Many (but not all) Swiss rental contracts allow for modification to rental prices based on current interest rates. As interest rates in Switzerland are currently at a long-term low, many tenants are eligible for a rent reduction. It is normally left to the tenant to realise this and take action.
Since 2010, the interest rate that is used as a reference for this modification of rental prices on many (but not all) lease contracts has decreased from 3% to 1.5%. The impact of this change could significantly help your monthly budget – a welcome thought in a country with high costs of living.
How does rent reduction work?
According to Swiss law, rent modifications (both increases and decreases) can be applied during tenancies, meaning while the current lease is valid. However, these modifications are subject to very specific conditions and in most cases are tied to the national reference rate, which at the time of writing (June 2017) has been revised downwards to 1.5% as per 2 June 2017. As a range of factors must be taken into account, the calculation of a possible rent decrease is quite complex. For example, if you have been in the same apartment or house for the last 3 years and have never received a rent reduction during your tenancy to date, you might be eligible for a rental decrease of 5.66%. In an apartment costing CHF 2'500 per month this is equivalent to a monthly saving of over CHF 150.
Reductions are not always directly in line with the change of interest rate. While landlords must reduce the rent based on calculations linked to the interest rate, they are also allowed to add costs to take into account inflation and other general cost increases. This is not necessarily a risk - at the time of writing many of these other factors will only have a minor impact or may even lead to an overall reduction.
The Comparis calculator is an easy way to estimate the reduction that you might be eligible to receive. Of course, this calculator cannot take into account any possible increased charges mentioned in the previous paragraph.
Rent reductions are not guaranteed
When the rate or reference increases, the landlords may apply a rent increase. However, they are not obliged to do so. When the rate decreases, the tenants must formally request a rent reduction - landlords will not systematically apply rent decreases. It is the responsibility of tenants to request rent reductions in writing.
This mechanism applies to lease contracts for which the minimum duration is less than 5 years. Therefore, if your lease contract stipulates an end date which is more than 5 years after the start date, rent modifications may not apply during the first 5 years of your tenancy agreement (see the explanation of this the exception below).
How to know whether it is worth requesting a rent reduction
If the following statements are true, then you are potentially eligible for a rent reduction.
- I have been renting this property for 1.5 years or more.
- I have never received any rent reductions since signing the lease contract.
- My landlord has neither invested in the property since my arrival, nor made any improvements to my apartment.
Even if you are unsure, the effort of asking for a reduction is minimal and worth doing.
Note: there are other factors that may invalidate your request. Your landlord may turn down your request with a justification.
How to estimate your potential rent reduction?
On your lease contract you will find the reference interest rate applicable on the date that you signed the lease contract. Use the calculator listed above comparing your contractual rate with the current market one.
When do I send the request and when will the reduction apply?
The request should be received by the agency/landlord prior to the beginning of your notice period for the next lease term (the timing is the same as for lease termination). For example, if your next lease term is 31 March and your notice is 3 months, the request should be received by your landlord before 31 December. In this case the reduction, if applicable, would begin at the next term (i.e. 31 March). The request should be sent by registered post to ensure there is proof of timely submission.
How to request a rent reduction in Switzerland
Download the letter in your local language:
Complete the form and send it by registered mail to your real estate agent or landlord (if your building is not managed by an agent). You should receive a reply within 30 days, either with a reduction proposal, a partial reduction proposal, or an explanation as to why the reduction does not apply to your specific situation.
If the landlord declines your request, you can officially contest the decision by requesting a mediation session, which is a kind of preliminary step before legal proceedings. The request to the mediation authorities must be made within 30 days of receiving the rejection by the landlord or agency.
If your minimum lease duration is five years the above might only apply after you have rented your property for five years. Before that time, your rent fluctuations will mirror the Swiss Cost of Living Index. If your landlord/agent wishes to apply a rent increase or decrease during the first five years, they are only allowed to do so once per year.