Buy to let: How to rent out your house

The English expression “buy to let” describes the situation when a person buys a house with the intention of renting it out later. This can make sense if a good offer for the property purchase comes along, but the buyer doesn’t (yet) intend to live in the house or apartment at the time of purchase. In some cases, it’s also worthwhile to purchase a property solely as an investment, without the intention of ever living in it themselves.

In principle, anyone can rent out a house. There are commercial landlords who have made this their profession and often own several properties, as well as private landlords. Whether commercial or private, landlords and homeowners should always consider a few important points.

Anyone who wants to rent out their home must adhere to the statutory provisions. The most important section is the Swiss Code of Obligations (CO): Article 253 CO, an entire section is dedicated to rent. This section contains all the legal principles surrounding the rental of residential and commercial properties. In addition to the Code of Obligations, the Ordinance on the Rental and Leasing of Residential and Commercial Premises (VMWG) applies. This Ordinance examines certain tenancy law topics in more detail, for example, details on regulations regarding ancillary costs.

To maintain a positive and, above all, legally valid tenancy, landlords must also adhere to their obligations. The statutory obligations of landlords can be found starting with Article 256 of the Swiss Code of Obligations (OR). This includes, among other things, the following points:

• The landlord must hand over the rental property in a “condition fit for its intended use” and maintain it in that condition.
• Landlords have a duty to provide information: Among other things, the landlord must disclose the amount of the previous rent upon request.

There are also some legal regulations regarding rental deposits. Article 257e of the OR stipulates that the security for rental payments may not exceed the amount of three months’ rent (gross rent including monthly utility costs). The landlord must also ensure that the money is not mixed with other assets: The rental deposit must be paid into a so-called blocked account in the tenant’s name, where the money bears interest and is only released with the consent of both parties. If the tenancy is terminated, the security deposit must be repaid, including interest. However, landlords retain the right, in some cases, to retain all or part of the deposit. This can be used to repair any damage or settle any outstanding payments.

As a landlord, you should also always keep an eye on the utility bill. For example, the topic of utility costs must be included in the rental agreement – ​​otherwise, tenants are not obligated to cover them (Article 257a, Paragraph 1 of the Code of Obligations). According to Article 4 of the Act on the Collective Maintenance of Tenants (VMWG), the landlord must also submit a statement of the utility costs at least once a year, depending on how they collect the utility costs. If the amount paid in advance exceeds the actual expenses, a refund must be made.

As a landlord, you should also not forget about tax matters. Rental income must be taxed in the normal way – regardless of whether you are a commercial or private landlord. This income is considered income and must therefore be declared as such in your tax return. Some costs (e.g., acquisition costs, utility costs, or fees for property management or brokers) can be deducted from your taxes. Your tax advisor can best assist you with this.

The rental agreement protects not only tenants but also landlords. It confirms that a tenancy exists between the two parties. Landlords can structure this relatively freely and should definitely include all the important details. Among other things, a rental agreement should contain the following details:

• What is the rental property? The main building and ancillary buildings should be listed, including things like gardens, garages, or parking spaces. The rental agreement should include the address of the property.
• What is the condition of the premises? What furniture is rented with the property?
• Tenant’s responsibilities. Landlords can require tenants to cover minor repair costs themselves – this is actually very common.
• Monthly rent and how and when it is to be paid.
• Which additional costs the tenant must bear themselves and which the landlord will cover.
• Is the rental period indefinite? If a fixed term is agreed upon, the termination terms (deadlines, form) should also be included.
• Details of the security deposit to be paid (amount, timing).

As a landlord, you might want to include some points in your rental agreement – ​​but not all of them are legally safe. Landlords cannot dictate the following to their tenants:

• Smoking is prohibited: The landlord cannot prohibit smoking in the rented apartment or house. However, the tenant is obligated to be considerate of the neighbors and to repair any damage (yellowed walls) before moving out.
• Subletting is prohibited: In principle, tenants are permitted to sublet their rented apartment or parts of it. Only in certain cases can the landlord prohibit this (see Article 262 of the Swiss Code of Obligations).

Anything that restricts tenants’ personal rights: Issues often discussed in house rules, such as a ban on showering at night or a ban on heating below a certain temperature, are generally unenforceable under the law.

It can be difficult for new landlords to calculate rent correctly. Article 269 of the Swiss Code of Obligations (OR) clearly states that abusive rents are prohibited. They may not be based on an inflated purchase price, but should be based on local prices. Landlord and tenant associations can also provide guidance on permissible rents. The permissibility of rent increases is also described in detail in the legal text.

An important point that many landlords forget is the handover of the apartment. Ensure that the apartment looks as stated in the rental agreement. It is best to inspect the apartment with the tenant during the handover and discuss any minor damages or defects. All of this should be documented in the handover protocol – ideally with photos or videos. This is so important because the tenant is liable for any defects they caused or failed to report upon moving out.

The keys should be handed over at the same time as the apartment is handed over. Be sure to write down which keys you gave to the tenant – they must all be returned at the end of the tenancy.

Buying and renting out real estate can be an attractive investment opportunity. Prospective landlords should always first calculate whether it’s worthwhile. Costs shouldn’t be neglected – most renovations and refurbishments, for example, are paid for by the owner, and expenses such as mortgages and property taxes must also be considered.

The costs for condominiums vary. If you own an apartment in an apartment building, you aren’t the only one responsible for repairs to the building. These costs are shared among the condominium owners, reducing the costs for each individual. Emotional aspects often play a role. For example, children may not want to sell their parents’ home, but they aren’t currently living there either.

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