Switzerland, which willingly cultivates its specificities and spatial planning, at the same time, distinctly restricts the sale of secondary residences to foreign nationals. Since the beginning of the 1960s – or for more than fifty years now! – it has been applying a system which the majority of States shun: make foreign nationals subject to a certain number of requirements, which are occasionally extremely strict, if they wish to purchase property in Switzerland. Authors, who have made amendments to legislation, have left their mark on the country down through the years... the latest to have been implemented is known as the “Lex Koller”.
The “empty bed” (or absentee accommodation) phenomenon
The situation became more complicated when, in spring 2012, an initiative aiming to restrict the number of secondary residences per municipality to 20% was adopted. This initiative was adopted by a narrow margin when the Swiss people voted in a referendum (50.6% of the votes cast, and 12 cantons and 3 half-cantons). It was not a federal councillor who gave their name to the “Lex Weber” but the ecologist Franz Weber, supported by the Helvetia Nostra organization.
A single figure was key to this initiative: 12% of housing stock, i.e. some 500,000 properties, are secondary residences. A large number of these are clustered in tourist resorts, in particular in the Alps, and contribute to the “empty bed” (or absentee accommodation) phenomenon. Time and again criticized by environmental conservationist spheres, these homes are only occupied a few weeks per year, most of the time their shutters remain closed.
Still much food for thought...
Restrictions on the sale of property to foreign nationals, restrictions on the number of secondary residences, and all the constraints that have to be faced as a result are directly or indirectly related to other restrictions – those imposed by the new Spatial Planning Act (abbreviated as LAT). This Act, which became effective on 1st May 2014, obliges cantons and municipalities to prioritize building homes, including secondary residences, within existing built fabric.
Although the willingness to preserve agricultural areas is but rarely discussed nowadays, the measures taken come up against the autonomy of cantons and municipalities with respect to drafting their spatial planning and they represent a real nightmare for the real estate sectors which have to deal with a new factor: urban fabric densification. We can assume that there is still much food for thought, for lawyers and legal experts as well as for political and economic circles, until the time that the new Spatial Planning Act (LAT) applies its full potential.
Restrictions on the sale of property
So, let’s take a more detailed look at the ins and outs of the substantial legislative package. The “Lex Koller” makes it more difficult for foreign natural or legal persons to purchase property.
We should point out straightaway that there are no restrictions whatsoever on commercial property. The Federal Council sets the annual cantonal authorization quotas which impact holiday accommodation apartments as well as apartments in apartment-hotels. In its quota allocation, it takes into account canton tourism activities, their tourism development plan and of the percentage of land/property ownership which, within their territory, belongs to foreign nationals.
Included among the overriding reasons for refusing to sell to a foreign resident is the fact that the surface area of the property is greater than the allocation imposed on it or whenever the buyer is already owner of a property of this type in Switzerland.
In contrast, legal heirs under Swiss law, blood relatives in the direct line, the buyer of a replacement property, following expropriation or the redrawing of plots, or a border dweller who wishes to purchase a secondary residence in a locality where they have established close relationships, their place of work in particular, are not subject to the authorization system. The cantons are free to apply stricter criteria in the authorization procedure.
Four years of uncertainties
After the “Lex Weber” had been much publicized and debated over and had led to recourse and concern which, on the face of it and fortunately, were exaggerated, it finally came into effect on 1st January 2016. “Finally” because the four years between the moment Franz Weber’s initiative was adopted and the date the Act and its implementing ordinance were published was a period of total uncertainty.
For the Swiss Working Group for Mountain Regions (SAB), “this long period caused severe damage to the most impacted areas by triggering a reduction in demand, a drop in prices and unemployment in construction jobs”. Even though some resorts did indeed show a significant decline in construction and in the property market, a majority of professionals relate much of this to an economic environment which was gloomy, to say the least, in industrialized countries and, in particular, to the increase in the value of the Swiss franc.
The Act and its implementing ordinance, as such, seem to be a lesser evil for the tourist resorts and real estate professionals. It is true that the prospect of a referendum had already led to numerous applications to build. Moreover, the number of primary residences, which are exempt from the restrictions, increased considerably. One of the reasons for this is the possibility for owners to transform them into secondary residences if they provide evidence that they unsuccessfully tried to sell them at a reasonable price.
This exemption is valid for two years maximum but can be extended if the situation has not changed. In addition, as regards couples, the property may be entered in the land register as the primary residence of the spouse. Among the other clarifications made to the Act, the ordinance establishes the conditions for creating dwellings to be allocated for tourist accommodation which are not impacted by the “Lex Weber” or the 20% quota.
In this respect, a hotel service in particular must be created, for example, a reception desk, a restaurant and other communal facilities like a swimming pool. Short-term rental must be privileged.
The end for industrial-style skiing
Owners of old hotels are authorized to turn them into secondary residences to finance the construction of new hotels, but strict criteria are applied; starting with the fact that if the establishment is more than 25 years old, if it is no longer lucrative and if this lack of profit is not the result of the owner’s wrongful conduct, then an expertise should confirm this.
Traditional granaries (raccards) and barns, buildings that are symbolic of high-altitude villages and evidence of mountain agriculture, may be turned into secondary residences.
The application of the Act and the jurisprudence guiding it will help establish the scope more precisely. In economic and political circles however, some are convinced that tourism stakeholders in Alpine resorts are now faced with a new challenge. Mountain regions must deal with inevitable structural change. They need to implement new models if they wish to survive, in particular by developing their infrastructures and by diversifying their sports, leisure and cultural activities.
“Mountain towns and villages can no longer survive on income gained from four intensive weeks”, sums up one of the leading players in the Valais Alps’ tourism sector. “The “Lex Weber” brought industrial-style skiing to an end”. Fortunately, a large majority of Alp resorts did not wait until the legislative axe fell to initiate this vital transformation.
Taking up residence in Switzerland
Foreign nationals who wish to purchase property but who do not fulfil the conditions stipulated in the “Lex Koller” and in the “Lex Weber”, “the only solution is to take up residence in Switzerland”, states Mr Philippe Kenel, Doctor of Law and lawyer (Lausanne, Geneva and Brussels, Python & Peter). He points out that it is relatively easy to be granted a residence entitlement and, once resident in Switzerland, the holder is no longer subject to the “Lex Koller” requirements.
For non-European nationals, the procedure to obtain a residency entitlement is more complicated. Before being granted a Swiss settlement permit, in principle over the first ten years of their stay in Switzerland, they are only authorized to purchase a primary residence with a parcel of land that must not exceed 3,000 square metres, except when a specific derogation is taken into account.
“In practical terms”, advises Mr Philippe Kenel, “a foreign national who wishes to maintain their residence in their home country must check that they meet the “Lex Koller” and “Lex Weber” requirements. When this is not the case, then they must consider relocating to Switzerland after having reviewed the conditions to be fulfilled to do so with a specialized lawyer”.