The property market can be confusing thanks to all its terms and provisions. One such term that often comes up in connection with selling property is the right of pre-emption. In the following blog post, we explain exactly what this is all about.
The right of pre-emption is actually quite straightforward – it is a legal provision that gives a certain person the exclusive right to purchase a property that’s up for sale before it is publicly put on the market. In Swiss property law, a distinction is made between two different rights of pre-emption: the statutory right of pre-emption and the contractual right of pre-emption.
The statutory right of pre-emption can be claimed by eligible buyers without the need for a special contract; they are entitled to the right of pre-emption by law. These eligible buyers are, for example, co-owners of the property or people with land rights to agricultural sites. The statutory right of pre-emption is valid for an unlimited period of time and exists without a contract being concluded. Nevertheless, it cannot be inherited – it serves to preserve the justified interest of certain people with a special connection to the property. But please note: even long-term tenants do not have a statutory right of pre-emption to the property they live in.
In contrast, the contractual right of pre-emption arises through, as the name suggests, a right of pre-emption contract. In this, the owner undertakes to give a selected eligible buyer, for example a family member or a long-term tenant, priority over third parties when the property is up for sale. A contractual right of pre-emption can be established for a maximum period of 25 years. Swiss law divides the right of pre-emption into two further categories:
1. Limited right of pre-emption:
Under a limited right of pre-emption, both the purchase price and any additional conditions are already defined in the contract. These conditions apply for the pre-emptor, regardless of the conditions or the purchase price at which the seller would have sold the property to a third party. If the price is determined in advance, the contract must be certified by a notary.
2. Unlimited right of pre-emption:
The unlimited right of pre-emption, on the other hand, only allows the eligible buyer to purchase the property under the conditions at which it would have been sold to a third party. In this case, the selling price of the property is not set, either.
In practice, the right of pre-emption means that the seller is obliged to consider the offer of the person with the right of pre-emption over other offers. This is usually done after the potential buyer has received prior notification. If the eligible buyer exercises their right of pre-emption, the sale proceeds with them as the buyer, provided the conditions are met.
As a seller, you need to plan the sale of your property according to standard procedure, including drawing up a sale contract. However, you must inform the pre-emptor in writing about the planned sale, who then has three months from the point at which they receive your notification to enter into the sale contract. If you do not notify the pre-emptor in writing, they have the right to claim the property retrospectively for up to three months after it has been sold to a third party.
As a buyer, it is important to find out from the land registry office about any rights of pre-emption that may exist for your desired property. This is the only way to prevent a third party from snatching your dream home from under your nose at the last minute, or even after the contract has been concluded.
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