Are you the owner of a rented apartment or house and are considering selling the property? The process of selling a rented property can present numerous challenges: The basics, understanding tenants’ rights, calculating the costs involved in selling, determining the right selling price and identifying the right buyer. The most important points are highlighted for you in this blog.
Can I sell a rented property?
In principle, it is possible to sell rented properties at any time. When selling a rented property, the seller is obliged to respect the rights of the tenants.
There are two options:
Option A: Terminate the tenancy(s) before selling the property
Option B: The property in its current condition, including existing rental agreement and rights and obligations
In both cases, certain legal requirements apply, such as the notice period of the rental agreement and the tenant’s right of first refusal.
How does the sale with a tenant work?
Before the sale can start, it must be checked whether the tenants have been granted a right of first refusal . If this is the case, the tenants must be made an appropriate offer. If the tenant rejects the purchase, a decision must be made on how to deal with the rental agreements: Continuation or termination. Regardless of the decision taken, it is imperative that the legal provisions at federal and cantonal level are observed.
“The current legal situation in Switzerland does not fully recognize the right of first refusal at either federal or cantonal level. Therefore, the owner of the property is not necessarily obliged to inform the tenant of their intention to sell.”
When selling a rented property, further documents must be prepared in addition to the standard documents. Among other things:
- Rental agreement
- Information on tenant status (letting, termination, vacancy)
- Details of the last rent increase
- Information on refurbishment
- Service charge settlements
- Status via maintenance reserves / renewal fund
- Regulations of the condominium owners’ association
- Additional contracts concluded (management contracts, maintenance contracts, etc.)
- Declaration of division (shows how other apartments in the same building may be used)
Legal requirements: Check carefully whether you have all the required documents and papers in full. It is important that you can provide information on all details that are relevant to the buyers or tenants. Legal details can be found at Federal Housing Office BWO.
If you have a contractual right of first refusal, for example with tenants, you must offer them the condominium or rented house for sale first.
Notice period and rescission by the tenant
Landlords in Switzerland have the right to terminate the tenancy agreement due to the intention to sell. The notice period for apartments can vary depending on the agreement in the rental contract. In addition to the usual period of three months (six months for business premises), longer periods are also possible, particularly in the case of long-term tenancies or special regulations in condominiums. It is therefore important to check the tenancy agreement carefully in order to know the specific notice periods for the apartment in question.
The tenant can contest the termination if:
- he can prove that the landlord is trying to persuade the tenant to buy the property
- the termination is aimed at evicting the tenant and is based on disputes or tensions
- the valid notice period was not observed
Inform the tenants of your intention to sell the property at an early stage. Clarify any questions and show understanding for the current situation. Positive communication can always make the sales process easier. This is because if the tenant contests the termination and is successful, a protection period of three years applies during which the tenants can continue to use the property.
How much profit do rented properties make when they are sold?
The market value of a rented property depends on various factors, such as the location, market demand, the condition of the property, investment costs, vacancy risk and tax aspects. In order to prepare the sale and all the necessary information for buyers, it is advisable to carry out a yield calculation in advance. Here are the steps for compiling the information:
- Rental income: Record the monthly rental income of the rented property(ies), broken down by rental unit.
- Operating costs: Record the estimated monthly costs associated with the operation of the property. These include, for example, insurance, maintenance costs, administrative costs, etc.
- Mortgage costs: Enter the monthly costs for the mortgage taken out to purchase the property. Make a note of the interest rate, term and all other relevant information about your financing to get a realistic picture of your actual income and expenditure.
- Vacancy periods: Take into account vacancy periods during which the property is not rented and therefore no rental income is generated.
Gross yield: Ratio of annual income to purchase price
Formula: (Annual rental income / purchase price) x 100
Example: CHF 62,000 / CHF 1,200,000 x 100 = 6.17 %
Net yield: Ratio of annual income and costs to purchase price
Formula: (Annual rental income – operating costs / purchase price) x 100
Example: CHF 62,000 – CHF 8,000 / CHF 1,200,000 x 100 = 4.5 %
How do I organize a viewing of a rented property?
In order to organize a viewing of the rented property, owners should contact the tenants at an early stage. They are generally obliged to tolerate viewing appointments, but as a landlord it is important to coordinate the appointments in good time and to respect the tenants’ privacy. It is also advisable to know the tenant’s rights or to consult a real estate expert. Among other things, tenants have the right to be present during the viewing of the apartment or to refuse to allow new images to be taken during the tenancy.
What needs to be considered in the purchase contract for a rented property?
When buying a rented property, it is important to have the purchase contract notarized. The experts draw up the contract and explain the legal consequences to the parties, including the rights and obligations of the new owner under the existing tenancy agreement. The sale of the rented property is concluded by notarization, payment of the purchase price and entry in the land register.
It is advisable to add provisions on operating costs, repayment of the deposit and any outstanding rental payments to the purchase agreement in order to secure the rental agreement in the event of a change of ownership. This is because the contract remains in force – the new owner has no right of termination or amendment.
In conclusion, it can be stated that the sale of a rented property is possible at any time. However, it is essential that sellers respect and protect tenants’ rights. Any action that disregards this aspect could lead to legal consequences. Therefore, owners should always act with caution and knowledge of the legal provisions if they wish to sell a rented property. This ensures that the interests of both tenants and owners are protected.
For this reason, it is advisable to appoint an experienced estate agent from the region to broker your rented apartment. They determine the current market value of your property and are on hand as competent discussion and negotiation partners for existing tenants, potential buyers and legal issues.
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.