Lex Koller Restrictions on Foreign Property Ownership
Switzerland is renowned for its stunning landscapes, high quality of life, and stable economy, making it an attractive location for international property investment. However, the Swiss government has put in place strict laws to prevent the over-acquisition of Swiss real estate by foreigners. One of the most significant laws in this context is the “Lex Koller,” which restricts foreign property ownership, particularly for non-residents. In this post, we’ll break down what Lex Koller is, its history, how it applies to property purchases, exceptions, and what these regulations mean for foreign investors interested in Swiss real estate.
What is Lex Koller?
The Swiss federal law commonly referred to as “Lex Koller” (officially the Federal Act on the Acquisition of Real Estate by Persons Abroad) is a legal framework designed to limit foreign property ownership in Switzerland. Enacted in 1983, Lex Koller was introduced to protect Swiss land and real estate markets, especially in desirable areas, from becoming dominated by foreign buyers.
The law restricts non-residents and non-Swiss citizens from purchasing certain types of real estate, particularly residential properties intended for secondary or holiday use. The rationale behind this legislation is to prevent real estate prices from inflating due to international demand and to ensure housing remains accessible to local residents.
Who Does Lex Koller Apply To?
Lex Koller specifically targets the acquisition of Swiss real estate by foreign nationals who do not have Swiss residency status. Here’s a breakdown of who is affected by the law:
Non-Residents and Non-EU/EFTA Nationals: Non-Swiss nationals who reside outside Switzerland are most affected, as they generally cannot purchase residential property without special permission.
EU/EFTA Nationals: European Union (EU) and European Free Trade Association (EFTA) nationals who have a legal residency in Switzerland and use the property as their primary residence are exempt from Lex Koller. They can purchase real estate under the same conditions as Swiss citizens.
Legal Entities: Foreign corporations or organizations are also subject to Lex Koller restrictions, particularly when attempting to purchase residential properties.
Types of Property Affected by Lex Koller
Lex Koller differentiates between property types, and the restrictions vary accordingly:
Residential Property
Residential properties intended for secondary or vacation use are the main focus of Lex Koller. Foreign buyers are generally prohibited from purchasing these properties unless they obtain special permission from local authorities.
Commercial Real Estate
The acquisition of commercial properties (such as office buildings, retail spaces, and industrial properties) is generally allowed for foreigners, as these types of investments are considered beneficial for the Swiss economy. However, the property must be used for commercial purposes only, without residential elements.
Agricultural Land
Agricultural land is also tightly regulated under Lex Koller to preserve the rural and agricultural landscape of Switzerland. Foreigners are generally prohibited from purchasing farmland or agricultural properties unless there is a compelling reason and approval from authorities.
Exceptions and Special Permissions
While Lex Koller is a strict law, there are some exceptions that allow foreigners to purchase certain types of residential properties under specific conditions:
Primary Residence for Swiss Residents
Foreign nationals who live and work in Switzerland on a long-term basis (such as those holding a B or C permit) can buy property for their primary residence. However, the property must be used as their main residence, and they cannot rent it out without permission.
Purchase of Holiday Homes in Certain Cantons
Some cantons, like Valais, Vaud, and Graubünden, allow foreigners to buy holiday homes, but with limitations on property size and region. The property size is generally capped, often at around 200 square meters of living space, and the location is restricted to certain tourist areas.
Inheritance
Foreigners who inherit property in Switzerland are often permitted to retain ownership, even if they don’t reside in Switzerland. However, they cannot increase their holdings or buy additional properties under this exception.
Exceptions for Commercial Real Estate
Foreign investors are typically permitted to acquire commercial real estate for business purposes. However, they must demonstrate that the property will be used commercially and not for residential use. This exception makes Switzerland an attractive destination for corporate investments.
Challenges and Limitations for Foreign Investors
Foreign investors face several challenges and limitations due to Lex Koller regulations:
Complex Approval Process: Purchasing property in Switzerland as a foreigner can require extensive paperwork and approval processes. Non-residents may have to prove the necessity of their purchase to authorities, especially for residential or holiday homes.
Limited Locations: Even when allowed, foreigners are restricted to buying properties in specific cantons or tourist areas. This limits choices and availability, often concentrating interest in high-demand regions.
Size and Usage Restrictions: Lex Koller not only restricts who can buy property but also imposes limits on the size and usage of real estate. For example, there are restrictions on the size of holiday homes and the duration they can be rented out to third parties.
Lex Koller and Property Market Implications
Lex Koller has notable implications for the Swiss real estate market:
Stable Real Estate Prices: By limiting foreign investment, the law aims to keep property prices stable and accessible for Swiss residents. This helps prevent rapid inflation in property prices that could result from high demand by foreign buyers.
Availability for Locals: The restrictions ensure that residential properties, especially in desirable areas, remain available to local residents rather than foreign investors who may use the property infrequently or solely for investment purposes.
Focused Foreign Investment: Lex Koller encourages foreign investment in the commercial real estate sector rather than residential, allowing for economic growth without significantly impacting housing availability or prices.
Final Thoughts on Lex Koller
Lex Koller reflects Switzerland’s unique approach to real estate by balancing economic openness with the preservation of Swiss culture and housing accessibility. For foreign investors, navigating Lex Koller can be challenging, but with the right knowledge, it’s possible to invest in Swiss real estate within the law’s boundaries.
Foreign investors can still explore opportunities in Switzerland’s commercial real estate sector, and those with residency can buy residential properties with certain limitations. By understanding Lex Koller and using tools like Opteam to facilitate planning, international investors can participate in Switzerland’s real estate market responsibly and effectively.
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