Service charges and incidental expenses

In Switzerland, the relationship between landlords and tenants is governed by a strict legal framework, particularly as regards rental charges and ancillary costs. These amounts, which are added to the net rent, represent a significant proportion of housing costs for tenants, and are a decisive aspect of property management for landlords. The distinction between what can legitimately be charged as ancillary costs and what must be included in the base rent is the subject of numerous disputes before the conciliation authorities. Swiss legislation, principally the Code of Obligations (CO), precisely defines the rules applicable to charges, their calculation and invoicing, and the rights of the parties involved. To navigate through this complexity, a thorough understanding of the system is essential for tenants and landlords alike.

Definition and legal framework of rental charges in Switzerland

In the Swiss rental system, rental charges (or ancillary costs) are defined as expenses incurred by the lessor in connection with the use of the rented property. Article 257a of the Swiss Code of Obligations is the main legal basis governing these charges. According to this provision, accessory costs are the actual expenses incurred by the lessor for services related to the use of the property.

A fundamental feature of Swiss law is that only those costs expressly mentioned in the lease as being payable by the tenant may be invoiced in addition to the rent. Without such explicit mention, these costs are deemed to be included in the net rent and cannot be billed separately.

Distinction between net rent and service charges

The Swiss rental system makes a clear distinction between net rent and service charges. Net rent represents the remuneration for the use of the rented premises, while service charges correspond to the ongoing expenses associated with the use of the building. This distinction is crucial, as it determines which costs can be passed on to the tenant in addition to the rent.

According to the case law of the Swiss Federal Supreme Court, for an expense to qualify as a charge that can be passed on, it must meet three cumulative criteria:

• It must be related to the use of the leased property.
• It must correspond to a service provided by the lessor
• It must be explicitly mentioned in the contract as being the responsibility of the lessee.

Specific legal bases

In addition to article 257a of the Swiss Code of Obligations, there are other legal provisions governing rental charges in Switzerland:

• Article 257b of the Swiss Code of Obligations (CO), which specifies that for residential and commercial premises, ancillary costs are the lessor’s actual expenses for services related to the use of the property, such as heating, hot water and other operating costs, as well as public contributions resulting from the use of the property.
• The Ordinance on leases and farm leases of residential and commercial premises (OBLF), which provides additional details.
• Cantonal regulations, which may sometimes include special provisions

The case law of the Swiss Federal Supreme Court plays a decisive role in interpreting these legal bases. In particular, it has clarified that certain expenses, such as administrative overheads or maintenance costs, cannot be considered as charges that can be passed on, but must be included in the net rent.

This precise, if sometimes subtle, legal distinction is fundamental to determining the correct allocation of costs between landlords and tenants, and avoiding potentially costly and time-consuming disputes for both parties.

Types of service charges payable by tenants

Under Swiss tenancy law, not all the landlord’s expenses can be automatically passed on to the tenant in the form of charges. Legislation and jurisprudence have established a relatively precise list of costs that can be considered as passing-on charges, provided they are expressly mentioned in the lease contract.

Heating and hot water expenses

Heating and hot water costs are the most common and significant category of rental expenses in Switzerland. They include :

• Cost of fuel or energy used (oil, gas, electricity, etc.)
• Operating costs for heating and hot water systems
• Meter reading and cost allocation fees
• Routine maintenance costs (chimney sweeping, descaling, etc.)
• Power consumption required to operate the installations

It should be noted that the cost of repairing or replacing heating systems cannot be passed on as a service charge, as it is part of the building’s maintenance, which is the responsibility of the owner.

Water, sewerage and wastewater treatment costs

Charges for cold water consumption, sewerage and wastewater treatment can be passed on to the tenant when they are mentioned in the contract. These charges include :

• Cold water consumption
• Sewer taxes
• Water treatment charges
• Individual meter reading costs, where applicable

Electricity costs for common areas

Electricity costs for the building’s common areas can be passed on to tenants. They include :

• Lighting of stairwells, corridors, entrances and other common areas
• Elevator power supply
• Building exterior lighting
• Electricity for security and intercom systems

Outdoor maintenance costs

Certain costs related to the routine maintenance of outdoor areas can be passed on:

• Maintenance of gardens and green spaces (mowing, pruning, etc.)
• Snow removal and salting
• Access cleaning

Public taxes related to the use of the building

Various public taxes directly related to the use of the property can be passed on:

• Garbage collection tax
• Road tax
• Certain environmental taxes linked to the use of

On the other hand, property taxes, building insurance premiums and connection charges are the responsibility of the landlord and cannot be passed on to the tenant.

For each of these categories, passing on expenses is only legal if explicitly provided for in the lease contract. In addition, the landlord must be able to justify these expenses by means of precise invoices and accounting documents, and the distribution among the various tenants must be based on a fair allocation key, generally based on the surface area of the dwellings or, where individual meters exist, on actual consumption.

Invoicing and billing methods

There are two main methods of invoicing service charges in Switzerland: instalments with final settlement, and flat-rate invoicing. Each system has its own characteristics and meets specific legal requirements.

Instalment system with annual statement

The installment system is the most widespread in Switzerland. Under this system, the tenant pays a monthly instalment, usually fixed in the lease contract. At the end of the billing period (usually one year), the lessor draws up a detailed statement comparing the instalments paid with actual expenses.

Legal aspects of the advance payment system :

• The lessor must submit a detailed statement within a reasonable time after the end of the period (usually 6 months).
• The statement must be transparent and allow the tenant to verify the validity of the charges billed.
• The tenant has the right to consult supporting documents (invoices, receipts, etc.).
• In the event of a balance in favor of the lessee, the lessor must reimburse the balance; in the event of a balance in favor of the lessor, the lessee must pay the balance.

Under article 257b, paragraph 2 of the Swiss Code of Obligations, the landlord must, at the tenant’s request, allow the tenant to consult the supporting documents. This provision guarantees the transparency of the billing and enables the tenant to verify the accuracy of the amounts invoiced.

Package system

In the lump-sum system, a fixed amount is agreed between the parties and remains unchanged for the duration of the lease, regardless of actual consumption. This system has the advantage of administrative simplicity, but entails significant legal restrictions:

• The flat rate can only be applied to certain types of expenses (for example, it cannot be used for heating and hot water expenses in multi-unit buildings).
• The lump-sum amount must correspond approximately to average actual costs.
• The flat rate can be contested if it is clearly disproportionate to the actual costs.

The Swiss Federal Supreme Court has ruled that a flat-rate system is not admissible for heating and hot water costs in buildings with more than five rental units, or where the heating system serves several buildings. The purpose of this restriction is to ensure that charges are fairly apportioned on the basis of actual consumption.

Load sharing keys

The distribution of charges between the various tenants in a building must be based on an equitable allocation key. The most commonly used methods are :

• Pro rata distribution of leasable area (m²)
• Pro-rata distribution of heated volumes (m³) for heating costs
• Breakdown by metered individual consumption

Swiss legislation promotes the use of individual metering systems for heating and hot water in new buildings and during major renovations. Article 9 of the Swiss Rental Lease Ordinance (OBLF) stipulates that heating and hot water costs must be calculated on the basis of actual consumption, where technically feasible.

Deadlines and procedures

Several deadlines and procedures govern the billing of charges:

• The statement must be submitted within a reasonable time after the settlement period (usually 6 months).
• The tenant generally has 30 days to contest the statement.
• In the absence of a breakdown within a reasonable time, the tenant may give formal notice to the lessor.
• Expense claims are subject to a 5-year statute of limitations

In the event of a change of tenant during the period, the practice is generally to establish a pro rata temporis allocation, i.e. proportional to the length of occupancy. However, for heating costs, a seasonal weighting can be applied to take account of variations in consumption between seasons.

Rights and obligations of parties concerning charges

The management of rental charges implies a series of rights and obligations for both landlord and tenant. These responsibilities, defined by the Code of Obligations and clarified by case law, are designed to ensure a balanced contractual relationship.

Lessor’s obligations

As the building manager responsible for billing charges, the lessor is subject to several fundamental obligations:

• Expressly mention in the lease contract the charges that will be billed separately from the rent
• Provide detailed, transparent and verifiable statements within a reasonable timeframe
• Keep and make available to the tenant all supporting documents
• Apply a fair distribution key between different tenants
• Prompt repayment of any overpayments on account
• Justify any significant increase in advance charges

The lessor is obliged to manage common facilities diligently to avoid excessive costs. For example, he must ensure that heating systems are properly maintained and optimally adjusted. Negligence in this area could be considered a defect in the leased property, entitling the tenant to claim a rent reduction.

Tenant’s rights

To balance the contractual relationship, the tenant benefits from specific rights concerning charges:

• The right to obtain a detailed statement within a reasonable period of time
• Right to consult all supporting documents
• Right to contest the statement if he considers it inaccurate or incomplete
• Right to request a reduction in advance payments if they are systematically higher than actual expenses
• Right to refuse to pay charges not provided for in the contract

Case law has clarified that the right to consult supporting documents is a fundamental right of the tenant, which cannot be contractually restricted. This right extends to all documents used to verify the accuracy of the account, including maintenance contracts and detailed supplier invoices.

Contesting a service charge statement

In the event of disagreement over the settlement, a specific procedure must be followed:

1. The lessee must submit a written objection to the lessor within a reasonable period of time (usually 30 days).
2. If the dispute persists, the tenant may refer the matter to the conciliation authority for leases and rents in his canton.
3. If conciliation fails, the case may be brought before the competent court.

In this context, the burden of proof is distributed as follows: the lessor must prove that the charges invoiced correspond to actual expenses related to the use of the leased property and provided for in the contract. The tenant, for his part, must prove that certain charges are excessive or unjustified if he disputes their amount.

Consequences of non-compliance with obligations

Failure to comply with obligations relating to charges may have various legal consequences:

• If the landlord fails to provide a statement of account, the tenant can put the landlord on formal notice and, in the absence of a response, refer the matter to the competent authority.
• If charges not provided for in the contract have been billed, the tenant may request reimbursement.
• If the landlord refuses access to the supporting documents, the court can order their production under penalty of a fine.
• In the event of systematically excessive invoicing, the lessee may request a reduction in future deposits.

In certain serious cases, such as the billing of fictitious or manifestly excessive charges, the lessor’s behavior could be qualified as an abuse of rights, or even give rise to criminal proceedings for attempted fraud.

Current issues and controversial practices in rental charges

The issue of rental charges in Switzerland faces a number of contemporary challenges that give rise to legal and practical debate. These issues affect landlords and tenants alike, and reflect changing energy standards, technologies and societal expectations.

Energy transition and cost allocation

The energy transition represents a major challenge for the Swiss building stock. Energy renovation work raises complex issues concerning the distribution of costs and benefits:

• The distinction between value-added work (which can be passed on to the rent) and maintenance work (for which the owner is responsible) is sometimes blurred in the case of energy improvements.
• Installing solar panels or heat pumps raises the question of how to share the savings fairly.
• The installation of individual heating meters, while promoting energy savings, entails significant installation and reading costs.

Recent jurisprudence tends to recognize the value-added nature of energy renovations, allowing them to be partially passed on to rents, while at the same time considering that the savings in costs should primarily benefit tenants.

Digitization and new technologies

The advent of digital technologies is transforming the way rental charges are managed:

• Smart meters enable real-time monitoring of consumption, but raise data protection issues
• The dematerialization of statements facilitates their transmission, but may pose accessibility problems for some tenants.
• Digital property management platforms are changing billing and communication practices

These technological developments require adaptations to the legal framework. For example, the legal validity of electronic statements has been recognized, provided that the tenant has expressly accepted this method of communication and that the integrity of the document is guaranteed.

Controversial practices and grey areas

Some rental charge practices fall into legally uncertain areas:

• Invoicing of administrative costs for the preparation of service charge statements, considered abusive by prevailing case law
• The outsourcing of building management to companies linked to the lessor, raising the question of pricing.
• Passing on janitorial costs, particularly when the janitor performs maintenance tasks (for which the owner is responsible) and not just routine cleaning.
• Costs associated with new services such as video surveillance and access control systems

These practices are the subject of evolving case law, which generally tends to protect tenants against abuse, while recognizing the need to adapt practices to new real estate realities.

Impact of changes in energy prices

The sometimes sharp fluctuations in energy prices pose particular challenges:

• Adjusting lease payments in the face of significant increases in energy costs
• Handling statements with exceptionally high balances
• Anticipating future variations when setting down payments

In this uncertain environment, transparent communication between landlords and tenants is essential. Some property management companies have adopted a practice of gradually adjusting down payments to avoid sudden corrections.

Legal assistance in disputes relating to service charges

In view of the growing complexity of issues relating to rental charges, it may be advisable to seek specialist legal advice. A lawyer specializing in tenancy law can offer a personalized analysis of the situation, check that statements comply with legal and contractual provisions, and effectively represent his client’s interests in the event of a dispute.

For landlords, preventive legal advice can help them draw up compliant contracts and set up billing systems that are immune to disputes. For tenants, the assistance of a specialist can be decisive in identifying abusive charges and asserting their rights effectively.

The current trend is for disputes relating to service charges to become increasingly litigious, with case law clarifying technical points such as the allocation of energy costs or the admissibility of certain new charges. In this evolving context, constant legal monitoring and appropriate advice are major assets in navigating the complex system of rental charges in Switzerland.