Rent increases and the reference interest rate
In Switzerland, most rents are linked to the mortgage reference interest rate, determined quarterly by the Federal Office for Housing (BWO/OFL). This rate reflects the average mortgage interest rate in Switzerland, rounded to the nearest quarter percent. The reference interest rate is published at the beginning of March, June, September, and December, taking effect one day after publication.
The mortgage reference rate, introduced on January 1, 2008, replaced the previously used cantonal bank reference rates, making rental prices more transparent across Switzerland.
However, certain rental agreements, such as cooperative apartments and subsidized housing, are subject to government control and are thus not tied to the reference rate. So-called indexed rental contracts are also independent of the reference rate; indexed rents instead track the Swiss consumer price index, i.e. inflation.
When can a landlord increase rent in Switzerland?
Rent increases can only take effect by the next termination date. Like any change to the rental agreement, a rent increase must respect the legal notice period of 3 months plus an additional 10 days. For example, if a rent increase is to take effect on October 1, 2024, the tenant must have received the notification by June 21, 2024.
Termination dates vary depending on the location and the terms of the contract. In most parts of Switzerland, the default termination dates are March 30 and September 30, plus additional dates depending on the municipality and canton. In some cantons, rental agreements can be terminated at the end of every month. However, any contractual terms take precedence over these default dates.
How much can a landlord increase rent every year?
According to Swiss law, an increase in the mortgage reference interest rate by a quarter percent allows a landlord to increase rent by the following amounts:
- 3% if the reference rate is below 5%
- 2.5% if the reference rate is between 5% and 6%
- 2% if the reference rate is above 6%
Since the current reference rate is below 5%, rents can be increased by 3% if the reference rate rises by 0.25%.
When can a landlord increase the rent?
A landlord can increase the rent if the reference rate has risen by at least 0.25 percent since the rental contract was signed or the last rent adjustment.
The key factor is the reference rate stated in the rental agreement, or rather, the difference between the new and old reference rates. If the current reference rate is higher than the rate used in the rental agreement, the landlord may increase the rent by 3% for every 0.25% rise in the reference interest rate.
Whether a rent increase is legal thus depends on when the rental contract was signed, the reference rate at that time, and whether reductions in the reference rate have already been passed on to the tenant in recent years.
A rent increase is not allowed if the reference rate stated in the rental contract is equal to or higher than the current reference rate. However, a landlord may still increase the rent for several other reasons.
What other reasons are there for a landlord to increase the rent?
Aside from an increase in the reference rate, there are several other reasons why a landlord may increase the rent in Switzerland:
- Inflation: The landlord can pass up to 40% of the inflation rate onto the tenant, based on the Swiss consumer price index at the time the contract was signed or the last rent increase.
- General cost increases: Between 0.5% and 1% of general cost increases per year can be passed on to the tenant. This only applies to costs not covered by the rent, such as insurance premiums and property maintenance.
- Value-added investments: If the landlord has made investments that enhance the property’s value (e.g., energy rehabilitation), the landlord may proportionally increase the rent. This only applies to true value-added investments, not regular maintenance like replacing old appliances.
When can I demand a rent reduction?
Just as the above cases allow for a rent increase, the reverse allows for a rent reduction. If the mortgage reference rate has decreased since the rent was agreed upon, tenants can request a reduction in their net rent. Tenants can also claim temporary rent reductions if breakdowns affecting livability occur and fall under the landlord's responsibility to repair.
To apply for a rent reduction, tenants should submit a request to their landlord ahead of the required notice period, ideally by registered mail. If the landlord does not respond satisfactorily within 30 days, tenants can file a case with the local arbitration authority.
