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The right of first refusal when selling real estate

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The so-called right of first refusal entitles a person to claim the property for themselves in the event of a property sale before it is sold to a third party. This is therefore a type of preferential purchase, but it must be contractually stipulated. Here you can find out more about this topic in Switzerland, the different types of this right and the correct procedure for applying it.


Right of first refusal – what is it?


The right of first refusal grants a person the privilege of entering into a purchase agreement before a planned property sale. Before the seller can sell the property to a third party, he must offer it to the person entitled to pre-emption. Only if the latter does not exercise his right can the sale be made to a third party. The tenant’s right of first refusal often comes into effect, which must be contractually stipulated.

In Switzerland, the corresponding requirements are precisely regulated in the Swiss Civil Code from Article 681 onwards. Among other things, it states that a right of first refusal may not be inherited or assigned. In addition, Article 216 of the Swiss Code of Obligations contains provisions such as the maximum pre-emption right period of 25 years and information on the registration of the right in the land register.


The right of first refusal is particularly important when selling houses, land and condominiums. The following conditions must be met:

  • The seller actually wants to sell the property
  • A purchase contract is concluded to which both parties agree
  • The beneficiary of the pre-emptive right expressly exercises its right
  • The seller has guaranteed the beneficiary the right of first refusal to the property

Factors such as the purchase price or the purchase agreement normally remain the same for the pre-emption beneficiary. At the same time, the seller may not demand more money from the buyer than from third parties – the limited right of first refusal is an exception.


In principle, the right of first refusal in real estate sales in Switzerland is governed by the Swiss Civil Code (ZGB), although cantonal and communal provisions may provide for additional regulations or specific arrangements, particularly in relation to agricultural land or special building zones. It is therefore possible that cantonal regulations apply in addition to federal law.


What types are there?


In Switzerland, a distinction is made between contractual and statutory pre-emption rights, as well as limited and unlimited rights. The contractual right is based on a pre-emption right agreement between the seller and the beneficiary, while the statutory right arises from co-ownership relationships or building rights. The limited variant specifies the conditions in the preliminary contract, while the unlimited right allows the same conditions to apply as for third parties.

In detail, there are the following variants of the contractual right of first refusal:

  • Limited right: All conditions relating to the purchase price of the property are already set out in the preliminary contract. In this case, the property must therefore be offered to the beneficiary, who then decides whether he wishes to exercise his right to purchase, taking into account the fixed price. The current market value and the price that willing third parties would pay are not relevant here.
  • Unlimited right: The contractual conditions that the seller has agreed with a third party apply here. These also apply to the beneficiary.

Please note that both the limited and the unlimited variant must be publicly notarized by a notary. The latter takes care of recording the right in the land register in order to guarantee its legal effect. Nevertheless, the beneficiary may refuse his right.

Tipp

As the seller, find out in good time whether there is a statutory right of first refusal that you may not have been aware of.


Bear in mind that the right of first refusal exists in the event of a sale. This is therefore relevant if you want to sell your property. However, if you transfer the property by way of a gift or pass it on to an heir, this right is not relevant.


How is the right of first refusal recorded?


The contractual right of first refusal requires a contract between the seller and the beneficiary as well as an entry in the land register. In the case of the statutory right of first refusal, a contractual agreement is often not necessary, but legal protection is advisable.

The following procedure is important in order to record the contractual right of first refusal in a legally valid manner:

  • Conclude a right of first refusal agreement with the beneficiary, such as the tenant. In this contract, you undertake to give priority to the beneficiary when selling.
  • Have the right of first refusal publicly notarized. This applies in particular to contractual, limited pre-emption rights for which a visit to the notary is necessary. The expert takes care of the public notarization, which is not necessary in the case of an unlimited right of first refusal.
  • An entry in the land register is required for both limited and unlimited pre-emption rights. The notary will ensure that the entry is made and that the right of first refusal is valid vis-à-vis third parties. Without a land register entry, you are not in a position to assert the right of first refusal against persons who are not your contractual partner.

Would you like to know what your property is currently worth in the event of a sale? Calculate the value of your property here.

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Rights and obligations of the seller?


Sellers must be informed of their rights and obligations in connection with the right of first refusal. Tenants do not automatically benefit from this unless it is contractually stipulated or a legal right exists. If the property is sold , the beneficiary must be informed of the intention to sell and has the right to exercise his right of first refusal.


When does the tenant have a right of first refusal?


Tenants do not have an automatic right of first refusal unless it has been contractually agreed or a statutory right exists. In principle, the Swiss right of first refusal is intended to give preference to certain persons when selling. As the seller, you are free to choose these persons in the contractual right of first refusal. The right of first refusal is often established for long-term tenants who know the property well.

It must be accepted by both parties and contractually secured in order to be valid.

What rights do I have as a tenant? Download all the checklists on the subject of rent now.

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Cancellation or circumvention of the right of first refusal


Contractual pre-emption rights expire automatically at the end of the agreed term or after 25 years. Statutory pre-emption rights can be restricted or revoked by a publicly notarized agreement. In order to avoid the right, the property can be transferred by gift or passed on to heirs.


Conclusion

The right of first refusal is a complex issue in the real estate market that is of great importance to both sellers and potential buyers. It is important to understand the different types and regulations in order to exercise your rights and obligations correctly. In Switzerland, the corresponding requirements are precisely regulated in the Swiss Civil Code from Article 681 onwards.

Do you have further questions about the right of first refusal in Switzerland? We offer free consultation appointments for landlords and sellers.

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All data are without guarantee. The information on these Internet pages has been carefully researched. Nevertheless, no liability can be assumed for the accuracy of the information provided.

 

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