Impending tightening of Lex Koller
Re-introduction of the permit requirement for the acquisition of a main residence by non-EU/EFTA-citizens
Today, non-EU/EFTA-citizens can acquire a main residence without a permit – but the permit requirement is to be re-introduced, according to the draft. A specific rule to this effect is included in the preliminary draft. This means that non-EU/EFTA-citizens must apply for a permit and that each acquisition will be reviewed by the competent authorities. The permit will be granted on the condition that the real estate purchased is intended to serve as the purchaser's main residence at the place of his legal and effective domicile. A restrictive condition will be attached to this authorisation, i.e that the real estate be re-sold within two years if the real estate is no longer used as a main residence. This obligation to sell may lead to unsatisfying situations in falling markets due to the potentially large losses and could have an enormous influence on prospective buyers’ intent to purchase property.
Acquisition of participation certificates in residential cooperatives also possible for non-EU/EFTA-citizens with a permit B and actual domicile in Switzerland
The Lex Koller permit will be granted in connection with the main residence and subject to the condition that the participation certificate be re-sold within two years if the real estate is no longer used as a main residence.
Ban on rent or lease of commercial real estate by foreigners
This means, in plain language, that foreigners may acquire commercial real estate only for personal use. If the commercial real estate is no longer used personally by the buyer and his personal use did not exceed ten years, the property must be sold within two years. Depending on the property, this obligation could trigger large losses, as it may be very hard to find a buyer for certain build-to-suit properties in such a short timeframe. Hence, such a rule might limit the number of foreigners willing to set up shop in Switzerland. Today's regulations, according to which commercial real estate is not subject to the Lex Koller, would be abolished. The preliminary draft contains one exception: cantons may grant permits for the acquisition of commercial property in connection with properties used for tourism purposes if the property is of high importance to a municipality. A special regime for commercial real estate was introduced in 1997 under the "investment program on economic policy measures" in order to create new production and service companies with the help of foreign investors. Hence, it is hard to see the rationale for abolishing it, as this would deprive the newly created companies of their foreign investors.
Ban on acquisition of shares in listed real estate companies by persons abroad
Since 2005, persons abroad have had the right to acquire shares in listed real estate companies without a permit, but not shares in non-listed real estate companies. In the future, this exception will only be valid for listed real estate SICAVs (Investment Companies with Variable Capital) – only a handful of which exist today – and real estate funds listed on a Swiss stock exchange. This means that the current exception, which only requires "frequent trading", would be tightened, and frequent trades outside of stock exchanges would no longer be sufficient. This amendment would impact many pension schemes and insurance companies and would lead to restructuring in frequent cases.
Ban on conversion of commercial real estate to residential real estate
In order to avoid abuse, the ban on conversion of commercial real estate to residential real estate will now be clearly anchored in the law.
Limitations on acquisition of residential property on commercial real estate without a permit
Based on municipal regulations regarding residential space on commercial real estate, persons abroad have, up to now, been allowed to buy such apartments together with the commercial real estate if the property is predominantly used commercially. The preliminary draft proposes a limit on residential use of one third of the total floor area.
The Lex Koller rules that apply to trusts and which have been detailed only in instructions issued by the Federal Department of Justice will be anchored directly in the federal law. As far as we can see, there are no changes in the content, and explicit regulation directly in the federal law is welcome.
Subsequent assessment of the permit requirement
According to current law, a subsequent assessment of the permit requirement is only possible if the buyer made incorrect or incomplete statements. The draft proposes that such assessment can be made anytime prior to the lapse of the limitation period.
Each canton may now decide whether it wishes to keep or abolish its authority empowered to appeal. In addition, there will only be one cantonal appeals instance in the future. This amendment is welcome because it would, for example, speed up cases in which orders of exemption from the permit requirements are obtained, as no deadline for appeal by the cantonal appeals authority would be given.
Link to the report with preliminary draft of the Federal Council (in German):