Lease contract in Switzerland

The lease contract is a fundamental document in Swiss rental relations. Regulated mainly by the Swiss Code of Obligations (CO), it establishes the rights and obligations of both parties – landlord and tenant. In a country where almost 60% of the population lives in rented accommodation, mastering the legal aspects of the lease is of major importance. Swiss lease law is characterized by a rigorous normative framework designed to protect both the lessor and the lessee, while paying particular attention to the latter, considered as the potentially more vulnerable party in this contractual relationship. Understanding the constituent elements of a lease, its conditions of validity and the rights it confers is a daily challenge for thousands of Swiss people, whether they are landlords or tenants.

Legal foundations of lease contracts in Switzerland

The main legal framework for leases in Switzerland is set out in the Swiss Code of Obligations (CO), more specifically in articles 253 to 304. These provisions define a lease as a contract by which the lessor undertakes to cede the use of a thing to the lessee, in return for rent. This seemingly simple definition has far-reaching legal consequences.

In addition to the Swiss Code of Obligations (CO), there are a number of other regulations governing rental relationships in Switzerland:

• Ordinance on rental leases and farm leases for residential and commercial premises (OBLF)
• The Federal Law on Abuses in the Rental Sector (LBFA)
• Specific cantonal provisions, which may vary from one canton to another

Swiss law distinguishes between several types of lease, each with its own specific rules:

The main categories of lease

• Residential leases for dwellings
• Commercial leases for business premises
• Farm leases, relating to the use of a productive asset
• The fixed-term lease, concluded for a fixed period
• Open-ended leases, with no predefined term

A fundamental feature of Swiss tenancy law is its semi-imperative nature. This means that many legal provisions cannot be modified to the detriment of the tenant. This feature reflects the legislator’s desire to protect the weaker party in the contractual relationship.

Through its case law, the Swiss Federal Supreme Court plays a decisive role in the interpretation and application of tenancy law. Its rulings are an essential legal source for understanding the real scope of legal provisions. For example, ATF 142 III 442 clarified the conditions under which a lessor may terminate a lease for his own needs, bringing significant nuances to the interpretation of article 271a CO.

The hierarchy of norms in Swiss tenancy law is as follows: mandatory provisions of the CO take precedence over contractual clauses, followed by semi-imperative provisions, then contractual clauses, and finally dispositive provisions of the CO. This hierarchy determines the validity of lease clauses.

Protection against unfair dismissal is a cornerstone of Swiss tenancy law. Articles 271 et seq. of the Swiss Code of Obligations (CO) establish a protective regime, enabling tenants to contest a notice deemed to be unfair. This protection reflects the importance attached by the legislator to housing stability, considered a fundamental need.

Elements of a lease contract

A lease contract valid in Switzerland must include certain fundamental elements that determine its nature and legal scope. These components define the respective rights and obligations of the parties and form the basis of their contractual relationship.

Precise identification of parties

The contract must clearly state the identity of the lessor (owner or manager) and lessee (tenant). For natural persons, this includes surnames, first names, dates of birth and addresses. For legal entities, the company name, registered office and trade register number are required. In the case of shared tenancy, all tenants must be listed on the contract, thereby creating joint and several liability between them in accordance with art. 143 CO.

Detailed description of the property

The object of the lease must be precisely defined. For residential property, this includes the full address, floor, number of rooms, approximate surface area in square meters, as well as outbuildings (cellar, attic, garage, etc.). For commercial premises, the specifications of authorized use must be mentioned. The case law of the Swiss Federal Supreme Court (ATF 136 III 186) has confirmed the importance of this precise description, particularly in determining the extent of the tenant’s rights.

Rent and service charges

The contract must specify :

• Net rent
• Expenses (itemized or flat-rate)
• Payment frequency (usually monthly)
• Terms of payment

The distinction between net rent and service charges is of considerable legal importance. According to art. 257a of the Swiss Code of Obligations, only additional services actually provided by the lessor in connection with the use of the property may be invoiced as service charges. In a number of rulings (notably ATF 141 III 245), the Swiss Federal Supreme Court has made it clear that charges must be expressly agreed as due in addition to the rent.

Contract term and expiry date

The contract may be concluded for a fixed or indefinite period:

• For a fixed-term lease, the start and end dates must be clearly indicated. This type of lease ends automatically on the agreed date, without the need for termination.
• In the case of an open-ended lease, only the effective date is mentioned, along with the applicable notice periods and termination terms.

It should be noted that according to art. 255 al. 2 CO, a fixed-term lease that tacitly continues after its term is transformed into an open-ended lease. This rule has significant practical implications, as recalled by the Swiss Federal Supreme Court in ATF 140 III 583.

Inventory of fixtures and fittings and rental guarantee

Although not required by law for a contract to be valid, these two elements are almost always included:

• Theinventory of fixtures documents the condition of the property when it is handed over to the tenant.
• The rental guarantee (or security deposit) is intended to cover any eventual default by the tenant. The amount is capped at three months’ net rent for residential premises (art. 257e CO).

Jurisprudence has specified that the rental guarantee must be deposited in a blocked bank account in the tenant’s name (ATF 119 II 241), thus reinforcing the tenant’s protection.

Conditions of validity and formalities

The validity of a lease contract in Switzerland is based on a number of formal and substantive conditions that merit particular attention. Swiss law, while favoring contractual freedom, imposes certain requirements specific to the rental sector.

Form of lease contract

The general principle in Swiss law is that no particular form is required for a lease contract to be valid. Article 11 of the Swiss Code of Obligations enshrines this freedom of form, theoretically allowing a lease to be concluded simply by verbal agreement. However, this apparent flexibility needs to be qualified:

• In practice, written form is essential for reasons of proof and legal certainty.
• Some cantons may require the use of official forms to conclude a lease (e.g. Geneva, Vaud, Zurich, Neuchâtel).
• The signature of the contracting parties remains a fundamental element in attesting their consent.

The case law of the Swiss Federal Supreme Court has confirmed that in the event of a dispute over the existence of a verbal contract, the burden of proof lies with the party claiming the existence of the contract (ATF 135 III 295). This position reinforces the practical value of written contracts.

Use of approved forms

In several Swiss cantons, the use of official forms is mandatory for certain aspects of the rental relationship:

• Notification of the initial rent to the new tenant
• To report a rent increase during the lease term
• Giving notice to a tenant

Failure to comply with this formal requirement may result in the nullity of the act in question. In ATF 142 III 369, the Federal Court confirmed that a rent increase notified without using the official form in a canton where this is compulsory is considered null and void.

Consent of the parties

Consent is a fundamental condition for the validity of any contract under Swiss law. In the case of leases, consent must cover both the objective and subjective essential elements of the contract:

• Theidentity of the parties
• Thepurpose of the lease
• The amount of rent
• Term (for fixed-term leases)

Consent can be vitiated by error, fraud or well-founded fear (art. 23 to 31 CO). In the rental context, the Swiss Federal Court has recognized that a tenant may be mistaken as to essential qualities if, after entering into the lease, he discovers that the apartment has a serious defect that makes it impossible to use it in accordance with the contract (ATF 135 III 537).

Special clauses and validity

Contractual freedom allows the parties to insert various special clauses into the lease contract. However, this freedom is limited by the semi-imperative nature of many lease provisions:

• Clauses derogating from mandatory standards are null and void.
• Clauses that derogate from semi-imperative standards to the detriment of the lessee are also null and void.
• Disproportionate penalty clauses may be reduced by the court (art. 163 para. 3 CO).

Case law has invalidated several types of clauses commonly inserted in lease contracts. For example, TF 4A_689/2016 ruled that a clause totally prohibiting subletting was null and void, as contrary to art. 262 CO, which guarantees this right to the tenant under certain conditions.

The validity of certain common clauses deserves special attention:

• Rent indexation clause: valid only for commercial leases of at least 5 years (art. 269b CO)
• Staggering clause: valid for leases of at least 3 years (art. 269c CO)
• Early termination clause: valid if offers equal rights to both parties

Rights and obligations of the parties

In Switzerland, the lease contract establishes a delicate balance between the rights and obligations of the lessor and the lessee. These prerogatives and responsibilities are governed by the provisions of the Swiss Code of Obligations, and may be specified in contractual clauses within the limits of the law.

Main obligations of the lessor

The lessor, as owner or manager of the property, has several fundamental obligations:

• Delivery of the leased property: The lessor must make the leased property available to the lessee on the agreed date and in the promised condition (art. 256 CO). This obligation includes handing over the keys and providing access to all the outbuildings provided for in the contract.
• Maintenance of the property: According to art. 256a CO, the lessor must maintain the property in a condition suitable for the use for which it was leased. This obligation includes carrying out any work necessary to maintain the substance of the property.
• Warranty against defects: The lessor must guarantee that the property is free from defects that would hinder or diminish the use for which it was leased (art. 258 CO). This warranty applies both to defects present at the time of handover and to those arising during the term of the lease.
• Protection against disturbance of enjoyment: The lessor must guarantee the lessee peaceful enjoyment of the leased property, by refraining from any act that might disturb this enjoyment and by taking the necessary measures against disturbances caused by third parties (art. 259a CO).

Case law has clarified the scope of these obligations. In ATF 135 III 345, for example, the Swiss Federal Court confirmed that the landlord is obliged to take measures against noise nuisance caused by other tenants in the building, this obligation deriving from his duty to guarantee the tenant peaceful enjoyment of the premises.

Tenant’s main obligations

In return, the tenant is subject to several essential obligations:

• Payment of rent and service charges: This is the tenant’s main obligation (art. 257 CO). Rent must be paid on the agreed terms, generally monthly and in advance.
• Careful use of the property: According to art. 257f of the Swiss Code of Obligations, the tenant must use the property with care, respecting the rules of the contract and the building regulations. He must have due regard for other residents and neighbors.
• Notification of defects: The lessee is obliged to notify the lessor of defects which he is not required to remedy himself (art. 257g CO). This notification must be made without delay, on pain of liability for damages resulting from the delay.
• Tolerance of work: The tenant must tolerate work to remedy defects or repair damage (art. 257h CO). However, if such work makes the use of the property significantly more difficult, the tenant may demand a proportional reduction in rent.

Violation of these obligations can have serious consequences. For example, non-payment of rent may justify early termination of the lease following formal notice (art. 257d CO). Similarly, persistent non-conforming use may constitute grounds for extraordinary termination (art. 257f para. 3 CO).

Specific tenant rights

Swiss law recognizes a number of special prerogatives for tenants:

• Right to sublet: Art. 262 CO authorizes the tenant to sublet all or part of the property, subject to the lessor’s consent. Such consent may only be withheld in certain cases, which are exhaustively listed by law.
• Right to dispute the initial rent: Within 30 days of taking possession of the property, the tenant may dispute the unfairness of the initial rent and request a reduction (art. 270 CO).
• Right to deposit rent: In the event of a defect that hinders the use of the property, the tenant may deposit the rent after setting the lessor a deadline for remedying the defect (art. 259g CO).
• Protection against termination: Tenants benefit from protection against unfair termination (art. 271 and 271a CO) and can obtain a lease extension (art. 272 CO).

These rights are all the more significant in that they are often accompanied by semi-imperative provisions, i.e. they cannot be removed or restricted by the contract to the detriment of the tenant.

Modifications and termination of the lease

The rental relationship in Switzerland is characterized by a certain dynamism, which can undergo various changes over the course of its existence, before coming to an end in accordance with terms and conditions strictly defined by law.

Rent changes during the lease

The rent can be modified during the term of the lease under certain specific conditions:

• Rent increase: Any rent increase must be notified using the official form (in cantons where this is compulsory), and must be justified on legal grounds (art. 269a CO) such as rising costs, increased operating expenses or adaptation to the usual rents in the area. Notification must be given at least ten days before the start of the notice period, and must take effect at the end of the notice period.
• Rent reduction: The tenant may apply for a rent reduction when changes in circumstances justify such a reduction, particularly in the event of a reduction in the reference mortgage rate. This request must be made for the next notice period.
• Indexed rents: In commercial leases with a minimum term of five years, the parties may agree to automatically index the rent to the Swiss consumer price index (art. 269b CO).
• Staggered rents: For leases of at least three years, the parties may provide for fixed periodic increases (art. 269c CO).

Case law has made it clear that the validity of a rent increase depends on strict compliance with legal formalities. For example, ATF 140 III 583 confirmed that a notice of rent increase which does not precisely state the reasons for the increase, or which is given out of time, is null and void.

Lease transfer

Swiss law provides for several lease transfer mechanisms:

• Transfer on sale of property: According to art. 261 CO, the lease passes to the purchaser of the property. However, the new owner may terminate the lease early for urgent personal reasons, subject to compliance with the legal deadline.
• Transfer of commercial lease: Art. 263 CO allows tenants to transfer their commercial lease to a third party who takes over their business or trade. The lessor may only withhold his consent for justified reasons.
• Death of the tenant: In principle, the death of a tenant does not automatically terminate the lease, which continues with the heirs. However, the heirs may terminate the lease early by observing the statutory notice period (art. 266i CO).

These mechanisms are designed to ensure a degree of continuity in rental relationships, while at the same time safeguarding the legitimate interests of the various parties involved.

Ordinary lease termination

The normal end of a lease contract varies according to its nature:

• Fixed-term lease: automatically terminates on the agreed expiry date, without the need for termination. However, if it continues tacitly after this date, it becomes a lease for an indefinite period (art. 255 al. 3 CO).
• Open-ended lease: Either party may terminate the lease by observing the notice periods and terms stipulated in the contract or, failing that, by law. For residential property, the legal notice period is three months, for the usual term of the premises (art. 266c CO).

Notice of termination must be given in writing. In many cantons, the use of an official form is mandatory for termination by the landlord. Failure to comply with this formality will render the notice null and void.

Extraordinary termination and contestation of notice

In certain circumstances, the lease can be terminated early:

• Termination for just cause: When performance of the contract becomes intolerable for serious reasons (art. 266g CO).
• Termination for non-payment: After formal notice, if the tenant is in arrears with rent payments (art. 257d CO).
• Termination for breach of duty of care: In the event of persistent non-conforming use despite a warning (art. 257f CO).

Tenants are protected against unfair dismissal. According to art. 271 of the Swiss Code of Obligations, a notice of termination is unfair if it contravenes the rules of good faith, in particular if it is given :

• In retaliation for a legal claim asserted by the tenant
• In order to impose a unilateral modification of the lease that is disadvantageous to the tenant
• No objective reason, just to replace the tenant

The notice of termination may be contested before the conciliation authority within 30 days of receipt. If conciliation fails, the case may be brought before the court.

Current practices and challenges in the Swiss leasing sector

The Swiss rental market is undergoing significant change, influencing the practice of tenancy law and raising new challenges for landlords and tenants alike.

Rental market tension and legal consequences

The housing shortage in Switzerland’s major urban centers has a direct impact on rental relationships:

• Increase in disputes relating to initial rents, considered to be unfair in relation to previous rents
• Increase in unauthorized subletting, particularly via short-term rental platforms
• Tougher conditions for access to housing, with more stringent demands from landlords

Faced with these tensions, the judicial authorities have had to clarify the application of tenancy law. In ATF 145 III 143, the Swiss Federal Supreme Court recently clarified the conditions under which excessive returns on a property can be invoked to contest a rent, providing additional protection for tenants in areas of high real estate pressure.

Digitizing rental relationships

Digital transformation is also affecting the leasing industry:

• Electronic signatures for lease contracts, whose legal validity is now recognized under certain conditions
• Online rental management platforms, modifying communication between landlords and tenants
• Dematerialization of termination and notification procedures

These developments raise new legal questions. Can the written form required for certain communications be satisfied by an email or electronic message? The Federal Supreme Court has begun to draw up guidelines, considering in particular in TF 4A_189/2017 that an email does not satisfy the formal requirements for a lease termination, which must be in a form that allows proof to be established by a text.

Energy retrofits and their impact on leases

The energy transition is having a profound effect on Switzerland’s housing stock:

• Energy renovation work leading to rent increases
• Cancellation for major renovation work
• Disputes over the allocation of energy costs between lessor and lessee

Recent case law has clarified the conditions under which energy renovation costs can be passed on to rents. Ruling TF 4A_554/2019 established that only the part of the work that adds value to the property can justify a rent increase, and not the part relating to the normal maintenance of the property.

The role of specialized legal support

In this complex and changing environment, specialist legal advice is often required:

• Preventive contract analysis to avoid problematic clauses
• Mediation in rental disputes before referral to the judicial authorities
• Assistance with procedures for disputing rent or notice to quit

A law firm specializing in lease law can offer valuable assistance in navigating the legal subtleties specific to the Swiss context. For example, when drafting a commercial lease agreement, a lawyer can help structure indexation or escalation clauses in line with legal requirements, while protecting his client’s interests.

In-depth knowledge of cantonal case law, which can vary considerably from one canton to another, is a major asset in managing rental relationships. The particularities of Geneva or Vaud law, for example, can significantly influence the outcome of a rental dispute.

Ultimately, the growing complexity of Swiss tenancy law, combined with the tensions in the real estate market, make specialist legal expertise particularly valuable in securing rental relationships and preventing costly litigation. Mastery of the formal and substantive aspects of the lease contract, as detailed in this presentation, remains the foundation of a balanced and legally secure rental relationship.