Real Estate Sales in Switzerland: Contract, Notary and Procedure

The Real Estate Sales Contract in Swiss Law

The sale of real estate in Switzerland is subject to strict rules designed to protect the parties and ensure the legal certainty of property transactions. Article 216 of the Code of Obligations (CO) requires authentic form: the contract must be executed before a notary to be valid. A simple written or oral agreement is null and void.

Requirement of Authentic Form (Art. 216 CO)

Authentic form is a requirement for validity, not merely for evidence. The deed must contain:

1. The full identity of the parties (seller and buyer)
2. The precise designation of the property (plot number, municipality, land register)
3. The sale price and payment terms
4. The date of transfer of ownership (date of entry in the land register)
5. The easements, land charges and mortgages encumbering the property
6. The seller's warranties (notably regarding defects)

Any subsequent modification of the contract, including a price reduction, must also be in authentic form (art. 216 para. 2 CO).

Steps of a Real Estate Transaction

1. Agreement in principle: the prospective buyer and the seller agree on the price and conditions. A reservation agreement may be signed (in authentic form to be binding).
2. Due diligence: land register extract, cadastral plan, statement of easements, mortgage certificate, compliance with construction law.
3. Financing: obtaining the bank's agreement in principle. Swiss banks generally require 20% own funds, of which 10% in cash (excluding second pillar).
4. Signing the notarial deed: the notary reads the entire deed to the parties, ensures their understanding and collects their signatures.
5. Application for entry in the land register: the notary submits the application. The transfer of ownership takes effect upon entry (art. 656 CC).
6. Payment of the price: generally made through the notary's escrow account.

Warranty for Defects (Art. 219 CO)

Article 219 CO refers to the general rules on warranty in sales (art. 197 et seq. CO). The seller is liable for material and legal defects of the property. However, in practice, contracts often contain an exclusion of warranty clause ("as is"), which is valid except in case of fraud by the seller (intentional concealment of a defect).

Option Agreement and Right of Pre-Emption

The option agreement (art. 216a CO) and the right of pre-emption (art. 216c CO) must also be concluded in authentic form. The right of pre-emption may be contractual (between parties) or statutory (for example that of PPE co-owners under art. 712c CC, or that of agricultural tenants under agricultural lease law).

Transfer Tax and Capital Gains Tax on Real Estate

Upon each real estate transfer, cantons levy a transfer tax (generally between 1% and 3.3% of the sale price) and a capital gains tax on real estate (difference between the sale price and acquisition price). The latter is degressive based on the holding period, with some cantons granting exemption after 25 years.

Restrictions on Acquisition by Foreign Nationals

The Federal Act on the Acquisition of Real Estate by Persons Abroad (FAREA / Lex Koller) subjects the acquisition of residential real estate by non-residents to authorisation. EU/EFTA nationals residing in Switzerland are exempt for their primary residence.