Land ownership

Land ownership is a fundamental pillar of the Swiss economy and Swiss law. In a country where land is limited and demand for real estate remains high, owning real estate not only represents a personal achievement, but is also part of a complex and specific legal framework. With its 41,285 km² and growing population density, Switzerland has developed a sophisticated system of real property rights, combining age-old traditions with modern legal innovations. The Swiss real estate market, characterized by high prices and strict regulations, reflects the peculiarities of a country where only around 40% of inhabitants own their own home – one of the lowest rates in Europe. This unique situation is explained by historical, economic and legal factors that shape the special relationship between the Swiss and their land.

Legal foundations of land ownership in Switzerland

The Swiss legal system for property ownership is based primarily on the Swiss Civil Code (SCC), which came into force in 1912. This code, the work of the jurist Eugen Huber, establishes the fundamental principles governing real property rights throughout the country, while leaving certain powers to the cantons for the application of specific provisions.

The right of ownership is defined in article 641 of the French Civil Code as “the right to freely dispose of a thing”, which includes the power to use, enjoy and dispose of real estate. However, this freedom is not absolute, and is limited by various legal provisions designed to protect the public interest and the rights of third parties.

Land ownership in Switzerland is based on several key concepts:

• The land register (art. 942 et seq. of the CCS): a public system for registering real property rights, guaranteeing the publicity and legal certainty of transactions.
• The principle of speciality: each property is identified by a unique number in the land register
• The principle of publicity: rights in rem in immovable property are enforceable against third parties only if they are entered in the land register.
• The principle of legality: only rights provided for by law may be entered in the land register

The different forms of real estate ownership

Swiss law recognizes several forms of real estate ownership:

• Individual ownership: classic form in which a natural or legal person alone holds all rights to a property.
• Co-ownership (CCS art. 646 et seq.): several people own the same property, each with an ideal share.
• Common ownership (CCS art. 652 et seq.): a form of collective ownership in which the rights of owners are not divided into quotas.
• Condominium ownership (CCS art. 712a et seq.): a special form of co-ownership giving each co-owner the exclusive right to use and fit out specific parts of a building.

Swiss law also provides for limited real rights such as servitudes, land charges and real estate liens, which enable third parties to exercise certain rights over a property without owning it.

In Switzerland, the transfer of ownership of real estate requires an authenticated deed (usually drawn up by a notary) and entry in the land register. This dual formal requirement is designed to guarantee legal certainty in real estate transactions and prevent disputes.

Acquisition and restrictions on acquisition of real estate

Real estate in Switzerland is mainly acquired by transfer (sale, donation, exchange), by inheritance or by other acquisition methods such as occupation, accession or usucapion. However, the acquisition process is framed by various legal restrictions that reflect national concerns about land use.

Lex Koller: restrictions for foreigners

A major restriction is the Federal Act on the Acquisition of Real Estate by Persons Abroad (LFAIE, commonly known as the “Lex Koller”). Adopted in 1983, this law makes the acquisition of real estate by persons domiciled abroad subject to cantonal authorization. Its main aim is to prevent foreign domination of Swiss soil.

The main features of the Lex Koller are :

• Requirement of authorization for individuals domiciled abroad or legal entities considered as foreigners
• Exceptions for the acquisition of principal residences by foreigners holding a settlement permit (C permit)
• Cantonal quotas for the acquisition of second homes
• Exemption for buildings used for commercial activities (offices, shops, industries)

Cantons have some leeway in applying this law, some being more restrictive than others.

The Planning Act

The Law on Spatial Planning (LAT) has a considerable influence on the acquisition and use of land. Revised in 2014, it aims to combat urban sprawl and promote more compact territorial development. Its effects on land ownership are manifold:

• Limit building zones to foreseeable needs over the next 15 years
• Requirement for cantons to reduce oversized building zones
• Promoting the densification of built-up areas
• Introduction of a capital gains tax on development measures

These measures can lead to significant restrictions on property rights, particularly when land initially classified as a building zone is downgraded to an agricultural or protected zone.

Rural land law

The Federal Law on Rural Property Law (LDFR) specifically governs the acquisition of agricultural real estate. It aims to maintain peasant farming and combat land speculation in this sector. Its main provisions include :

• Prohibition on subdividing farm businesses and buildings
• Pre-emptive rights for individual farmers
• Limiting the purchase price to the yield value
• The obligation to obtain authorization for the acquisition of farm buildings

These restrictions are designed to ensure that agricultural land remains in the hands of farmers who farm it personally, thus contributing to the country’s food security.

Property taxation and financial charges

Taxation is a key aspect of property ownership in Switzerland. The Swiss tax system, characterized by its federalism, involves a superimposition of federal, cantonal and communal taxes that affect property owners at different stages: when a property is acquired, during its ownership and when it is sold.

Acquisition-related taxes

When purchasing a property, the buyer is generally subject to several levies:

• Transfer taxes (or registration fees): levied by the cantons when property is transferred, they generally vary between 1% and 3% of the property’s value.
• Notary fees: for drawing up the deed of sale required for the transfer.
• Land registry fees: calculated in proportion to the value of the property

Some cantons offer exemptions or reductions for first-time buyers or in the case of direct inheritance.

Taxes related to ownership

Owning a property generates a number of recurring tax charges:

• Property tax: levied annually by the cantons or communes on the taxable value of the property, generally between 0.1% and 0.3%.
• Wealth tax: includes the taxable value of real estate in the tax base
• Income tax: includes the rental value, a fictitious income corresponding to the rent the owner would pay if he were a tenant in his own home.

The rental value system is an often-debated Swiss peculiarity. In return for taxing this notional income, the owner can deduct mortgage interest and building maintenance costs from his taxable income.

Taxes on disposal

The sale of a property can generate several taxes:

• Real estate gains tax: levied on the difference between the purchase price and the sale price. The rate is generally degressive according to the length of ownership.
• Income tax: applicable if the seller is considered to be a professional real estate trader

Real estate financing in Switzerland has its own specific characteristics. Mortgages are used almost systematically, with a minimum personal contribution of 20% of the property’s value (at least 10% of which must not come from the 2nd pillar). Mortgages are predominantly fixed-rate, for terms of 5 to 10 years, although other models exist (variable rate, Libor/Saron, etc.).

A particular Swiss feature is the practice ofindirect mortgageamortization, whereby contributions are made to a pension account (pillar 3a) or life insurance, rather than repaying the borrowed capital directly. This method makes it possible to maintain maximum tax deductions while building up capital.

Condominium ownership and other forms of collective ownership

In a country where building space is limited and real estate prices are among the highest in the world, collective forms of property ownership have become particularly popular. Condominium ownership (PPE), introduced into the Swiss Civil Code in 1965, now accounts for a substantial proportion of residential property, especially in urban areas.

Legal framework and operation of the PPE

PPE is a special form of co-ownership defined in articles 712a to 712t of the Swiss Civil Code. It combines :

• Exclusive rights to private areas (apartment, commercial premises)
• Joint ownership of the building’s common areas (land, shell, staircases, elevators, etc.).

Each floor owner holds a share of the co-ownership expressed in thousandths or percentages, generally calculated according to the respective value of the exclusive parts. This share determines voting rights at the general meeting and the distribution of common expenses.

The PPE is governed by rules of administration and use that specify the rights and obligations of co-owners. These regulations, often supplemented by a deed of incorporation, are entered in the land register and are enforceable against third parties.

The administration of the PPE is organized around two main bodies:

• Thegeneral meeting of co-owners: the supreme decision-making body, with variable majority rules.
• Thedirector: appointed by the general meeting to manage day-to-day business and implement its decisions

Other forms of collective ownership

In addition to PPE, other forms of collective ownership exist in Switzerland:

Ordinary co-ownership (art. 646-651 CCS) enables several people to own a property together, each for an ideal share. Unlike PPE, it does not confer exclusive rights to a specific part of the property. This form is often used for second homes or undivided inheritances.

Joint ownership (art. 652-654 of the Swiss Civil Code) links several people who, by virtue of law or contract, own a property without any one of them having a specific share. It exists in particular in the context of joint inheritance, joint marital property and certain companies.

Although not a form of ownership in the strict sense of the term, housing cooperatives are an interesting alternative. Members acquire shares that entitle them to occupy a home on advantageous terms. This model, particularly developed in Zurich and Geneva, accounts for around 5% of Swiss housing stock.

Advantages and challenges of collective forms

Collective forms of ownership offer several advantages:

• Greater affordability than individual ownership
• Sharing maintenance and renovation costs
• Professional building management

However, they also present specific challenges:

• Sometimes complex decision-making process requiring compromises
• Risk of conflicts between co-owners over use or maintenance
• Constraints on freedom of design or transformation

The case law of the Swiss Federal Supreme Court has gradually clarified the rights and obligations of co-owners, particularly with regard to majority rules for renovation work and the validity of restrictions on use.

Contemporary developments and challenges in land ownership

The Swiss real estate market is undergoing profound transformations that are changing the way people relate to property ownership. These changes are taking place against a backdrop of growing tensions between individual aspirations, environmental concerns and socio-economic change.

Price pressure and accessibility

Switzerland has been experiencing a steady rise in property prices for over two decades. According to the Swiss Federal Statistical Office, property prices have risen by over 80% since 2000, making home ownership increasingly difficult for middle-income households.

This situation is the result of several factors:

• The scarcity of buildable land in a mountainous country where 70% of the territory is unbuildable
• Economic attractiveness and quality of life drive demand
• The historically low interest rates that have prevailed until recently
• Land-use restrictions limiting new supply

Faced with this situation, new approaches are emerging to facilitate access to property ownership: shared ownership models, modern housing cooperatives, building rights, etc. Specialized legal advice is essential to navigate these complex structures.

Impact of the energy transition

The energy transition is profoundly changing the value and management of real estate assets. The Swiss government’s Energy Strategy 2050 sets ambitious targets for reducing energy consumption in the real estate sector, which is responsible for around 45% of national energy consumption.

Owners face several obligations and incentives:

• Stricter construction standards for new buildings (Minergie standards)
• Subsidy programs for energy renovation (Buildings Program)
• Building energy certificates (CECB) influencing market value
• Increasing restrictions on fossil fuel heating systems

These developments create new responsibilities for owners, particularly in collective structures such as PPE, where energy renovation decisions require qualified majorities. Providing legal support for these transformations is becoming a major challenge in reconciling legal obligations, profitability and the preservation of asset value.

Digitization and new technologies

Digitization is gradually transforming the management and transfer of land ownership. The electronic land register project aims to fully dematerialize real estate transactions, with significant legal implications:

• Simplified registration procedures
• Greater access to property information
• New legal security and data protection issues

Blockchain technologies are beginning to be explored to secure and simplify real estate transactions. Although their use remains experimental, they could ultimately profoundly alter property transfer processes.

These technological innovations bring with them new legal challenges concerning the validity of electronic transactions, the protection of personal data and cybersecurity. In this changing context, the expertise of a specialized law firm can prove decisive in securing transactions and anticipating the legal risks associated with these new technologies.

Law firms specializing in Swiss real estate law are now developing cross-disciplinary skills that combine expertise in traditional property law with a mastery of contemporary issues: international taxation, environmental regulations, digital technologies applied to real estate. This multidisciplinary approach enables them to provide effective support to owners and investors in an increasingly complex legal environment.