Claiming a builder’s lien: Rights in Switzerland

When construction companies or tradespeople perform services on a construction site, they only receive payment after the work has been completed. But what happens if the client refuses or is unable to pay for the work performed? In this case, there is a special protection mechanism regulated in Article 837, Paragraph 1, Item 3 of the Swiss Civil Code. This is a statutory mortgage. Craftspeople, contractors, and their subcontractors can thus apply for the registration of a provisional mortgage on the building they have worked on. This mortgage is intended to secure the claim with a lien.

The construction craftsman’s mortgage is an indirect mortgage. It does not take effect automatically. For it to apply, the beneficiaries must file an application with the competent court to have the mortgage registered in the land register. This mortgage exists regardless of whether the landowner is the debtor of the claim or not—even if they ultimately bear the costs of the mortgage.

The final registration of a statutory lien in the land register provides security for tradespeople or construction companies. It gives them absolute priority over holders of rights subsequently entered in the register. It also offers them priority over previously registered lienholders, according to Article 841 of the Swiss Civil Code. Finally, it enables tradespeople to be treated with the same rights as other entrepreneurs.

When materials are installed, they become part of the property of another person and become the property of the landowner. The tradesperson or contractor thus loses ownership of the material. The construction contractor’s lien is intended to prevent a building owner from having a structure constructed, only to suddenly become insolvent upon completion, leaving the tradespeople to watch as the property, including the structure, is used to cover existing or priority claims.

It is also intended to prevent tradespeople from building for a general contractor, only for the general contractor to file for bankruptcy, leaving the building contractors empty-handed and unable to reclaim their money directly from the profiting owner. The construction contractor’s lien enables contractors to secure their claim by timely registering a lien on the building site.

Article 837, Paragraph 1, Item 3 of the Swiss Civil Code regulates who can claim a construction tradesman’s lien. In principle, companies and tradesmen who have supplied materials and labor, or who have performed labor solely on a property for construction or other works, demolition work, scaffolding, excavation pit stabilization, or similar activities, can secure their claim with a construction tradesman’s lien.

Thus, all persons involved in construction or demolition work on a building, as well as related services, are entitled to a construction tradesman’s lien. This applies to all trades performed independently on the construction site. This ranges from bricklaying and tiling to kitchen construction, heating installation, and painting, as well as other craft work. Furthermore, this applies to both natural and legal persons. In addition to tradesmen and building contractors, their subcontractors can also assert this right.

In summary, this right is available to anyone who has performed work on a construction site or contributed labor and materials. These services must be subject to a work contract. Subcontractors may also assert this right, even if they have no contractual relationship with the owners. Furthermore, this right applies regardless of who is liable for the claim, be it the owner of the building, tenants, lessees, tradesmen or companies, or any other person with a right to the property.

As a rule, suppliers who have only supplied fungible goods for the construction project are not entitled to a lien. However, if the item was manufactured specifically for this construction project and is therefore not usable or difficult to use, a lien is also available.

The builder’s lien does not take effect automatically. Rather, the following requirements must be met for the statutory lien to be registered:

• Applicant: All tradesmen and contractors who have supplied materials and labor, or who have committed to providing labor alone, are entitled to registration.
• Claim: The claim for which the builder’s lien is requested must have arisen from the supply of materials and labor, or labor alone.
• Respondent: The respondent is always the landowner.
• Competent Court: The court at the location of the property has primary jurisdiction.
• Deadline: The statutory deadline for registering the builder’s lien in the land register of four months after completion of the work must be observed.

The last condition mentioned above for the entry into force of the builder’s lien concerns the deadline for its registration in the land register. The builder’s lien can be registered with the court and entered in the land register as soon as the obligation to perform work arises. According to Article 839, paragraph 2 of the Swiss Civil Code, the latest deadline for registering the lien is four months after completion of the work.

The date of completion of the work must therefore be determined to the exact day to ensure that this deadline is met. The work is considered completed when all contractually agreed services have been provided and the building is “ready for delivery.” In the event of a claim regarding the work, the date of completion is used, not the date of its completion, but the date of the last day of the work performed.

Please note that this four-month deadline cannot be extended or suspended. It is therefore important to act as quickly as possible, but no later than upon completion of the work. This gives the court sufficient time to decide on the application and order registration in the land register. If the services were performed on several properties, the builder’s lien must be applied for separately for each of these buildings – in proportion to the work performed.

To assert their claim to a statutory lien, tradespeople cannot simply submit an application to the land registry office themselves. They must contact the court and request the entry of the lien in the land register within four months of completing the work. The tradespeople must provide credible evidence of their claim. There are no special requirements for this. The lien is then provisionally registered. The provisional registration serves to meet the deadline. In subsequent legal proceedings, it is examined whether the claim actually exists, and then the entry is made and no longer merely provisional. Only then is the construction tradespeople’s lien enforceable by the tradespeople.

It is possible to submit either an application for a precautionary measure or an application for a super-provisional measure. The latter is an emergency measure that allows for an entry in the register before the deadline expires. After the application is submitted, both parties will be heard before the court, where the judge will issue a provisional decision.

After the court’s decision, the creditors must file a formal lawsuit to have the builder’s lien confirmed. To do so, they must quantify the amount of the claim and provide evidence of this, usually through cost estimates and minutes. If the mortgage is ultimately confirmed by the court, the builders can file a lawsuit for enforcement of the lien to obtain payment. This lawsuit usually results in the building being put up for sale unless the owners are able to pay the amount owed.

Renovation Fund – A Responsibility of the Condominium Association

Saving in a renovation fund is not required by law – yet many condominium associations opt for it. Whether or not such a fund is established is decided jointly by the association. The amount of the fund is also discussed and approved at the condominium association meeting – all by majority vote. If the minority of owners oppose a renovation fund, they have no choice but to pay anyway.

The money saved in a renovation fund is used for renovations and major renovations. These “major” renovations, such as roof or facade repairs, are expected every 25 years. By making an annual contribution to the renovation fund, condominium owners can protect themselves from having to pay large sums in one go. A typical rate is between 0.2 and 0.5% of the value of the building’s insurance.