Legal information

FEDERAL OFFICE OF JUSTICE

Acquisition of real estate by persons abroad

________________________________________________________________________

Guidelines

Berne, June 3 2002

Contents

1 Purpose of these guidelines

2 Legal basis

3 Purpose of Swiss federal legislation and principles

4 Prerequisites for transactions subject to prior authorization

5 Persons abroad within the meaning of Swiss federal legislation

a Natural persons

b Legal entities and companies with no legal personality but able to acquire property

c Fiduciary transactions

6 Authorization requirements by type of real estate use

a Dwellings

b Main residences

c Secondary residence

d Real estate for permanent business establishment purposes

e Undeveloped land zoned for construction

7 Acquisition of real estate within the meaning of Swiss federal legislation

8 Other Exemptions from prior authorization requirements

9 Procedure for establishing need to satisfy prior authorization requirements

10 Grounds for authorization and authorization procedures

a Banks and insurance companies

b Staff pension schemes

c Charitable purposes

d Beneficiaries under wills

e Hardship cases

f Holiday homes and hotel condominium units

g Secondary residences

h Subsidized housing

11 Administrative, civil and penal consequences of violations

Appendix: Addresses and telephone numbers of cantonal authorities 13

These guidelines are also available in German, French and Italian from: Swiss Federal

Office of Justice, the Office in charge of the land Registry and of land law, Bundesrain 20, CH-3003 Berne

http://www.ofj.admin.ch, Services, Land register and acquisition of real estate.

1 Purpose of these guidelines

These guidelines provide an overview of the Federal Law and Ordinance, as well as of the complementary cantonal and communal provisions, that restrict the acquisition of real estate in Switzerland by persons abroad. The guidelines are merely for information purposes and are not legally binding.

2 Legal basis

Federal Law and Ordinance:

Federal Law of December 16 1983 on the Acquisition of Real Estate by persons abroad (FL, SR 211.412.41).Ordinance of October 1 1984 on the Acquisition of Real Estate by persons abroad (OFL, SR 211.412.411).

Cantonal provisions:

Mandatory enacting provisions concerning the cantonal authorities as well as optional legal provisions about the introduction of additional cantonal grounds for authorizing or restricting the acquisition of holiday homes and hotel condominium units (art. 3, para 2, art. 9 and art. 13, para 1, FL).

Communal provisions:

Optional legal restrictions on the acquisition of holiday homes and hotel condominium units (art. 13, para 2, FL).

3 Purpose of Swiss federal legislation and principles

The Federal Law restricts the acquisition of real estate in Switzerland by persons abroad (art. 1 FL). To acquire real estate for which prior authorization is required, permission has to be obtained from the appropriate cantonal authority (art. 2, para 1, FL). Consequently, the Canton in which the real estate is located is primarily responsible for implementation of this Law. The authority specified by the Canton (art. 15, para 1, subpara a, FL) decides on whether a transaction should be subject to authorization and whether it should be authorized. This permission may be granted solely on grounds provided for in the Law and, as appropriate, in cantonal legislation (arts. 3, 8 and 9, FL).

In terms of the authorization requirement and granting of permission, the fact that the real estate is already in foreign hands and the legal motive for acquiring it (purchase, exchange, gift, heritage, legacy, takeover of assets or a business, merger, conversion or break-up of companies) are in principle immaterial. Moreover, ownership of real estate in Switzerland in no way confers residence entitlement on the owner.

 4 Prerequisites for transactions subject to authorization

Whether or not a legal transaction is subject to authorization depends on three conditions, all of which must be met:

- The person acquiring the real estate must be a person abroad within the meaning of the FL (subjective authorization requirement, see section 5).

- The object of the transaction must be real estate for which authorization is required (objective authorization requirement depending on the purpose for which the real estate is used, see section 6).

- The entitlement obtained must be valid as the acquisition of real estate within the meaning of the FL (objective authorization requirement depending on the type of law, see section 7).

Even when these three conditions are met, there are what are termed «further exemptions» from authorization requirements (see section 8).

A transaction concerning real estate for which authorization is required where no further exemptions are involved can be entered in the Land Register only if the buyer has obtained permission. The same applies to the completion of a purchase transaction for which authorization is required but which does not involve entry in the Land Register, e.g. transfer of a real estate company shares. Under certain conditions, permission may however be given for a purchase requiring authorization (see section 10). The Law provides for authorization grounds for banks and insurance companies, for staff pension funds and charitable purposes, beneficiaries under wills as well as in «cases of hardship». Cantonal legislation may contain authorization grounds for purchasing holiday homes and hotel condominium units, secondary residences and low-rent apartments (subsidized accommodation).

5 Persons abroad within the meaning of Swiss federal legislation

a Natural persons

The following are regarded as persons abroad with the status of natural persons (art. 5, para 1, subpara a and abis FL, art. 2 OFL):

- foreigners residing abroad;

- foreigners residing in Switzerland, who are neither nationals of a European Community (EC) country nor of the European Association of Free Exchange (EAFE) and who do not hold a valid settlement permit (foreigner permit C).

Therefore, the following persons are not concerned by the FL:

• Swiss citizens, including those who have double nationality, residing in Switzerland or abroad;

• Nationals of a country which is an EC or a EAFE member who have a residence in Switzerland (in principle with a stay or a settlement EC-EAFE permit or even perhaps a short stay EC-EAFE permit; even perhaps persons working forembassies, consulates and international organization and who hold an identification card of the Federal Department of Foreign Affairs or persons with a service certificate who work for foreign railway, post and customs’ administrations based in Switzerland);

• Nationals of other countries who hold a valid settlement authorization (C permit) and are actually residing in Switzerland; persons working for embassies, consulates and international organizations or for foreign railway, post and customs administrations based in Switzerland are not considered as persons abroad if they can prove a stay in Switzerland which corresponds to the settlement entitlement qualification (5 or 10 years, depending on their nationality).

Whether or not the acquirer’s spouse has Swiss nationality is immaterial.

b Legal  entities  and companies with  no  legal  personality  but  able  to  acquire property

Companies which have their registered office abroad (even if they are Swiss-owned and are, economically speaking, Swiss companies, art. 5, para 1, subpara b, FL) are also regarded as persons abroad, as are legal entities (joint stock companies, limited partnerships with shares, limited liability companies, cooperative companies, associations, foundations) or companies able to make acquisitions but having no legal personality (general and limited partnerships) which, while they have their legal and physical registered office in Switzerland, are controlled by persons abroad (art. 5, para 1, subpara c, FL). Control by persons abroad is specifically presumed when more than one third of a company’s capital or over one third of the voting rights are in their hands or if they have lent the company substantial sums (art. 6 FL).

c Fiduciary transactions

Persons who are not, in principle, concerned by the FL are nevertheless considered as persons abroad if they acquire real estate on behalf of persons abroad (fiduciary transaction, art. 5, para 1, subpara d, FL).

6 Authorization requirements by type of real estate use

a Dwellings

The purchase by persons abroad of single-family houses or blocks of flats, apartments and building land intended for constructing such accommodation is subject in principle to FL authorization requirements. Exceptions to this are main residences (see 6b), secondary residence for EC commuters across national borders (see 6c) and dwellings that can be purchased in conjunction with permanent business real estate (see 6d).

b Main residences

Foreigner who reside in Switzerland but do not hold a settlement permit (see 7a) may purchase a dwelling (single-family house or apartment) in his place of residence (main residence, art. 2, para 2, subpara b FL, art. 5 and 18a, para 2 OFL) without having to obtain authorization. The same applies to building land provided construction work on this accommodation commences within one year. As nationals of countries who are EC and EAFE members residing in Switzerland are not considered as persons abroad (see 5a), the articles on main residence do not apply to them. They only apply to nationals of other foreign countries who reside in Switzerland (as a rule with a B permit, perhaps also persons with a Swiss Foreign Office identity card for employees of embassies, consulates or international organizations or with an official identity card establishing him as an employee of a foreign rail, postal or customs administration service based in Switzerland. The buyer must occupy the dwelling himself. He cannot rent it out even in part.

The purchase of a main residence is exempted from the authorization requirement only if bought in the buyer’s own name (art. 8 OFL). The living area may be of any size, as long as only one residential unit is concerned. There are no restrictions on the real estate surface area in itself, but it must not be large enough for the real-estate purchase or even part of it to be regarded as being purely for investment purposes. This is why the Land Register Office does not usually enter a transaction concerning an area of over 3’000 m2 in the Register immediately but refers the buyer straight to the authorization body which then has to decide whether the purchase can still be considered as exempt from authorization or whether it cannot be allowed on the grounds that it is purely for investment purposes.

If the buyer changes his place of residence, he need not sell the dwelling and can dispose of it as he sees fit. He may continue to use it as a secondary or holiday residence or rent it to third parties. He may also purchase another home in his new place of residence without having to sell the first one. However, a buyer who had no intention of living in that home for any length of time is in violation of the law, especially when he changes his place of residence for the express purpose of being able to purchase several dwellings without obtaining an authorization. In such cases, the appropriate authorities can invoke authorization requirements retroactively (art. 25, para 1bis, FL) and can order reinstatement of the original legal situation (art. 27 FL).

c Secondary residence

The national of a member state of the EC or of the EAFE who works as a commuter across borders in Switzerland (with a EC-EAFE border permit), can acquire a secondary residence in the area of his or her place of work without authorization (art. 7, para j FL, art. 18a, para 3 OFL). The buyer must occupy the residence himself, only as long as he works in the area as a commuter across borders. He cannot rent it, even in part.

 The above reasoning concerning main residences in 6b, para 2 and 3 (purchase in the buyer’s own name, living area, real estate surface area, proceedings, violation of the law), is also applicable to purchases that do not require an authorization by commuters across borders who are nationals of EC or EAFE member states. However, in this case, the Land Register Office will not, as a rule, make an entry of real estate ownership if the real estate surface area is more than 1000 square meters (article 18a, para 3, subpara c OFL), it will redirect the purchaser to the appropriate authorization body.

Purchases of secondary residences by non-across borders commuters are dealt with under 10g.

d Real estate for permanent business establishment purposes

Real estate which is used for economic purposes (so-called permanent establishments, e.g. manufacturing premises, warehouse facilities, offices, shopping centers, retail premises, hotels, restaurants, workshops, doctor’s practices) can be purchased without authorization (art. 2, para 2, subpara a, FL). In this case, it is immaterial whether the real estate is used by the buyer’s company or rented/leased by a third party in order to pursue an economic activity. Such items of real estate may also be purchased solely as an investment: besides there being no prior authorization requirement for the purchase, the buyer may also acquire other rights in the real estate such as building, purchasing, first refusal or repurchase rights, financing of the real estate purchase or purchase of a mortgage note.

The erection, rental or leasing of housing accommodation is not recognized as economic activity within the meaning of art. 2, para 2, subpara a FL, nor in trading in such accommodation (art. 3, OFL). The acquisition of real estate for such purposes requires prior authorization and is excluded because there are no grounds for granting authorization (with the exception of subsidized housing, see 10h). Living accommodation run on a hotel basis are considered as permanent business establishments and can be acquired or built without an authorization.

However, living accommodation may be acquired without prior authorization as part of a permanent business establishment when it is necessary for the business (e.g. for a caretaker or technician when permanent on-site presence is required) or when it is impossible in practical terms and unreasonable to separate this accommodation from the business site (e.g. house in the middle of a factory site or an apartment in a factory or a multi-storey commercial building, especially when the apartment can only be accessed through the commercial premises). Moreover, individual apartments may be acquired as part of the package provided they are of minor significance in terms of size and value (e.g. on the upper floor of a multi-storey commercial or office building) or if prescribed by zoning regulations (art. 2, para 3 FL). In cases of doubt, an official declaration must be obtained from the appropriate Cantonal authorization body to the effect that no prior authorization is required for purchase.

The purchase of reasonable land reserves (approximately one third, and in special cases up to half, of the total surface area) for expansion in the medium term of an existing or planned business establishment does not require prior authorization either.

This means however that about two thirds of the surface area must be already built or should be in a near future, i.e. within a one year period, and that about one third can be kept unconstructed and unused as reserve land for a possible extension in a more distant future. If the proportion of land reserves exceeds one third, an official declaration of statement must also be obtained from the appropriate cantonal authorization body.

e Undeveloped land zoned for construction

In principle, prior authorization is required for the acquisition of undeveloped land in residential, industrial or commercial zones, except when work on a building for which no such authorization is needed (main residence, secondary residence, permanent business establishment development) is begun within approximately one year, when it is used as a permanent business site in some other way (e.g. storage, parking, access) or can be regarded as permissible land reserves (see 6d). Vacant buildings which are no longer used for economic activity in the medium term should be regarded as undeveloped land. Land hoarding - even of land zoned for industrial or commercial, and not residential, use - also counts as an inadmissible investment.

7 Acquisition of real estate within the meaning of Swiss federal legislation

Not only Land Register entry of real estate ownership but any transaction that gives a nonresident actual control over real estate for which prior authorization is required (under the principle of economic considerations) comes under the FL authorization requirement. Consequently, the valid definition of the acquisition of real estate is:

- the acquisition of property (sole, collective or joint ownership incl. condominium ownership), of a leasehold, occupancy or usufruct rights on real estate (art. 4, para 1, subpara a, FL);

- participation in companies that are legal entities (joint stock companies, limited partnerships with shares, limited liability companies, cooperative companies) or in companies able to make acquisitions but having no legal personality (general and limited partnerships) the real purpose of which is the acquisition of real estate (art. 4, para 1, subparas b and e, FL; see also art. 1, para 1, subpara a, OFL; consequently, the purchase of just one share in a company involved solely or substantially in acquiring residential property or dealing therein, requires prior authorization under the FL);

- acquisition of a share in a real-estate investment fund whose shares are not traded regularly on the market (art. 4, para 1, subpara c, FL);

- justification and exercise of a right of purchase, first refusal or repurchase in respect of real estate (art. 4, para 1, subpara f, FL);

- the purchase of other rights which can put the buyer on the same footing as the owner of a property (art. 4, para 1, subpara g, FL; cf. art. 1, para 2, OFL); for instance, a long-term rental/lease contract with unusual contractual conditions such as one off-payment of rent in advance or the waiving of consent to fundamental architectural alterations, the linking of a rental contract to a loan agreement with offsetting of rent against interest on the loan, the financing of the purchase or development of the real estate in excess of the usual tolerance limit applied by Swiss banks (for housing accommodation, generally over 80% of the market value), a construction ban and similar ownership restrictions on neighboring land; in such cases, the criterion is not the subjective intention of the parties but solely the objective facts, i.e. objective judgement of the potential results obtainable with the procedure adopted by the parties);

- transfer abroad of a company’s headquarters if it retains rights in a property (even when all company shares remain solely in Swiss hands; art. 4, para 2, FL).

8 Other exemptions from prior authorization requirements

As a general rule, the following are exempted from prior authorization requirements (art. 7 FL):

- Legal heirs under Swiss law, if they acquire real estate as part of an estate (as sole owners or through division of inheritance, subpara a). «Legal heirs» covers not just those who inherit through legal succession (generally children and spouse) but also beneficiaries under wills who, as relatives of the decedent, may possibly qualify as legal heirs, i.e. should all closer relatives of the decedent predecease him, for instance a nephew.

- Relatives in line of ascent or descent of the person disposing of the property (grandparents, parents - children) and his spouse (subpara b). Transfer to collateral relatives, e.g. brothers/sisters, is not exempt from prior authorization requirements. Consequently, the sale of real estate by a child to its parents is in violation of the law and requires authorization if the latter sell it to another child shortly afterwards, although the individual transactions in themselves do not require authorization. The first conveyance too might be aimed at evading the law if the child acquired the real estate shortly before selling it to his parents.

- Brothers/sisters of the person disposing of the property who are already co-owners or joint owners of the real estate (subpara c);

- Condominium owners for the exchange of their apartments in the same building or housing development (subpara d). A smaller apartment can be exchanged for a slightly larger one, against payment of the difference, provided that the authorized surface area is not exceeded (art. 10, para 2 and 5, OFL.)

- The buyer who acquires a small area to complement the real estate he already owns (subpara g). This covers the addition of parking space, an access road or a garden sitting area up to 100 m2 and the additional acquisition of residential or storage space or covered parking that increases his ownership share by less than 20%.

- Foreign countries and international organizations that acquire real estate for their representations (subpara h).

 - The EC and EAFE commuters across borders for the acquisition of a secondary residence in the area of their workplace (subpara j, see also 6c).

9 Procedure for establishing need to satisfy prior authorization requirements

If the purchaser cannot without more ado exclude the possibility of the transaction requiring prior authorization, he must apply to the appropriate authority for permission or for a declaration that no authorization is required (art. 17, para 1, FL, art. 15, para 1, OFL). In the case of a transaction requiring prior authorization, no Land Register entry and no purchase without Land Register entry (e.g. by share transfer) can take place without legal authorization.

The cantonal authority within whose jurisdiction the real estate or the portion of the real estate with the highest value is located is responsible for establishing whether or not prior authorization is necessary (art. 2, para 1 as well as art. 15, para 1, subpara a and para 2, FL; the appendix to these Guidelines contains the addresses and telephone numbers of the cantonal authorizing bodies of the first instance and, in the case of cantons with several authorizing bodies, of the cantonal supervisory body.

If the Land Register Office, the Commercial Register Office or the Auctioneers’ Office cannot automatically exclude the possibility of a transaction requiring prior authorization, they refer the buyer to the authorizing body to which he must apply for a declaration that no such authorization is required or for the granting of an authorization within 30 days and within 10 days in compulsory auction cases (arts. 18 and 19 FL, art. 15, para 3, subpara a, FL). This referral is not an order which can be challenged independently.

The authorizing body also takes a decision when so requested by a cantonal authority entitled to appeal, the Federal Office of Justice, civil judges, criminal-court judges or some other authority (art. 15, para 3, subparas b and c OFL).

Orders become absolute only when the cantonal authority entitled to appeal, the Federal Office of Justice and the commune in which the real estate is located have waived the right to appeal or if the 30-day appeal time limit has expired without being used and provided no appeal has been made from another quarter. The contractual partners (buyer and vendor) and other persons with a valid interest in the lifting or amendment of an order by the cantonal authorizing bodies of the first instance can appeal against it to the cantonal appeals body and appeal in administrative proceedings against the latter’s decision to the Swiss Federal Court. The cantonal authorizing body of the first instance, the Federal Office of Justice and the commune in which the real estate is located have the same right (arts. 20 and 21 FL).

10 Grounds for authorization and authorization procedures

The acquisition of real estate for which prior permission is required may be authorized only on grounds provided for in the FL and, as appropriate, in cantonal legislation (art. 3 FL). Grounds for authorization under Swiss federal law are listed in article 8 of the Federal Law (see a to h below). Grounds for authorization under the terms of cantonal implementation legislation, if permission is to be given on that basis, are regulated in article 9 of the Federal Law (see f to h below).

Authorization is given by the cantonal authority within whose jurisdiction the real estate is located (see section 9, para 2). The authorization is issued subject to conditions that ensure that the real estate is used for the purpose cited by the purchaser (art. 14 FL, art. 11 OFL). The preconditions mentioned at the end of section 9 for appeals against an order establishing an authorization requirement also apply to appeals against authorization orders. Authorizations lapse if the real estate is not purchased within three years. In exceptional cases and on important grounds, the authorizing body may extend this period if the purchaser applies for an extension before this time limit elapses (art. 12, paras 1 and 2, OFL).

a Banks and insurance companies

A bank or insurance company with a permit to operate in Switzerland may be granted authorization if the real estate is encumbered in its favor with a real-estate mortgage and if the purchase is part of a foreclosure or a liquidation settlement (art. 8, para 1, subpara d FL). Furthermore, an insurance company may be authorized to make the acquisition on the grounds of technical reserves for domestic business (art. 8, para 1, subpara b FL).

b Staff pension schemes

An authorization may be issued if acquisition of the real estate is used to secure staff pension schemes in Swiss operations for personnel employed in Switzerland (art. 8, para 1, subpara c FL). It should be pointed out in this connection that foundations subject to provident scheme legislation (BVG) are not in practice considered to be foreign-controlled companies, even if the company setting up the foundation is foreigncontrolled.

c Charitable purposes

A purchase is authorized if the real estate is intended for charitable purposes (art. 8, para 1, subpara c, FL). The real estate must be used directly for this purpose. It is not enough for revenue from renting or leasing it to be used for charitable purposes.

d Beneficiaries under wills

Beneficiaries under wills who do not come under legal heirs exempt from prior authorization (see beginning of section 8) and cannot claim any other grounds for authorization are granted acquisition permission provided that they sell the real estate within two years (art. 8, para 2, FL).

e Hardship cases

A person abroad who needs an authorization, can acquire a holiday apartment or hotel condominium unit (see 10f) in a present or former holiday resort when, on the basis of a cantonal or communal authorization freeze or the removal of the location from the cantonal list of holiday resorts, no authorization could be granted, but this involves hardship for the vendor and provided the following conditions are met (art. 8, para 3 FL, art. 4 OFL). The vendor (Swiss or foreigner) must be in financial straits and the dwelling must have been offered for sale unsuccessfully at cost plus appropriate interest to persons who do not require authorization. The vendor himself must also have used the dwelling as his main, secondary or holiday residence or hotel condominium unit.

f Holiday homes and hotel condominium units

A person abroad who needs an authorization, may acquire a holiday dwelling or hotel condominium unit (art. 9, paras 2 and 3 and art. 10 FL). The dwelling must be in a place designated by the cantonal authorities as a holiday resort. Moreover, every authorization must be deducted from the annual quota assigned to the cantons by the Confederation for holiday apartments and hotel condominium units (art. 11 FL, art. 9 OFL and Appendix 1 OFL) except when the vendor has already received an authorization in the past for the acquisition of this dwelling or apartment. Quota units may also be assigned to persons not requiring authorization for the sale of such apartments to persons abroad (so-called authorization of principle) whereby the individual purchases by foreigners still require authorization but are no longer counted as part of the quota. The cantons and tourism-oriented communes may make their own restrictions. For instance, they may decide on a total ban on authorizations for a specific location, acquisitions of condominiums only and only up to a certain quota. Alternatively, they may limit the annual number of authorizations or only permit the purchase of residences that are already foreign-owned (art. 13 FL).

Grounds for authorization for the acquisition of holiday apartments or hotel condominium units are required in the following cantons: Berne, Fribourg, Glarus, Grisons, Jura, Lucerne, Neuchâtel, Nidwalden, Obwalden, St Gall, Schaffhausen (for hotel condominium units only), Schwyz, Ticino, Uri, Vaud and Valais.

Holiday homes may not be let on an annual basis but at most only periodically. The purchaser must be able to use them at any time for their alleged purpose. Hotelcondominium units must be made available to the hotel owner for hotel operations especially during the high season (art. 10, para 2 and 3 OFL); this also applies to a person not requiring authorization who purchases a hotel condominium unit from a person abroad; the operational condition is tied to the object, art. 7, subpara 2, OFL). Holiday homes and hotel condominium units may only be acquired by natural persons under their own name, and under no circumstances through a company (art. 8 OFL).

The surface area of the real estate and net floor space in holiday homes and hotel condominium units is determined by the needs of the buyer and his immediate family. As a general rule, the net floor space and the surface area of the real estate must not exceed 200 m2 and 1000 m2 respectively (art. 10, paras 2 and 3, OFL). In accordance with consistent practice, larger areas are authorized without further ado on proof of additional need. In practice, authorizations for extra space will only be given in exceptional cases regarding areas in excess of 250 m2 (net floor space) and 2’000 m2 (real estate as a whole).

If the person acquiring a holiday dwelling or hotel condominium unit, his spouse or children under 18already own such a dwelling or secondary dwelling in Switzerland, authorization may only be granted provided that the latter dwelling is sold before the new purchase transaction is entered in the Land Register (art. 11, para 1 OFL).

g Secondary residences

A foreigner who does not reside in Switzerland may be authorized to acquire a secondary residence in a place with which he has exceptionally close ties worthy of protection (art. 9, para 1, subpara c, FL). Regular ties which the purchaser must maintain to safeguard mainly economic, scientific or cultural interests are regarded as such. Relationshi by blood or marriage with persons in Switzerland and holiday, cure, study or other temporary stays do not constitute close ties worthy of protection (art. 6 OFL).

The following cantons have introduced this justification for authorization: Appenzell AR, Basel-City, Fribourg, Grisons, Jura, Lucerne, Neuchâtel, St Gall, Solothurn, Ticino, Uri, Vaud, Valais and Zurich.

A secondary residence may not be rented to third parties and must be sold within two years if the purchaser no longer uses it as such. Secondary residences may only be acquired by natural persons under their own name, and not through a company (art. 8 OFL).

The same restrictions on the real-estate surface area and net floor area as for holiday homes apply to secondary residences (see 10f). If the purchaser, his spouse or children under 18 already own a secondary residence, holiday dwelling or hotel condominium unit in Switzerland, authorization may be granted only if the latter dwelling is sold before the new purchase transaction is entered in the Land Register (art. 11, para 1 OFL).

EC or EAFE commuters across borders do not need an authorization to acquire a secondary residence in the area of their workplace (see 6c).

h Subsidized housing

A person abroad may be authorized to acquire real estate for the construction of subsidized housing, i.e. for the building of accommodation with a rent which is low and reasonable compared with similar premises in the same locality, or newly built housing accommodation of the same type when there is a local housing shortage (art. 9, para 1, subpara a FL). This justification applies only in cantons Fribourg, Geneva, Grisons, Jura, Neuchâtel, Ticino, Vaud and Valais.

11 Administrative, civil and penal consequences of violations

A transaction requiring authorization is invalid until legal authorization has been obtained (art. 26, para 1 FL), though the contractual partners are still bound by the undertaking. The transaction becomes null and void with the refusal or revocation of an authorization or rejection of the Land Register entry. Moreover, it is also null and void if the purchaser transacts the deal (e.g. by transferring the shares of a real estate company) without applying for authorization or before the authorization comes into force (art. 26, para 2, FL). Authorization may be revoked if conditions are not complied with, despite a reminder, or if it has been obtained under false pretences with incorrect information. The authorization requirement may also be determined after the event, if the purchaser provided incorrect or incomplete information about facts of significance for authorization requirements (art. 25 FL).

In the event of nullity, promised services cannot be claimed but services received can be reclaimed within one year (art. 26, para 4 FL). If the parties do not act of their own accord, the cantonal authority which is entitled to appeal or the Federal Office of Justice can initiate proceedings to restore the original situation or to have the real estate compulsorily disposed of (art. 27 FL).

Evasion of authorization requirements and incorrect or incomplete information when it comes to establishing the need for authorization or the granting of authorization in respect of the appropriate authority, Land or Commercial Register Office, as well as failure to comply with conditions and refusal to provide information or proof are punishable with a prison sentence or fine (arts. 28.31 FL).

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