Leaseholds: advantages you can count on
All landowners are deeply attached to their properties. Either they were acquired generations ago and have been managed by the family ever since, or they were bought by the owner years ago at an attractive price, or they are to remain in the ownership of, say, a community or a company. But fallow or poorly developed land is often a burden: it generates little or no income, requires attention and involves recurring costs. And if one day state intervention were to result in compulsory development of the land, your options would be severely limited. Nevertheless, during periods of zero and penalty interest rates, selling a property seems like a poor business deal, as the proceeds from the sale generate hardly any returns at all. So, what options are available for generating a profit with your property? Leaseholds are the solution. And we are experts at this.
How a leasehold works
As the landowner, you grant us or one of our project companies the right to build on (and under) your property. In return, you receive ground rent. This is known as a leasehold. Leaseholds are covered by Articles 675 and 779 of the Swiss Civil Code (ZGB) and must be entered into the local land register. A leasehold is an agreement that includes the following key elements:
- Land market value
- Ground rent
- Adjustments to the ground rent
- Duration of the leasehold
- Property reversion compensation
- Other important aspects that need to be addressed
Leaseholds are reliable
Leaseholds are reliable legal agreements for both landlords and tenants. Since tenants erect valuable buildings on land that does not belong to them, this requires clear and legally binding provisions. Only then is it possible to ensure sensible, long-term investments. Likewise, these provisions protect landlords because they create a reliable legal framework.
Leasehold advantages for landlords
- For private individuals: you remain the owner of the land and can bequeath (or sell) it
- For public authorities and other landlords: the state, municipality or institution remains the owner, which is highly appreciated for political reasons
- You retain your asset – your land – and receive immediate income from it, for example, for a period of 90 years
- You avoid property capital gains taxes (CH) and a number of land transfer taxes (DE)
- Another advantage over selling is that you avoid any possible negative interest rates, recurring bank fees as well as the costs associated with alternative investments (e.g. issue surcharges, purchasing, administrative and custody fees), which are all things worth taking into account when conducting a full cost accounting comparison
- There is no need to worry about making your own cost-intensive investments in the property
- You do not have to invest anything in developing the building site because this is done by the leaseholder
If you are more interested in acquiring the highest possible direct sales price, we suggest that you look into our sales agreement model.
Leasehold advantages for investors and developers
- No capital expenditure for the building land
- More attractive market opportunities thanks to lower selling prices for real estate
- Investment security nonetheless, thanks to property reversion compensation
- Access to building land that cannot be acquired by purchase
Want to find out more about leaseholds?
Take this opportunity to arrange an individual consulting session with us.
Our real estate, legal and tax specialists will review your property’s potential and make a recommendation that is tailored to your situation.