Private rentals: what landlords and tenants need to know

Letting or renting an apartment privately is not only a question of trust but involves rights and obligations for both landlords and tenants. What you need to know if you let or rent an apartment privately.

What do I need to watch out for when finalizing the rental agreement?

The law does not insist on formal agreements. Thus, a tenancy can in principle also be concluded verbally. Nevertheless, a written contract is recommended. In principle, both parties are free to draw up their own contract, but it is advisable to use model contracts. This will make it easier to ensure that all the key aspects are covered in the agreement.

The other advantage of model contracts is that other important topics are listed in the associated general provisions. In some cantons, the initial rent must also be recorded on an official form.

Remember to document the condition of the apartment at the beginning of the tenancy in an inventory – otherwise a tenant can usually not be held liable for any damage during the rental period. It is customary in the rental sector today to demand a deposit of two or three months’ rent. A maximum of three months’ rent is permitted by law when renting out residential premises. The law also provides for certain notice periods – at least three months for apartments and at least six for business premises.

It is important that the two parties to the contract are listed in full in a written contract – in the case of tenants, for example, both spouses or cohabiting partners, etc. The tenants are then jointly and severally liable for their obligations, especially to pay the rent.

Ancillary costs such as heating, house maintenance, sewage, etc., may only be charged if this is contractually agreed.

And last of all: A tie-in transaction that is related to the rental of residential or commercial premises is void if the conclusion or continuation of the lease agreement is made dependent on it and the tenant thereby assumes an obligation towards the landlord or a third party that is not directly related to the use of the leased property.

What inquiries are allowed? How can I check the creditworthiness of a prospective tenant?

Lost rent and vacancies are among the greatest risks a landlord faces. The challenge is to choose a suitable tenant from among a usually larger number of interested parties. Most landlords ask the potential tenant to fill out a registration form with their personal details, references, income, etc.

References may be checked if the tenant has expressly named them or given their consent. The provision of references by the tenant is voluntary and only the references of tenants who will definitely be considered may be obtained.

Key documents also include current excerpts from the debt collection register, although these can only be requested from the definitive tenant and in principle only in relation to the tenant named in the contract. This applies in general to documents relating to information provided on the application form. Remember that an excerpt from a debt collection register from a given city only reflects the situation there. You may also be justified in requesting excerpts from places where the potential tenant previously lived. Last but not least, the impression made during a face-to-face interview is very important.

Tenancy law is complex. Where do the most common pitfalls lie?

Things can take an unpleasant turn with a rental if cantonal legislation requires a compulsory form for the initial rent. Should the landlord neglect to use the form, this can cost them dearly: If a tenant later contests the rent, a court will set it – and experience shows that this is typically substantially lower and effective retroactively.

Is the landlord free to set the rent at their discretion?

This depends on whether the tenancy is a first-time rental or a re-rental.

In the latter case, the limits are relatively strict. Rent increases are less problematic, if you have undertaken major works, such as an extensive renovation. Other reasons for a possible rent increase, including for an existing tenancy, are an adjustment of the reference interest rate or inflation.

For a first letting, most private landlords will probably stick to the market rate. However, the prevailing city and district rates are de facto hard to prove, as courts require a high burden of proof. You might think about having an expert assess the rental value of the property. 

How do I find out whether renting out my apartment or house makes financial sense?

Financially, it all depends on correctly assessing the approximate condition of the property, technical installations and appliances, so that maintenance costs can be assessed accurately.

Important to know for financing:

Someone who buys a house or apartment in order to rent it out cannot use pension assets held in the second or third pillar (pillar 3a). When it comes to financing, UBS does not distinguish between property you live in yourself or one you rent out to a third party. 

The landlord’s responsibilities are defined in the rental agreement, together with the legal regulations. It is one of the landlord’s duties to ensure the apartment or house is in good condition and to maintain the building. The time and money involved should not be underestimated, as safety in and around the building (for example, safe use of stairwells and safe access to the house in winter) must also be ensured.

A new building will usually require less expense than an older one. If you own a home that hasn’t been renovated for 30 years, there will be almost always be something to do. If the amount of work involved exceeds a certain level, you can of course also commission an external management company. The costs for this depend on the size of the property and on the agreed scope of services. This is often less profitable for individual properties, as management companies tend to charge a certain minimum amount.

Where is the best place to advertise my apartment if I want to rent it out privately?

Today, there are numerous housing market portals. It is worth comparing the different portals since it is crucial how your property is found and presented.

How does the search process on a portal work? Where can you present your apartment as attractively and meaningfully as possible? How does a potential tenant make contact? These questions will all be important to your decision. In addition, you should find out exactly how much the advertisement will cost. It is often possible to book packages. You can of course also list the property on two or three portals, but this will be more expensive.

Another option is to advertise using a realtor. If you do so, remember to check their references and to obtain different offers. Note also the costs, for example the realtor commission.

What tax aspects do I need to consider when renting out my apartment privately?

Owning real estate can have significant tax implications. The property itself must be taxed as an asset and the rental income as income. In return, the homeowner can deduct mortgage interest, maintenance and ancillary costs (provided they are not paid by the tenants). A fixed amount for maintenance can also be claimed in some cases.

What contractual conditions need to be in place when renting privately?

The contract must clearly define the parties, the rental property, the net rent, the notice period and its dates, as well as the ancillary costs. General terms and conditions of contract are only part of the contract if they are also listed in it. It is important that you read the contract carefully and seek support if necessary, for example, from a lawyer.

Important: Contractual conditions that differ from mandatory legal regulations do not apply. These include conditions such as that tenants should pay up to one percent of the annual net rent towards repairs.

For tenancies, it is generally advisable to use standard contracts that stipulate the rights and obligations of tenants and landlords in accordance with the law.

Before moving into the apartment or on the date of handover, a detailed inventory should also be taken. This will ensure clarity on the condition of the rental property.

A deposit of two or three months’ rent is standard in the rental sector today. A maximum of three months’ rent is permitted by law when renting residential premises. The law also regulates notice periods – at least three months for apartments and at least six for business premises. Make sure that the deposit, the notice period and the contract in general complies with current legislation.

If a rented property is deemed to be the family’s home, special provisions apply, for example, one spouse may terminate the lease only with the express consent of the other and important notices must be sent separately to both parties.

What ancillary costs can arise when renting from a private individual?

Ancillary costs are generally stipulated by law. These costs are compensation for the services provided by the landlord or a third party related to the use of the property. It makes no difference whether you rent from a private individual or a management company. These costs include heating, hot water and similar operating costs, plus public charges resulting from the use of the property.

Billing of ancillary costs – fixed amount or advance payment: the differences

Ancillary costs are billed either as a fixed amount or in advance, depending on the rental agreement.

Advance payment: Here you pay an amount in advance each month and at the end of the year the landlord draws up a detailed bill. If you’ve paid too much, the relevant amount will be refunded. If the costs are higher, an additional payment will be due.

Fixed amount: You pay a fixed amount but do not receive an annual bill.

There is also the “inclusive” model by which ancillary costs not expressly named in the agreement are included in the rent. They cannot be billed separately if they are not included in the contract. 

What are my rights and obligations as a tenant if I rent from a private individual?

As a tenant, you have numerous rights and obligations. An important right in all tenancies is the disclosure of the previous rent and the new initial rent. Ask what amount the previous tenant paid for the apartment. In some cantons, the form requirement applies. This means that in addition to the new rent, the landlord must also disclose the old rent on an official form.

Check the utility bill carefully if ancillary costs are paid for in advance. Only ancillary costs that are clearly mentioned in the rental agreement have to be paid. You have the right to demand a detailed statement if the utility bill is not clear, for example, because the individual items are not precisely declared. For example, items such as “other operating costs” are not permitted.

As a tenant, you are obliged to pay the rent and ancillary costs and to treat the rented property carefully and conscientiously. This is known as the duty of care and it also requires consideration for other tenants, for example. Important: The duty of care does not apply only to your apartment but also to shared spaces such as the stairwell, laundry room and cellar.

A common issue, for example, is damage that arises if the heating is broken, mold develops or a pipe in the bathroom is leaking. Here you have both the right to a speedy repair or remedy of the defect, as well as the obligation to report the damage to the landlord as soon as possible. If, for example, water damage is not reported immediately, you could be sued.

In fact, in tenancy law, it does not matter whether the tenancy is between you and a realtor or a private individual, or whether a management company is appointed: the same laws apply. You enjoy the same legal protection in accordance with tenancy law.

For example, the landlord cannot simply change the conditions in the rental agreement. To do so, they must comply with the relevant regulations and notice periods, which may involve the use of an official form. This form also states that as a tenant you are entitled to challenge the amendment to the contract by contacting the arbitration authority by the stated deadline.