Law: Federal court on the contestability of the rent
A recently published ruling by the Federal Supreme Court on the amount of the initial rent has caused quite a stir. According to the ruling, it is sufficient to prove that there is a housing shortage in the local market in order to challenge the initial rent of an apartment. On the other hand, it is not necessary to prove that a personal emergency or predicament existed when the rental agreement was concluded.
The Federal Supreme Court thus overturned a ruling by the Zurich Higher Court of November 2015 and sent it back to the lower court.
In the specific case, two people had rented a 3.5-room apartment in Zurich in 2013 at a rent of CHF 3,900 plus CHF 300 for ancillary costs. The tenants went before the arbitration authority and argued that they had been virtually forced to sign the rental agreement due to the difficult situation on the Zurich housing market - from their point of view, an emergency situation existed. Such a situation existed if the vacancy rate was below 1.5 percent. In her case, it was as low as 0.11 percent.
The tenants requested that the initial rent be reduced by CHF 1,100. An out-of-court settlement failed, and the higher court also rejected the request. It was not sufficient for a tenant to prove that he was in distress or in housing need. Rather, he must prove that he was in a predicament for this reason and that no alternative was available, it was said at the time.
Imbalance between landlord and tenant
In its ruling, the Federal Supreme Court states that the law contains three alternative grounds for challenging an initial rent, namely a significant increase in rent compared to the previous tenant, personal hardship and precarious conditions on the local housing market. The last two reasons do not have to be fulfilled cumulatively, as the Zurich High Court had required, the Federal Supreme Court ruled. A housing shortage could not only be proven with current statistics. A tenant could also prove a housing shortage by proving an intensive but unsuccessful search (judgment of 18.5.2016, 4 A_691/2015).
The Federal Supreme Court expressed the view that a housing shortage entitles a tenant to challenge an initial rent in order to counter possible abuse in the event of a market imbalance. It is a "truism that consumers in general and tenants in particular do not occupy a position comparable to that of suppliers, which could enable them to negotiate a balanced contract," the top court said. The principle that contracts must be honored applies without restriction. But only if equal and comparably strong counterparties conclude a contract, the Lausanne judges wrote in their decision.
The Zurich Tenants' Association welcomes the ruling, but the Swiss Homeowners' Association is outraged. If every tenant can contest the rent after signing the contract, the principle of good faith is undermined.
