Ready Constitute of 1983, They Are Superimposed on It

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Editorial he "Law on regional development (LAT) T of 01.05.2014", ... the "Law on second homes (LRS) of 01.01.2016"... The legislator’s The acquisition of holiday homes in Switzerland ingenuity knows no bounds and the situation has moved on a lot since our first newsletter by foreigners from outside the EU and EFTA, on the subject (No. 5), which focused on the without a permanent residence permit (C permit) conditions under which a person regarded as foreign (generally and put in simple terms, usually a national from a country outside the European Union) may acquire a second home 1 in Switzerland, in accordance with the Introduction Swiss law has recently evolved further in this Federal Law on the acquisition of real estate domain, since the Law on Second Homes by persons domiciled abroad (LFAIE). The advantage of having one of the best came into force on 1 January 2016; it bars Although the two laws mentioned above qualities of life in the world has made new second homes from being built in pursue different goals from those of the LFAIE Switzerland an attractive country in which municipalities where they already constitute of 1983, they are superimposed on it. to acquire property. Given the environment, more than 20% of residences. In addition, It is true that, during this period, Switzerland its economic stability, security and tax ad- the cantons are currently in the phase of im- experienced substantial growth in the vantages, Switzerland is a very advantageous plementing the requirements of the revised economy and in real estate within a limited place in which to live and go on holiday. Law on Regional Development (LAT), which territory, so much so that popular opinion came into force on 1 May 2014, requiring called for restrictions in order to avoid However, since the beginning of the future urban development to be concen- "sprawling" development. 1960s, the Swiss authorities have pro- trated primarily in the existing construction This also means that it is not "foreigners" who gressively put measures in place to zones, in order to curb urban sprawl. are the target of this new legislation, but rather restrict access to property by foreigners in the pressures of uncontrolled urbanisation that Switzerland, particularly to preserve cer- 2 Acquisition of a holiday home Switzerland would like to channel and regulate tain highly tourism-based regions from better. As a result, certain municipalities, which foreign control. Federal regulation of the are already considered to have an ample supply acquisition of real estate by persons of second homes, find themselves, for example, barred from acquiring new ones (subject to The Federal Law of 16 December 1983 abroad (LFAIE) certain exceptions outlined below, which are on the acquisition of real estate by per- To determine whether or not you are quite restrictive). Coming back to the LFAIE, sons abroad (the LFAIE - also known subject to the LFAIE and the OAIE, you the quota of permits for the purchase of as "Lex Friedrich" or "Lex Koller") and should take into consideration (1) your second homes by foreigners is limited to 1500 its implementing ordinance (Ordinance country of origin and (2), if relevant, your for the whole of Switzerland, to be divided on the acquisition of real estate by category of Swiss residence permit. As a among only the cantons identified as being "tourism-oriented" (which does not include, persons abroad – OAIE) regulate access general rule, the LFAIE is applied according for example, the two urban cantons of Geneva to property in Switzerland by foreigners. to the following principles: or Zurich – as opposed to the canton of Vaud).

In summary: it is not impossible for a foreigner With Without a Swiss With an L 1 With a B 2 With a C 3 to buy a holiday property in Switzerland, but Origin residence permit residence permit residence permit residence permit there are considerable restrictions and each EU or EFTA individual case requires specialist advice in nationals, Subject to Same treatment Same treatment Same treatment except those the LFAIE/OAIE as a Swiss citizen as a Swiss citizen as a Swiss citizen order to stand the best chance of a successful from Croatia 4 outcome. Nationals from Thierry Barbier-Mueller third countries 5 Subject to Subject to Subject to Same treatment Chief Executive Officer and Croatia the LFAIE/OAIE the LFAIE/OAIE the LFAIE/OAIE as a Swiss citizen If you are a person affected by the restric- - In the event that you want to acquire unity between these homes and the esta- tions of the LFAIE/OAIE (we designate a building plot, construction must start blishment. such persons hereinafter as "foreigners"), within a reasonable time frame (which in A structured accommodation establishment in order to acquire a holiday home, this practice is within a maximum of one to that existed prior to 11 March 2012 may be possibility must be provided for in the law two years). reassigned as homes without restriction of the canton where the property in ques- - The holiday home may be rented out for on their use, for up to 50% of its usable tion is situated. Currently, this is the case short periods, but year-long rental is not surface area, on certain conditions (in op- in the following cantons: Appenzell Aus- allowed. eration for at least 25 years, and no further serrhoden (AR), Bern (BE), Fribourg (FR), - It is not possible to acquire a holiday home potential for profitable operation). Glaris (GL), Graubünden (GR), Jura (JU), if you, your spouse or your child aged un- Lucerne (LU), Neuchâtel (NE), Nidwald der 18 years, are already the owner of a New properties in protected buildings (NW), Obwald (OW), St. Gallen (SG), second home or a holiday home in Swit- New second homes can be built in pro- Schwyz (SZ), Schaffhausen (SH), Ticino zerland, unless you sell your first property. tected buildings in the construction zone (TI), Uri (UR), Vaud (VD) and Valais (VS). if the external appearance and the original It is therefore not possible, for example, to Federal regulation relating to se- architectural structure remain unchanged, if acquire a holiday property in Geneva or cond homes (LRS) the long-term preservation of the building Zurich. In 2015, the cantons where the ma- The LRS, which came into force on 1 January cannot be achieved in any other way and if jority of foreign-owned holiday accommo- 2016, introduces the rule whereby no new there is no conflicting predominant interest. dation was located were Valais, Ticino, Vaud, second home can be permitted in muni- Graubünden and Bern. cipalities where the proportion of second Properties built under the previous law homes already exceeds 20% of housing If the property already existed (or if a con- In addition, you should check whether the stock (for example, Montreux, Château- struction permit had been granted) before holiday home that you plan to purchase is d’Œx, Saanen, Saint-Moritz, etc). In other 11 March 2012, it can be used freely as a main actually located in one of the municipali- words, in principle, it is no longer possible or second residence, no matter what its pre- ties designated as a "holiday resort"; those to build a holiday home (which by definition vious use was. Such a property may also be municipalities are designated in the inter- is a second home) in these municipalities, renovated, converted and rebuilt. Where ad- nal legislation of each of the cantons cited with certain exceptions (see below). ditional properties result from this, they may above. be used without any restriction on their use. It should be stressed that, unlike the LFAIE, Before purchasing a holiday home, you must which is designed to limit the ability of for- A property built under the previous law in a apply for a permit. This will only be granted eigners to acquire property, the LRS places construction zone may be enlarged, but up within the quota of permits, currently set by Swiss nationals and foreigners under the to a maximum of 30% of the main usable the Federal Council at 1500 units per year same constraints. area that existed before 11 March 2012, for the whole of Switzerland; this is in or- provided that it does not result in any addi- der to guard against uncontrolled increase It is also important to state that the cantons tional home. of second homes and holiday properties and municipalities may impose even stricter in tourist areas and to counter the prolif- conditions than those set out in the LFAIE The LRS provides for the option of suspend- eration of "unoccupied beds". The Federal and the LRS, as we will see later on. ing, for a period of two years (extendable), Council allocates the quota units among the the requirement to designate a property as cantons according to their importance for The exceptions to the ban on new second the main residence if the owner can prove tourism and the proportion of land on their homes include the following: that the property has been offered for sale territory which is owned by foreigners: for on the market at a reasonable price, but has example, in 2016 there were 175 units in Properties linked to structured accommo- not been sold. In this context, it should be the canton of Vaud, 330 in Valais and 195 in dation establishments noted that the Federal Supreme Court (TF) Ticino. Structured accommodation establishments 6 has recently blocked two real estate pro- may build new second homes (which may jects concerning a total of 44 apartments in It should be noted that you will not need to be put up for sale), subject to the following Ovronnaz (VS). The permits granted stipulat- obtain a permit from the quota if the prop- conditions: ed that these apartments would be used as erty in question is being sold by a person - The establishment may only be operated main residences, but the TF considered that who is also a foreigner and who was granted profitably by using the income generated checks should be carried out, in view of the a permit to buy said holiday home. by building such homes. absence of evidence that there was a real - The owner or operator is able to prove need for such a number of new main-resi- There are, in addition, certain restrictions that the income earned by such properties dence properties in this municipality. In other on the acquisition of a holiday home by a is invested in the construction or opera- words, there was a real risk that these prop- foreigner: tion of the establishment. erties were simply disguised second homes. - The total surface area of the plot must not - The main usable areas of these properties This decision is a strong signal of the rigorous exceed 1000 m2 and the net floor area do not exceed 20% of all the main usable stance adopted both towards tourism-based must not exceed 200 m2. In actual fact, in areas of the bedrooms and the properties municipalities and the builders. line with normal practice, if an additional (33% if the properties remain owned by need can be duly proved, a permit can the establishment and are rented out by Procedure be granted for a net floor area of up to the latter). The procedure for granting a permit for 250 m2 and a plot size of up to 1500 m2. - There is an architectural and functional buying a holiday home is carried out in

www.spgfinestproperties.ch your own name and not through a company. • whilst maintaining a reasonable ratio between been drawn up by the Bern Directorate of It is processed via the competent cantonal existing and new holiday homes, Public Economic Affairs. Note that certain authority in the location where the proper- • and a balanced ratio between Swiss and municipalities have introduced a provisional ty that you are interested in is situated. foreign property owners. block on permits, as in Bienne and Grindel- wald, for example. In practice, you are advised to consult with The procedure is as follows: a notary or a lawyer and/or with the com- - File an application with a declaration of The 2016 annual quota for the canton stands petent cantonal authority in the place where intent with the Land Registry Service; at 140 units. the property is situated, as the permit pro- - Obtain a guarantee that a unit has been cedure can vary noticeably from one place allocated under the quota (providing the The competent first-instance authority for to another. It is also necessary to check that decision is positive); then granting permits is the prefecture of the there is no restriction on use mentioned in - Sign the deed of sale (after having obtained administrative district in which the pro- the land register for the property in question. the guarantee). perty is located.

When it comes to the acquisition itself, it Note that you must own the property for a The allocation criteria in the canton are as will generally be a notary who, having drawn minimum of five years before you can resell follows: up the deed of sale, collected a percentage it to a foreigner (but no minimum period if • Financing must be guaranteed, of the purchase price when the parties sign you resell to a Swiss purchaser). • priority is given to projects that are best the deed and, depending on the case, for- adapted to regional tourism development, malised a mortgage loan – will then carry In addition, some municipalities within the • projects to build, extend or renovate hotels out the necessary steps with the competent canton have adopted even more restrictive take precedence over projects to build holi- cantonal authority so that you obtain the measures. day apartments, and projects with a valid required permit to purchase the property. building permit take priority. The outstanding amount must be paid at It should be stressed that it is no longer the time the acquisition becomes definitive. possible for a foreigner to acquire a holiday Canton of Fribourg home in Zermatt, as this municipality is no The State Council in Fribourg has drawn up It is not possible to indicate exactly how longer included in the list of holiday resorts. a list of 20 municipalities where it is possible long the process for acquiring a permit to Currently it is not even possible for a for- for foreigners to acquire holiday homes, purchase will take on average; moreover, this eigner who obtained a permit to purchase including Bulle, Gruyères and Charmey. varies between cantons: it may take anything a holiday home before the municipality was from a few weeks to several months. Du- withdrawn from the list of holiday resorts The 2016 quota for this canton stands at ring this time, it is possible to enter into a to resell it to another foreigner. However, 50 units for holiday homes. lease agreement for the property with the this could change soon. You are therefore vendor, subject to the payment of rent. advised to make full enquiries before com- The competent authority for granting per- However, do not forget to anticipate the mitting to any step involving the acquisition mits is the Commission for the Acquisition possible consequences of your application of a holiday home in Valais. of Property by Persons Domiciled Abroad. being refused. Canton of Vaud Canton of Jura Cantonal situation The Vaud government has drawn up a list of A cantonal decree lists 18 places where the We outline below the situation in a few of 29 municipalities on the territory of which purchase of holiday homes may be author- the cantons that are most concerned by it is permitted to acquire a holiday home. ised. holiday homes. This concerns in particular Château-d’Œx, Rougemont, Lausanne (only for apartments The 2016 quota for holiday homes in the The Canton of Valais in serviced aparthotels), Leysin, Montreux canton of Jura stands at 20 units. The State Council of Valais has identified or Vevey. more than 100 tourist locations in which The competent first-instance authority for the acquisition of holiday homes is deemed The 2016 quota for holiday home permits receiving permit applications is the Legal necessary for the development of tourism. is 175 units. The quota is allocated within Service of the Canton of Jura. the canton in particular in the light of the In 2016, the number of units in the quota for regional development programmes and the Canton of Neuchâtel holiday homes stood at 330. state of the housing market. The government of Neuchâtel has designated around thirty tourism-based municipa- The allocation of individual permits is car- The first-instance cantonal authority in charge lities in the canton, including La Chaux-de- ried out by the legal and administrative of granting permits is the Land Commission, Fonds, Val-de-Travers and Neuchâtel. office of the Land Registry and Geomatic Section II. Service, which is the competent first-in- The quota for holiday homes stands at stance authority: Canton of Bern (Saanen – Gstaad) 35 units. • on the basis of the applications submitted, In this canton, foreign demand is focused pri- • with priority being given to property sales marily on a few highly tourism-based areas. The competent first-instance authority which, through the way they operate, guar- for granting permits is the Cantonal Com- antee a higher rate of occupancy (for example A list of holiday resorts in which it is mission for the Approval of Property operation or rental contracts), possible to acquire a holiday home, has Acquisition by Persons Domiciled Abroad.

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Canton of Uri was granted by the Federal Council in Note that in 2013 for the first time and then The State Council of Uri has drawn up a list December 2007, in the superior interests of again in 2014, no canton has requested an addi- of 19 municipalities in which the acquisition the Confederation. tional quota, whereas previously, strongly tour- SIGN NEWSLETTERS UP FOR of holiday homes may be authorised. All the ism-oriented cantons (namely Vaud, Valais and municipalities in the canton are included Canton of Graubünden Bern) could obtain units not used by another OUR except Bauen. However, the municipality of The Graubünden government has designat- canton once their annual quota was used up. [email protected] Silenen has made use of its autonomy to ed around one hundred municipalities In addition, the proportion of the total quota prohibit the acquisition of holiday properties where it is permitted for foreigners to ac- used was 75% in 2011, 68% in 2012, 53% in as well as units in aparhotels. quire a holiday home. 2013 and 44% in 2014; and we can therefore see that there has been an easing in terms of The quota for the canton is 20 units. The 2016 quota stands at 290 units. the number of units available since recently.

The competent first-instance authority for The competent first instance authority for gran- Although the quota situation may have improv- granting permits is the Economic Affairs ting permits is the Land Registry Inspectorate. ed, the entry into force of the LRS at the Directorate (Volkswirtschaftsdirektion). beginning of 2016 makes it much more difficult It should be specified that in Saint-Moritz, the to build new holiday homes. The effects of this Cantonal law states that the surface area municipal law states that if a property was have been quickly felt: the number of applica- of buildings acquired by persons domiciled registered as a main residence with the Land tions for building permits is already falling. abroad in a condominium or an aparthotel Registry, even before 11 March 2012 - the must not exceed 50% of the living area of deadline set by the LRS (see above) - it must In spite of the above, opportunities to ac- the said condominium or aparthotel. Muni- be used exclusively for this purpose. This quire a holiday home do exist; your real cipalities are free to impose additional re- type of property cannot therefore be resold estate advisers will help you to overcome strictions. Bürglen, for example, limits the as a holiday property. the last hurdles to owning property in possibility of acquiring a holiday home to Switzerland, with the guidance of lawyers the purchase of a building plot on which a 3 Conclusion or notaries. holiday home will be built, thereby prohibit- ing the acquisition of a holiday home within For many years, the Swiss government has been a condominium or an aparthotel. Seelisberg examining the merits of repealing the LFAIE: has set a limit of 3 units per year. this law does not really make it possible to N. B. The content of this article can only deal with general points and the details of each specific case should be effectively combat the sprawling development carefully analysed. The permit process usually takes around caused by second homes. In addition, it is discri- three weeks. minatory because it only applies to foreigners. However, its repeal was rejected by the Swiss By Cyril Troyanov and Yasmine Dubois- Finally, the Andermatt Swiss Alps project en- National Council (lower house of the Swiss Ferrière, attorneys-at-law, ALTENBURGER joys an exemption from the LFAIE, which Parliament) and is no longer on the agenda. LTD legal + tax, Geneva, www.altenburger.ch

1 Short-term permits (generally less than a year). 2 Residence permits (renewable annually). 3 Permanent residence permit (may be granted after 10 years or, for citizens of many EU or EFTA countries, after 5 years of regular, uninterrupted residence). 4 Croatian citizens will be treated the same as other EU citizens, once Protocol III, concerning the extension of the agreement on the free movement of persons to Croatia, comes into force. At the present time it is not known when this will enter into force. 5 States outside the EU or EFTA. 6 An establishment that includes standard hotel-type services and infrastructures used by the majority of clients, which is organised according to a hotel-type operating concept and run as a uniform business, in other words a hotel-type residence.

GENÈVE Route de Chêne 36 1208 Genève T. +41 (0)58 810 30 30 [email protected] NYON Avenue Alfred-Cortot 7 1260 Nyon A specialist in luxury properties, SPG Finest Properties' mission is to look for, sell and let presti- T. +41 (0)58 810 36 50 gious properties in Switzerland. Thanks to its affiliation with Christie’s International Real Estate, [email protected] the world benchmark in luxury residential property, SPG Finest Properties gives you access to an international network, high-quality services and recognised professionals in their field. LAUSANNE-OUCHY Place de la Navigation 14 1006 Lausanne Sign up for our newsletters: [email protected] T. +41 (0)58 810 35 50 [email protected] www.spgfinestproperties.ch July 2016 / 240 copies / © SPG 2016 / All rights reserved / / 240 copies © SPG 2016 2016 July