By contrast with commercial property, the sale of residential property is very carefully controlled in Switzerland. The Law on the Acquisition of Property by Persons Abroad (LFAIE), better known as the Lex Koller, introduced in 1983, prohibits the acquisition of a residential building by any foreigner who does not hold a residence permit (permit B) or settlement permit (permit C). The sole exception is for the acquisition of a second home.
However, the acceptance by popular vote in 2013 of the Weber initiative on limitations to the construction of second homes greatly reduced this possibility. As a result, almost all Alpine resorts now prohibit new constructions. Meanwhile, the plains are rarely suited to this kind of proposition.
Exceptions in Montreux
Regions such as Montreux, where this is still possible, remain the exception. In addition, foreigners wishing to acquire a home in Geneva can choose to settle there after negotiating a tax package.
The Lex Koller, which aims to prevent foreign ownership in Switzerland, does not extend to commercial property. Industrial, office and commercial buildings can be acquired without limitation by foreign persons. It is this liberal framework that has stimulated the construction of administrative buildings in recent years, and which has also led to a rise in the vacancy rate in this segment.
The end of dual-use buildings
However, a foreigner cannot acquire a commercial property if it also includes a residential section. Goodbye, therefore, to the buildings with a retail arcade on the ground floor. These buildings, known as dual-use, are treated as residential, and therefore unavailable. Naturally, this limits the number of available properties on the market.
Nevertheless, exceptions to this rule still remain. Residential buildings may be purchased by legal persons that include foreigners in their capital. These legal persons may adopt various legal forms, such as property investment funds, public limited companies, limited liability companies or cooperatives. The condition, however, is that the majority of the capital remains in Swiss hands. And how is this determined? By verifying the source of funds that banks must make according to the Money Laundering Act (LBA).
Changes are in the air, however. In Spring 2017, the Federal Council put out for consultation a proposal for the reform to the Lex Koller with the aim of hardening certain points, clarifying certain aspects and accelerating procedures. Thus, people from non-EU and EFTA countries will have to resell their housing as soon as they have left Switzerland definitively and are therefore no longer in possession of a residence or settlement permit.
It also seeks to clarify the situation of commercial buildings that are to be converted into housing, and wants to open a door for major investments, especially for tourism purposes. The procedure is still in its infancy. The consultation procedure on the preliminary draft of the Federal Council met with a lot of opposition. The revision is still expected to take several years to come into effect.
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