obtain planning permission and deal with finance and construction requirements.
A self-promoter must obtain a building permit from the local Authority before starting the works. This permit is issued after a formal request drafted by a registered architect or engineer, who drafts a project and submit it to the Authority.
It must be not that the recent so called Lex Weber (by the name of the promoter of the law) has now prevented any building permits being granted for second homes in any communes in which second homes already make up the 20% of the property stock. That means that in such communes only homes destined to primary use by the owner can be allowed.
Planning is also important in order to obtain the financial sustain of a Bank, normally through a mortgage.
It is convenient to find a reputable contractor and formalise a detailed contract in written form.
It is suggested to be assisted by a lawyer to check all the contracts in order to avoid unpleasant surprises.
Annual running costs
These taxes can be levied by the communal and Cantonal authority every year:
- Property tax: (in different Cantons known as real estate tax) this is a cantonal or communal tax on land and buildings.
- Rental Value Tax: this tax is calculated by determining the theoretical rent the home would yield by the owner if rented out.
In some Cantons it is mandatory to obtain an insurance covering the value of the building.
What minimum legal checks should be done when selling a property?
The vendor must assure that he can deliver the property in the conditions agreed in the contract.
For new buildings, the seller is generally responsible in case of defects of the building.
The Notary conducts all the necessary checks to verify if there are legal obstacles for the sale.
Selling costs and taxes.
If a real estate agent is involved, a commission fee around normally 2-3% of the sale price is due, depending on the contract.
The taxes related to the sale are:
- Capital gains tax: it is levied at the Cantonal level and computed according to the applicable rates of taxation in that Canton and taking into account the length of time the seller has owned the property (to avoid speculation): a surcharge is levied on properties sold within five years; the lesser the period of ownership, the higher is the surcharge on the tax.
- Registration tax at the Land Register
The costs relating to the deed, the Notary’s fee and the Land Register fees are fixed according to the sale price of the property.