Information on Real Estate Leasing in Switzerland

Disposal phase

In the disposal phase, the termination of the real estate leasing agreement requires agreeing to and providing for the necessary “liquidation arrangements:” 

variations and right to choose

  • purchase rights
  • purchase obligation (= no right to choose)
  • extension leasing
    • original agreement (clause)
      • option of an extension leasing
    • subsequent agreement (subsequent agreement or direct extension agreement)
      • agreement to an extension leasing
  • return
    • sale to third party
    • sale to a third party with lessee’s profit sharing right
  • (optional) negotiations for another type of real estate succession

purchase rights (legal)

  • =   branch practice and standard case
    • it is standard practice that the lessor grants the lessee purchase rights to acquire the leasing property
  • sale and lease back
    • in the case that the lessor purchases the leasing property from the lessor (sale and lease back), the acquisition option at the end of the ordinary leasing duration constitutes a “repurchase right”
    • cf. sale and lease transactions
  • purchase price
    • residual value at the end of the leasing duration
  • time of execution
    • at the end of the ordinary leasing duration

purchase obligation (requirement)

  • =  exceptional case
    • lessee’s purchase obligation
    • similar to right to compensation for non-exercising of purchase right

option for extension leasing

  • =  right to continued leasing after the end of the ordinary leasing duration
  • standard or a matter for negotiation depending on the lessor
  • exercising the option
    • expediency
      • depending on the circumstances, an extension leasing can be legally, commercially, financially or profitably beneficial
    • further leasing investment
      • total investment costs = residual book value of the leasing property plus investments necessary after the “first” leasing duration (repairs, updating to the latest use and construction standard, conversion, expansion, etc.)
    • future leasing payments and new amortisation amounts
      • adjustment of the leasing payment and the amortisation amount to the new total investment costs (residual book value + required investment) and possibly current refinancing conditions
      • depending on the situation, an increase or lowering of the leasing payment and or amortisation rates is conceivable
    • duration
      • continued validity of the leasing agreement generally for the same duration again
    • negotiation need
      • the establishing of new key leasing information often requires negotiations between the partners to the agreement
      • usually, the result of the negotiation process is a new leasing agreement, independent of the original leasing agreement and an individual contractual work
  • not exercising the option
    • not exercising the option for an extension of the leasing means the return of the leasing property and sale (sale to third party or a lessee, exercising a possible purchase right or an agreement dependent on it)

return

  • = standard case
  • lessee
    • clears out the property
    • prepares it for return inspection
  • lessor
    • property transfer subsequent to acceptance
    • lessor’s disposal liquidation risk
      • shift back to the lessee
      • correlation to disposal liquidation risk
        • profit sharing right
    • preparation for outside or other use or sale

sale

  • sale to a third party
  • settlement of the liquidation result
    • loss
      • shift of a liquidation loss to the lessee according to the prevailing contractual agreement
    • profit
      • handing over a liquidation profit or a portion of it (profit share from profit participation of the lessee = percentage of the net liquidation revenues [= difference between the residual book value according to the lessor’s books and the net purchase price], less a processing fee for the sale) according to the prevailing contractual agreement to the lessee