New yield rules: How much profit will landlords be allowed to make?
Switzerland wants to clarify how much return landlords may earn from rental apartments.
Author: Nikita von Niederhäuser , UrbanHome Real Estate Expert Updated on: · Reading time: approx. 8 minutes
What is a permissible yield under 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 on a rental apartment that remains permissible in relation to capital, costs and risk.
Checking the yield is not the same as deciding whether an apartment appears expensive or inexpensive on the market.
Relevant criteria under tenancy law include net yield, gross yield, invested equity, the reference interest rate, value-enhancing investments and, where applicable, the usual rents in the locality or neighbourhood.
A high asking rent alone does not show whether an excessive return exists under tenancy law. A specific calculation is required.
What is set to change
The proposed amendment to the tenancy ordinance aims to clarify recent Federal Supreme Court practice in the ordinance itself.
The aim is greater legal certainty, so that tenants and landlords can more easily determine which yield is still permissible at a given reference interest rate.
Alongside net yield, the terms gross yield and value-enhancing investments should also be defined more clearly.
This article describes the proposed or debated clarification of the yield rules.
The actual application depends on the final wording of the ordinance, its entry into force and the individual tenancy.
For ongoing proceedings or specific rent questions, consult a specialist service, legal adviser or the competent conciliation authority.
How much profit will landlords be allowed to make?
Under the proposed system, the maximum permissible net yield depends on the mortgage reference interest rate.
The surcharge above the reference rate would gradually decrease as interest rates rise.
Up to a 2% reference rate
At a reference interest rate of up to 2 percent, a surcharge of 2 percentage points would continue to apply.
From 2.25%
If the reference rate rises above 2 percent, the permissible surcharge would decrease in stages.
From 6%
At very high reference rates, the surcharge would stabilise at 0.5 percentage points above the reference rate.
Example with a 1.25% reference rate
With a reference interest rate of 1.25 percent, the permissible net yield under this approach would generally be 3.25 percent.
Important: The 3.25 percent does not refer to the property's entire market value, but to the invested equity relevant under tenancy law. The calculation can be considerably more complex in an individual case.
Current practice versus proposed rules
| Topic | Previous practice | Proposed clarification |
|---|---|---|
| Net yield | Largely shaped by Federal Supreme Court case law. | The definition in the tenancy ordinance should become clearer. |
| Surcharge at a low reference rate | According to current practice, a surcharge of 2 percentage points applies up to a 2% reference rate. | This practice would be expressly incorporated. |
| Surcharge at a higher reference rate | The legal situation is less clear, particularly above a 2% reference rate. | The surcharge would gradually fall from a rate of 2.25%. |
| Gross yield | The concept has been shaped by case law. | The concept should be defined more precisely. |
| Value-enhancing investments | A frequent point of dispute in rent adjustments. | Interest, amortisation, useful life and maintenance should be clarified. |
steps to understand the new rules
Check the current reference interest rate and the relevant basis for the rent.
Distinguish whether the issue concerns a rent increase, a rent reduction or a yield assessment.
Consider the net rent separately from service charges and advance payments.
Check whether value-enhancing investments, maintenance or general cost increases are being claimed.
For yield calculations, determine which equity is relevant under tenancy law.
Observe the formal requirements for rent changes, especially official forms, reasons and deadlines.
If unsure, consult a tenancy-law adviser, conciliation authority or specialist.
Assess the actual tenancy and the supporting documents, not just percentage figures.
Is a rent plausible from a yield perspective?
These questions help objectively assess a rent adjustment or an argument based on yield.
Questions to check under the new yield rules 1. Which reference interest rate is the current rent based on? 2. Has the rent been adjusted since the tenancy began? 3. Does the question involve net yield, gross yield or usual local and neighbourhood rents? 4. Which invested equity is relevant to the yield calculation? 5. Are value-enhancing investments being claimed? 6. Are maintenance costs, amortisation and useful life transparent? 7. Was a rent increase communicated in the legally required form? 8. Could the proposed rent result in an excessive return?
Two typical yield questions
Net yield at a 1.25% reference rate
A landlord argues that, at a reference interest rate of 1.25 percent, the net yield may not exceed 3.25 percent.
The tenant checks whether the calculation is actually based on the correct equity, the correct costs and the net rent.
Rent adjustment after investments
After renovating the property, the landlord increases the rent and cites value-enhancing investments.
The key questions are which share genuinely adds value, over what period the investment is amortised and which ongoing maintenance costs may be included.
How to check the new yield rules
Reference interest rate checked
Rent basis documented
Net rent considered separately
Service charges separated
Type of yield identified
Net yield understood
Gross yield distinguished
Relevant equity checked
Added value checked
Maintenance considered separately
Amortisation verified
Useful life taken into account
Official form checked
Reasons checked
Deadlines checked
Options for challenging checked
Excessive return checked
Local and neighbourhood rents assessed
Documentation complete
Advice planned if uncertain
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Frequently asked questions about the new yield rules in tenancy law
The key answers, explained concisely.
The proposed rules aim to define more clearly which net yield is permissible at a given mortgage reference interest rate. This would clarify Federal Supreme Court case law in the tenancy ordinance.
Under the proposal, a surcharge of 2 percentage points would continue to apply up to a reference rate of 2 percent. At a 1.25 percent reference rate, this would generally mean a net yield of 3.25 percent on the relevant invested equity.
No. The yield assessment depends on the specific tenancy, financing, invested equity, value-enhancing investments and other factors under tenancy law.
An excessive return arises when the rent produces an unjustifiably high yield from the rental property. Such rents may be considered abusive under Swiss tenancy law.
Not automatically. The rules are primarily intended to clarify how permissible yields are calculated. Rent changes must still be formally justified and may be reviewed in individual cases.
When rent increases, tenants should particularly check the reference interest rate, reasons given, possible cost factors, usual local and neighbourhood rents and any excessive return.
Put simply, net yield measures income after certain costs relative to invested equity. Gross yield focuses more on the relationship between rent and investment costs.
The reference interest rate is a key benchmark for rent adjustments and is also intended to play an important role in determining permissible net yields.
This aims to avoid an abrupt change of system and prevent permissible yields from rising disproportionately at very high reference rates. The surcharge would therefore be reduced gradually.
Value-enhancing investments are expenses beyond ordinary maintenance that increase a property's value or usefulness. Their interest and amortisation should be regulated more precisely.
Under certain conditions, tenants can seek a review of or challenge rents and rent increases. Deadlines, formal requirements and the specific tenancy are decisive.
Landlords should carefully document the rent basis, investments, maintenance costs, equity, reference interest rate and calculation methods. This makes future checks easier and reduces disputes.
Yield calculations should become more transparent
The proposed yield rules aim to define more clearly what return landlords may earn from rental properties.
At low reference interest rates, the surcharge of 2 percentage points remains central.
At higher reference rates, the surcharge would gradually decrease.
For tenants, this would provide a clearer basis for assessing potentially abusive rents.
For landlords, clear records of equity, investments, costs and the rent basis would become even more important.
Compare current rental apartments in Switzerland
Compare rental apartments by region, budget and number of rooms. If you already rent, keep an eye on the reference interest rate and the basis of your rent.