May foreigners acquire real estate in Switzerland?

The “Federal Act on Acquisition of Real estate by Persons living abroad” restricts the acquisition of real estate in Switzerland by foreigners.

The acquisition of real estate by persons abroad is restricted by the Federal Act on Acquisition of Real estate by Persons living abroad (“Bundesgesetz über den Erwerb von Grundstücken durch Personen im Ausland”, hereinafter “the Act”). This Act is commonly referred to as “Lex Koller” or previously also “Lex Friedrich”. It restricts the acquisition of real estate in Switzerland by foreigners, by foreign-based companies or by Swiss-based companies controlled by foreigners. As a rule, these categories of persons require an authorization from the competent cantonal authority. Neither the fact that the real estate may have already been in foreign hands nor the legal cause of the transfer (i.e. purchase, inheritance, gift, merger, etc.) have a bearing on the application of the law.

The application of the Act is based on three criteria: (i) an acquisition of real estate within the meaning of the Act (ii) by a person abroad and (iii) none of the exceptions applies.

Persons abroad within the meaning of the Act

Within the meaning of the Act (i) natural persons, i.e. individuals, domiciled abroad and (ii) natural persons domiciled in Switzerland, who are neither nationals of the European Union (EU) nor nationals of the European Free Trade Association (EFTA) Member States and who do not hold a valid residence permit in Switzerland (so-called “permit C”) are considered to be persons abroad. Companies with registered seat abroad qualify as persons abroad within the meaning of the Act even if they are Swiss-owned. Furthermore, legal entities or companies without legal personality but capable to own property, who are controlled by persons abroad, are also considered persons abroad, even if they have a registered seat in Switzerland.

Persons, who in principle are not subject to the Act may nevertheless qualify as persons abroad in case they acquire real estate on behalf of persons abroad.

Acquisition requirements

The authorisation requirements differ by the type of use of the real estate at issue. The acquisition of dwellings (single-family dwellings, apartment houses, owner-occupied flats and raw land on which such dwellings are to be built) is in general subject to the Act. As an exception from this rule, the acquisition of main residences, secondary residences for cross-border commuters from the EU or EFTA Member States and dwellings purchased in exceptional circumstances in conjunction with commercial real estate are not subject to the authorisation requirements of the Act.

Foreigners domiciled in Switzerland may acquire a dwelling or building land (provided that construction starts within one year after the acquisition) in their actual place of residence as main residence without authorisation. In this case, the buyer needs to occupy the dwelling himself. Because persons in Switzerland can have only one main residence, only one residential unit may be acquired without authorisation.

EU or EFTA Member States citizens commuting cross-border work (permit G) may acquire a secondary residence in the area of their place of work without authorisation. They are obliged to occupy the residence themselves.

Real estate used for commercial purposes may be acquired without authorisation. In this case, it is immaterial whether the real estate is used for the buyer’s business or rented resp. leased by a third party in order to pursue commercial activities. As an exception, living accommodations may be also acquired without prior authorisation in case it may be necessary for the business.

The acquisition of undeveloped land in residential, industrial or commercial zones is in general subject to prior authorisation.

Exceptions

The Act provides several exceptions from the authorisation requirement: Legal heirs under Swiss law, relatives in line of ascent or descent from the person disposing of the property and their spouse or registered partner, buyers who already hold an interest in the real estate in joint ownership or co-ownership, condominium owners exchanging their units in the same building, buyers acquiring small areas to complement the real estate they already own and cross-border EU and EFTA commuters regarding secondary residences at their workplace do not need any prior authorisation for the acquisition of real estate.

Reasons for authorisation

In the Act provides various special reasons for the authorisation. In case of holiday homes and serviced flats, the dwelling must be situated in a place designated as a holiday resort by the cantonal authorities. There are annual quotas assigned to the cantons by the Confederation for holiday homes and serviced flats that have to be met.