There are various rules in Switzerland’s tenancy laws about when a tenant could be asked to pay a higher rent than the amount originally set in the contract.

One such grey area concerned renovations — but it no longer does.

In this specific case taken up by the Federal Court, a 5-room apartment in Geneva was renovated in 2015 and 2016.

Subsequently, the landlord increased the rent from 905 francs to 1,420 francs. At the time, the district court concluded that an increase to 1,117 francs would be justified. The cantonal court, however, set the permissible rent at 985 francs per month — only 80 francs more than the pre-renovation rent.

The landlord eventually brought the case before Switzerland’s highest judicial authority — the Federal Court.

In its ruling handed down on September 10th, the court decided the post-renovation rent of the Geneva apartment can be increased more than the cantonal court allowed for. 

What is the exact amount?

With this verdict, which sets the rules for determining the permissible rent increase after renovation, the Federal Court said that investments resulting in an increased value can be remunerated at the same rate as the one defined for calculating the permissible net return.

While this concept may be complex to understand for an average tenant, this would be a return that exceeds the reference interest rate by 2 percent — as long as the reference interest rate is below 2 percent.

So if we take the current rate of 1.75 percent, the post-renovation rent could go up by 3.75 percent.

As a result of this ruling, the Federal Court has allowed the landlord to set the rent at 1,117, as the district court originally decided — which is certainly not an exorbitant price for a 5-room apartment in Geneva, where an average flat of this size would cost well over 2,000 francs.

Tenants’ association is not happy with the ruling

Predictably, the Swiss Homeowners’ Association welcomed the Federal Court’s decision, praising this move to “support investments in value-enhancing measures and energy improvements.”

The Swiss Tenants’ Association, on the other hand, criticised the verdict, pointing out that “the Federal Court is favouring the landlords and their property returns instead of the purchasing power of the tenants.”