Note for the attention of foreign buyers concerning the options of making a quick resale(Acquisition prior to 1st January 2008)

The acquisition of an apartment or a chalet as a holiday home is subject to the receipt of an authorisation by virtue of the Swiss Federal Law governing the acquisition of buildings by individuals domiciled abroad (LFAIE).

This acquisition is subject to a contingent. The annual contingent is set by the Confederation for each Canton. An allocation to the Communes of the Canton is then made. There can be a wait for between three months to several years to obtain a permit.

When a buyer has received a permit and a unit from the contingent, he may resell his property to another foreigner who will obtain an authorisation without appropriating the contingent. This will also allow the purchaser to obtain an authorisation faster (about two and a half months). It is therefore an advantage for certain foreigners. Additionally, the foreigner may resell his property to a Swiss.

Previously it had been foreseen, as is the case still in Valais, that resale was forbidden for ten years. Such a restriction (ban on selling within five years) was again introduced on 1st January 2008 in the Canton of Vaud.

This faculty of immediate resale must be approached with caution keeping in mind the goal of the LFAIE.

The goal of the LFAIE is to forbid foreigners from making the property owned in Switzerland into an investment. Article 12 LFAIE foresees that a permit is refused if the purchase is made only for investment.

This goal is also expressed by the ban on a foreigner from obtaining an authorisation if he himself, his children aged less than eighteen or his spouse are already owner of a property in Switzerland.

At the time of the purchase restrictions are foreseen. These restrictions are registered in the deed of sale at the land registry and are :

a) The obligation to use regularly the property that the authorisation was granted for.

b) The obligation to sell the property within two years if it is no longer used by the buyer.

c) A ban on annual rents.

These three restrictions are the expression of the ban on investing funds.

The owner must not only use his property but use it regularly as a holiday home.

This does not preclude one from renting out his property for a certain number of months per annum as he can use it during his own holidays.

The law does not foresee a minimum time limit, nor does it quantify the word regularly.

As per current practice, all resales made in a relatively short period must be justified by the vendor (urgent grounds – of health or financial difficulties for example). These motives of course must not exist at the time of the purchase. The foreigner will also have to show proof that he has used personally his dwelling (airline tickets, credit card statements, restaurant bills, ski passes, etc…).

The resale, if allowed for urgent reasons, does not yet signify it can be done with a profit. In fact, as mentioned above, the law forbids an investment and the possibility of an owner to make profits from a quick resale.

It is not possible to ascertain what is acceptable and what is not.

Several theories :

1. If the vendor cannot prove that he has used his dwelling or does not have urgent reasons obliging him to sell his property (nor one nor the other) the Land Commission could authorise a resale but without any profit.

2. If the vendor can prove that he has used his dwelling personally and that he has urgent motives that are obliging him to sell his property, in principle he will be authorised to sell with a profit. However the Land Commission could forbid a profit if the resale is made too quickly and that it detects a motive of profit making. It is difficult to know from which time an owner is allowed to make a profit. For information the High Court of the Canton Vaud ruled favourably for a vendor who in such a situation made a profit.

The profit is calculated by adding to the purchase price, the purchase costs, any interest paid, various works and selling costs as well as the agent’s commission.

François Bianchi, Notary

Aigle, February 2009/me