New Yield Rules: What Will Landlords Be Allowed to Earn?
Switzerland wants to define more clearly what return landlords may earn from rental apartments.
In brief
The planned yield rules in tenancy law are intended to clarify when a rent leads to an excessive return. The key question is what net return landlords may earn on the relevant invested equity. At a low reference interest rate, a surcharge of 2 percentage points should continue to apply; at higher interest rates, the surcharge should gradually decrease.
What does permissible return mean in tenancy law?
Under Swiss tenancy law, rents are abusive if they generate an excessive return from the rental property. Put simply, the question is whether the landlord earns a return from a rental apartment that remains permissible in relation to capital, costs and risk.
The return assessment is not the same as asking whether an apartment appears expensive or cheap on the market. The decisive factors are tenancy-law criteria such as net return, gross yield, invested equity, reference interest rate, value-enhancing investments and, where applicable, local and neighbourhood comparability.
What is to be newly regulated
The planned adjustment to the tenancy law ordinance is intended to specify recent Federal Supreme Court case law in the ordinance. The goal is greater legal certainty: tenants and landlords should be able to better identify which return is still permissible at which reference interest rate.
How much will landlords be allowed to earn in future?
Up to 2% reference rate
At a reference interest rate of up to 2%, a surcharge of 2 percentage points should continue to apply.
From 2.25%
If the reference interest rate rises above 2%, the permissible surcharge should gradually decrease.
From 6%
At very high reference interest rates, the surcharge should stabilise at 0.5 percentage points above the reference rate.
At the current reference interest rate of 1.25%, this logic would generally result in a permissible net return of 3.25%. Importantly, this does not mean the return on the entire property value, but the tenancy-law-relevant return on the relevant invested equity. The calculation can be complex in individual cases.
Today and in future compared
| Topic | Current practice | Planned clarification |
|---|---|---|
| Net return | Strongly shaped by Federal Supreme Court case law | Definition in the tenancy law ordinance is to become clearer |
| Surcharge at low reference rate | At a reference rate of up to 2%, case law provides for a surcharge of 2 percentage points | This practice is to be expressly incorporated |
| Surcharge at higher reference rate | Legal situation less clear, especially above a reference rate of 2% | Surcharge should gradually decrease from 2.25% |
| Gross yield | Concept shaped by case law | Concept is to be defined more precisely |
| Value-enhancing investments | Often a point of dispute in rent adjustments | Interest, amortisation, useful life and maintenance are to be specified more clearly |
Step by step: How tenants and landlords should interpret the new rules
- Check the current reference interest rate and the relevant rent basis.
- Distinguish whether the issue is a rent increase, rent reduction or return assessment.
- Consider the net rent separately from ancillary costs and advance payments.
- Check whether value-enhancing investments, maintenance or general cost increases are being claimed.
- For return questions, clarify which equity is relevant under tenancy law.
- Observe formal requirements for rent changes, especially official forms, justification and deadlines.
- If uncertain, consult tenancy-law advice, the conciliation authority or a specialist.
- Assess not only percentages, but the specific tenancy and documentation.
Assessment questions: Is a rent plausible from a yield-law perspective?
The following questions help assess a rent adjustment or return argument factually.
Assessment questions on yield rules in tenancy law
1. Which reference interest rate is the current rent based on?
2. Has the rent been adjusted since the tenancy agreement was signed?
3. Is the issue net return, gross yield or local and neighbourhood comparability?
4. Which equity is relevant for calculating the return?
5. Are value-enhancing investments being claimed?
6. Are maintenance costs, amortisation and useful life understandable?
7. Was a rent increase notified correctly in formal terms?
8. Could the requested rent possibly lead to an excessive return?Practical examples
Example 1: Low-interest environment
A landlord argues that, at a reference interest rate of 1.25%, his net return may not exceed 3.25%. The tenant checks whether the calculation is actually based on the correct equity, the correct costs and the net rent.
Example 2: Renovation with rent adjustment
After a renovation, the landlord increases the rent and refers to value-enhancing investments. The decisive questions are which share is genuinely value-enhancing, over what period the investment is amortised and which ongoing maintenance costs may be taken into account.
Checklist: Reviewing the new yield rules correctly
Frequently asked questions about the new yield rules in tenancy law
Summary
The new yield rules are intended to define more clearly what return landlords may earn from rental properties. At a low reference interest rate, the surcharge of 2 percentage points remains central; at higher reference interest rates, the surcharge is to decrease gradually. For tenants, this means more transparency when reviewing potentially abusive rents. For landlords, clean documentation of equity, investments, costs and rent basis becomes even more important.