REFORM OF TENANCY LAW – A “SLIGHT” TIGHTENING ADOPTED BY THE GENERAL MEETING

In a previous article of March this year, the undersigned explained the two motions that were proposed to “toughen up tenancy law”. These two proposals still had to be approved by the National Council. This has now been done and, on 29 September 2023, the Federal Assembly adopted an amendment to Article 262 of the Swiss Code of Obligations (CO) concerning subletting and an amendment to Article 261 of the CO concerning termination by the lessor for his own needs.

These two amendments are still subject to referendum, and the referendum deadline is 18 January 2024. Asloca has already announced that it intends to submit a double referendum. It is therefore not yet certain whether these two amendments will come into force.

But what do they concern?

First amendment

The first amendment relates to subletting. Its aim is to prevent abusive subletting. The draft stipulates that the lessor’s consent must now be given in writing. It also provides that the lessor may refuse a sublet if it lasts for more than two years.

The new text of article 262 CO is as follows (changes from the original text are in italics):

“The tenant may sublet all or part of the property with the written consent of the lessor.

Unless the parties have agreed otherwise in writing, the lessee shall submit to the lessor a written request for subletting that contains :

a. the name of the sublessee;

b. the terms and conditions of the agreement, including the description of the property to be sublet, its use, the rent and the duration of the sublease.

During the term of the sublease, he must inform the lessor of any changes to the information required under para. 2.

In particular, the lessor may withhold his consent in the following cases :

a. if the tenant refuses to provide the information required under paragraphs 2 and 3 ;

b. if the conditions of the sublease, compared with those of the main lease, are unfair;

c. if the sublease presents major disadvantages for the lessor;

d. if the planned duration of the sublease exceeds two years.

The tenant guarantees to the lessor that the sublessee will only use the property for the purpose authorised by the head lease. The lessor may apply directly to the sublessee to oblige him to do so.

If the lessee sublets the property without the written consent of the lessor, gives false information or fails to inform the lessor of any changes in accordance with para. 3, the lessor may terminate the lease with a minimum notice period of 30 days, after a written protest has been lodged but has no effect”.

As already explained in the undersigned’s article of March 2023, the lessor’s consent to subletting is already required under the old text of article 262 CO and, in practice, consent is usually already given in writing. Moreover, a prudent tenant is advised to request consent in writing.

The amendment therefore changes little on this point and appears to formalise current practice.

With regard to the duration of the sublease, it is already accepted that the sublease must remain temporary. In other words, it must be limited in time.

At present, under the old text, subletting is permitted if the main tenant leaves the property for a few months (e.g. to travel abroad) and wishes to sublet the property during this period. The main tenant therefore intends to reclaim the property on his return, and the subletting does not have to be permanent.

In practice, it is not uncommon for landlords or management companies to agree to sublets of up to six months. Beyond this period (which is debatable), but especially beyond a period of two years, the sublease is no longer temporary and the tenant’s desire to reclaim the property is doubtful (except in special cases, of course).

The amendment therefore does not change much on this point either, and puts into practice what is already being done in practice.

Second amendment

The second amendment relates to the termination of the lease by the landlord for his own needs.

At present, the lessor’s urgent need is mentioned in several articles, namely articles 261, 271a and 272 of the Swiss Code of Obligations.

Article 261 of the Swiss Code of Obligations deals with the disposal of the leased property and provides that the new owner may, in particular, “in the case of residential or commercial premises, terminate the lease by observing the statutory notice period for the next legal term if he claims an urgent need for himself or his close relatives or relations”.

In the new wording of Article 261(2)(a) of the Swiss Code of Obligations, the term “urgent need” is replaced by “on the basis of an objective assessment, an important and current need for himself, his close relatives or his close relatives”.

Article 271a of the Swiss Code of Obligations deals with the voidability of notice given by the landlord and provides that notice is voidable if it is given by the landlord, in particular, during conciliation proceedings or legal proceedings relating to the lease, unless the tenant is acting in breach of the rules of good faith. It is also voidable if it is given within three years of the end of conciliation proceedings or legal proceedings relating to the lease.

The notice is not void, however, if the notice is given by the lessor because of the urgent need that he or his close relatives or allies may have to use the premises themselves.

In the new wording of Article 271a of the Swiss Code of Obligations, “urgent need” is replaced by “by reason of the significant and present need, established on the basis of an objective assessment, that the lessor or his close relatives or business associates may have to use the premises themselves”.

Article 272 of the Swiss Code of Obligations (CO), which deals with lease extensions, provides that the tenant may request an extension of a fixed-term or indefinite-term lease if the end of the contract would have painful consequences for him or his family without the interests of the landlord justifying it.

In weighing up the interests, the competent authority will in particular take into account the need that the lessor or his close relatives or allies may have to use the premises themselves, as well as the urgency of this need.

In the new text of Article 272 of the Swiss Code of Obligations, the urgent need is replaced by “the need that the lessor or the lessor’s close relatives or relations may have to use the premises themselves, as well as the importance and topicality of this need, to be assessed objectively”.

The changes therefore relate solely to the following: the notion of “urgent need on the part of the lessor” has been replaced by the notion of “significant and current need, established on the basis of an objective assessment”.

According to the current case law of the Federal Court, the lessor’s need must be serious, concrete and hypothetical, and the lessor need not be in a situation of constraint or necessity.

So, as with the question of subletting, the proposed amendments seem in the end only to give concrete form to what is already being done in practice and what is already accepted by the courts.

Contrary to the wishes of some landlords, the amendments adopted do not affect the procedure for contesting and requesting an extension in the event of termination of the lease by the landlord, and therefore do not change the duration of such procedure.

As Guillaume Barazzone rightly pointed out in the Journal de l’Immobilier of 4 October 2023 (https://jim.media/articles-jim/articles-de-une/ce-qui-pourrait-changer), “Asloca representatives are wrong to cry wolf. Landlords, for their part, are wrong to rejoice (too much)”.