Challenging your rent: “What are my rights?”
Rents are high, especially in cities. After one tenant moves out and the new one moves in, new tenants are often charged hefty surcharges. Tenants, however, are not completely helpless victims in this price spiral.
Has it ever occurred to you to fight your rent? The topic often comes up for discussion nowadays in view of the housing shortage and high rents in cities. A tenant in the city of Bern describes his experiences: “The landlord is renting my former apartment for 24% more than what I paid. The only improvement was that he replaced the old fitted carpet with a laminate floor!” Or take a tenant in Zurich as an example: She was offered an attractive internship in Zurich-Nord at short notice. Because she could not afford to search very long, she checked out a small 2.5-room apartment in her neighborhood. "1800 francs for an old building with a view of a sheet metal avalanche in front of the house is a bit much," she muses. She finds the price rather inflated, and has to find a solution soon.
Do high rents and rent surcharges cause apartment and condo managers and landlords to make unjustified profits? This is a hot-button topic that is currently being hotly debated. Fabian Gloor, a lawyer with the tenants' association, says, “The question of abusive rents is extremely complex.” Numbers alone do not reveal anything about whether the landlord is possibly profiting from inflated, legally prohibited income.
Set the Rent—But How?
Put simply, the tenancy law provides for three options when setting apartment rent:
- The net yield from the property may not exceed 0.5 percent above the current reference mortgage rate (1.5 percent, 2019). Two percent net yield is currently permitted. This is the common method. Deriving the correct amount to charge for rent, however, can still be a challenging task.
- For new buildings less than 10 years old, the gross return counts. Gross yield is currently allowed at a maximum of 3.5 percent (summer 2019). Another key factor is the reference interest rate, plus a 1.5 - 2 percent surcharge.
- In older houses, the locality and accommodation are an important criterion. Are there at least five comparable apartments (size, age, standard), but which are not allowed to be owned by the same landlord?
So far so good. But most laymen are overwhelmed with these net and gross numbers. What you can do in cases of doubt, however, is to contest the initial rent.
Contesting Your Rent: Points to Remember
We will show you step by step what the essential requirements are if you challenge your rent. Here are the most important tips and their risks:
- Legitimacy: You are only entitled to assert a claim if you have actually signed a lease. You have 30 days after you have taken possession of the key to challenge the initial rent. The local arbitration board is responsible for hearing your claim.
- Requirements: Most rent contracts can be challenged, but there is an important exception: the legislation governing abusive rent does not cover single-family homes and apartments with more than six living spaces that are luxuriously appointed and in perfect condition.
- Emergency: There must be at least one valid reason, of which three in particular apply: there is a housing shortage in the region; you were forced through personal plight to sign the lease, or third—no renovations have been made, for example, but the new rent is considerably higher—at least 10 percent more—than the previous tenant paid.
- When is it not possible to challenge the rent? If none of these prerequisites are fulfilled, you cannot contest your rent, for example, in regions where there are a sufficient number of apartments on the market.
- Formal procedure: The appeal must be sent by registered post to the local arbitration board. Everyone involved must sign if several persons are contractual partners (e.g. shared flat, family dwelling).
- Forms: The so-called form requirement applies (ZH, GE, ZG, BS, FR, VD) in cantons that have a housing shortage. The landlord must state on an official form how much rent the previous tenant paid. Even if the form is not filled out, the tenant has the right to ask how much the previous tenant paid. Tip: A hefty surcharge without significant renovation can but need not necessarily indicate inflated rent. Sometimes it just indicates the landlord’s right to charge what the prevailing market will bear.
- Burden of proof: The burden of proof rests with the tenant who lodges the complaint regarding the initial rent, but the landlord is obligated to provide access to essential documents, since the tenant has no insight into the property’s accounting.
- Litigation risk: Negotiating before an arbitration board is still free, but if the case goes to court, you are responsible for any advance court fees and the risks that come with instigating litigation. We recommend you absolutely seek legal advice and realistically assess your chances of success.
- If you do decide to challenge your rent, pay attention to deadlines: The 30-day period mentioned above is critical. If the contract is valid and the deadline has passed, you cannot resort to arbitration later.
Challenging Your Rent: Pros & Cons
As a tenant, if you want to challenge your rent you must see the issue in context, because the landlord is generally not going to want to listen. Why? Because you signed a contract.
You have the legal right to challenge your initial rent. While such disputes often occur in French-speaking Switzerland, especially in the Geneva area, they are more of an exception in German-speaking Switzerland. “It also depends on the circumstances,” says lawyer Fabian Gloor. When dealing with the housing management in a large anonymous apartment house, “the inhibition threshold to initiate arbitration is probably lower than in a private house,” where the landlord might also be your neighbor in that same house.
Legislation regarding rent abuse is now making headlines in the media and in politics, and representatives of the Home Owners' Association have introduced initiative to parliament, which would definitely relax the current abuse provisions.
Are You a Landlord Yourself?
An increasing number of private citizens are becoming landlords nowadays. Maybe you own a condo that you are not living in right now? Or perhaps you have moved in with your friend or partner?
Some traps lurk in the complex tenancy law, especially when the contract is drawn up and the rent is set. “I would not advise anyone to rent an apartment without having a basic knowledge of tenancy law,” recommends attorney Juris Fabian Gloor. Otherwise, as he explains, inexperienced individuals run the risk of getting into “difficult waters.”