There are many different types of purchasing contracts in the real estate industry you can choose from. Freehold and Leasehold are some of the options available according to Swiss law.
Freehold is a type of contract used to buy property wholly and completely, meaning the property buyer also gets the land. This way you get full rights to the land which will enable you to do whatever you wish with it, may it be to build on it, lease it or even sell it again.
Since land availability is scarce in Switzerland, leasehold contracts are the most common type of contract when it comes to the purchase of a property. In general, this means the user of the land does not become the owner of it but owns the building which he builds upon it. Usually, a leaseholder will get the right to use the land for a period of 30 to 100 years, but cannot sell it since he is not the owner of it. However, the leaseholder could sell the building built on top of the leased land, in which cases the buyer of the building becomes the new leaseholder of the land. In simple words, you own the building but not the land beneath it.
Benefits and disadvantages
In comparison to freehold contracts, there are some key benefits when opting for leasehold. For one, you can negotiate a much cheaper price when buying the building instead of the whole package. The procedure is also faster and you can probably find it easier to rent than to buy land.
However, not owning the full rights of ownership to the property can be a major issue, since someone else will have a say in future endeavors. It is also a possibility for your landowner to ask you to pay increased rent when the market prices shift upwards. Also when the leasehold period expires, the owner of the land may choose not to extend the contract, which will leave you without your house. So whenever you decide to buy property in Switzerland you should take careful consideration of all possible outcomes.
What types of ownership are available in Switzerland?
There is a possibility to buy property as one individual or jointly with other entities or people.
Here are some of the possible structures of ownership:
· Sole owner – Ownership, and responsibility to a property lie with one person.
· Joint owners – At least two people or more are owners of the property. One cannot dispose of the property without the consent of other joint owners.
· Co-owners – Similar to Joint ownership, but different in a way. Whereas with joint ownership, the financial investment made by the parties is disregarded, Co-owners have shares corresponding to the amount of investment they made for the property. One co-owner can dispose of its share whenever he pleases but has to offer the other co-owners first.
When purchasing property in Switzerland, you should consider all of the above-said types, and decide which option is best suitable to your needs.