1. Offer, down payment and preliminary contract
The days when real estate purchases were sealed with a handshake are long gone. Nowadays, authentication by a notary is a legal requirement. For their mutual protection, both contractual parties often agree on a reservation contract in advance (also called a “purchase commitment”). This can be kept very concise. It specifies the designation of the property, the agreed purchase price, the division of Land Registry costs, the date of transfer and the amount of any down payment – including a provision in case the buyer or seller withdraws from the contract.
2. Notary and purchase contract
Notary’s offices are organized differently depending on the canton. In some cantons, notaries are freelancers, in others they are employed by the state. Both alternatives have their advantages: in the first case, buyers and sellers can choose who they want to entrust the transaction to. In the second case, the functions of the notary’s office and the Land Registry are combined, which simplifies the whole process – for example when issuing mortgage notes and transferring ownership.
The notary usually draws up the draft purchase contract. Of course, both the buyer and the seller have the right to study the documents thoroughly, ask questions or request changes. The notary is available to both parties to the contract in an advisory capacity.
Depending on the transaction, the individual contractual provisions vary. They usually include:
- Name of the buyer and seller
- Detailed description of the land or property
- Purchase price repayment (agreed purchase price and planned payment procedure)
- Date of transfer of ownership
- Liability for defects
- Allocation of real estate transfer and notary’s fees
It is important to avoid drawing up and signing the contract under time pressure. And remember: the content of the contract is always authoritative. Any prospectuses, sales documents or oral discussions are irrelevant from a legal perspective. Even in this phase, it is a major advantage to be able to count on the support of the financing bank. Your client advisor has in-depth know-how and extensive experience in real estate transactions and will be happy to provide you with advice and assistance.
The fees for the notary’s office and the Land Registry differ greatly from canton to canton and are based on the tariff in force in the relevant canton. Often the buyer and seller share the costs, in some cantons they are borne by the buyer alone.
3. Authentication by notary
The authentication also takes place at the notary’s office. This is a very formal act. Depending on the canton and notary, the wording of the contract is read out and discussed again, one point at a time. You will be given another opportunity to ask technical questions. However, the formalities must have already been clarified by this point:
- As a buyer, you should, for example, have thoroughly checked whether certain details concerning the property in question, so-called easements and encumbrances (rights of way in favor of neighbors), have been entered in the Land Register. This information can be essential for the future use and development of the plot of land.
- You must have submitted binding proof that the purchase price can actually be financed. The corresponding document is subject to different requirements from canton to canton and is also called the “irrevocable promise of payment” or “confirmation of financing by the bank”. In some cases, a binding verification of a financing application from the bank is also sufficient.
If all the documents are complete, the purchase contract is signed by both parties and by the notary.
4. Transfer of ownership
Transfer of ownership is when the property passes from the hands of the seller into those of the buyer. At this point, the mortgage notes required to secure financing must have been issued and be available.
Legally speaking, the transfer of ownership and the authentication of the purchase contract are two different processes. Depending on the procedures in force in the notary’s offices and Land Registries in the particular canton, the property may change hands immediately after authentication by the notary. However, there may also be a considerable delay between the authentication of the purchase contract and the actual transfer of ownership.
5. Payment of the mortgage
For the bank to pay out the mortgage, several conditions must be met:
- The client must have chosen a suitable mortgage and signed the mortgage contract with the bank.
- The client must have paid in the equity capital (their share of the purchase price, usually 20 percent of the total amount).
- All the collateral required for the loan must have been provided: mortgage notes, any additional collateral, pledges, etc.
- The purchase contract must have been authenticated by notary.
6. Report and handover of the property
In principle, the following rule applies: the buyer takes over the property in exactly the same condition as they found it during the viewing. It has long been customary in the real estate sector to exclude any liability for defects in purchase contracts for real estate properties – especially older buildings. This means that the seller cannot be called to account if, a few weeks after the handover, the heating is found to be defective or a leak is discovered in the roof. The omissions not permitted by law are “fraudulently concealed defects” (article 199 of the Swiss Code of Obligations). This would be the case, for example, if the seller knew that the heating was broken.
To be on the safe side, you should therefore have the property checked thoroughly before you buy, for example by consulting an architect or building expert. As a buyer, you naturally also have the possibility to have specific characteristics or a certain condition of the property guaranteed in the contract. In any case, a detailed report should always be drawn up when the property is transferred. With a new building you are in a stronger position than with an older property: you can invoke the usual guarantees for construction work and hold the workmen responsible for carrying out immaculate work, for example.
7. Settlement of incidental expenses
It is the responsibility of the seller – or, in the case of condominium ownership, of the management – to settle the accounts for any payments already made on the date of transfer. These include:
- the cost of supplies remaining in an oil tank
- premiums paid in advance for building insurance (fire and natural hazards) or building water insurance
- garbage charges or other public fees
Unless the day of handover falls at the end of the year, these costs will be invoiced pro rata temporis.
Finally, any plans, guarantee certificates, operating instructions etc. should be handed over when the property changes hands – and the house should be clean. Again, the rule is that it is best for the buyer and seller to agree in advance on the formalities of the transfer.