What is a condo?

Condominiums, condos for short, have existed in Switzerland since 1965, when Article 712a of the Swiss Civil Code came into force. Article 712a is the legal basis for condominiums, i.e., owning an apartment. In this article we explain what exactly a condominium is, what you must do as a member of a condominium association and what is optional.

A condominium gives you a share in the ownership of an entire plot of land and the building built on it. Compared to a single-family house, the cost of land as well as other infrastructure elements – heating, facade, staircase, roof – are split between several people. There are many reasons why people choose to buy a condominium. As a condominium owner, you can enjoy more living space or a higher standard for the same money than you would get in a house, depending on the location. Maintenance costs are also shared between several parties. Condos are associated with a number of rules and obligations that you should be aware of as the buyer.

You should become familiar with common terms related to condominium ownership such as co-ownership share, special right, and special right of use. Below we compare the main differences.

Buying and selling property always involves planning. The same is true of condos.

The co-owners together form the condominium association, which is responsible for using, managing and maintaining the plot of land and the property. Although the community is not a legal entity, it can sue and prosecute independently, as well as be sued and prosecuted. It meets at least once a year for the owners’ annual meeting, during which information is provided about expenses or changes to the condominium bylaws which, together with the house regulations, govern the coexistence of residents.

Decisions are made by simple majority. The law stipulates that for a quorum to exist, half of the community must be present that holds at least half of the co-ownership shares. Changes to the condominium declaration which records the co-ownership shares, i.e., the shares of the individual units in the total ownership, must be made unanimously.

The decisions of the owners’ annual meeting are recorded in the minutes. As a potential buyer, these give you a good idea of the relationship between the condominium owners, how property maintenance is financed and the running costs. If a management company is involved, they will be responsible for the minutes.

Financing, maintenance costs and the renovation fund

Condominium owners have the same basic financing options as house-buyers. Whether you finance the purchase with a private loan, mortgage, personal equity or pension fund assets, you’ll need to check the different options and mortgage types and select the best solution for you. Professional advice is advisable in nearly all cases.

Knowing the approximate annual costs that you will incur before buying will help you stay on the safe side financially. Your costs will include the interest on the mortgage and the capital repayments stipulated in the loan agreement. For a sufficient safety margin, financial viability is calculated using a hypothetical interest rate of five percent on the total loan amount.

Maintenance and ancillary costs also arise. Individual owners must be able to finance all repair, maintenance, redecorating, etc., to their unit themselves on a pro rata basis and according to their co-ownership share. The amount required depends mainly on the age and condition of the apartment, but one percent of the property value can be taken as a basis. It is often difficult to estimate general ancillary and management costs, especially for a new building. “We recommend asking the seller or a general contractor about them,” suggests Michel de Roche, Basel lawyer and President of the Professional Chamber for Condominium Ownership.

As is the case with real estate ownership, as a condominium owner you can also deduct mortgage interest from your taxable income when filing your tax return. Value-preserving maintenance costs for your apartment, such as the replacement of kitchen appliances, are also deductible. You can also deduct the costs of property administration and maintenance by third parties – details can be found in the guidelines of the cantonal tax authority. Payments into the renovation fund also qualify for tax relief, provided that the money is actually used for building maintenance and not for another purpose. Last but not least, energy-saving measures (e.g., installing a photovoltaic system, fitting energy-efficient windows, etc.) are also usually fully deductible. However, you cannot claim value-adding investments or expenses that are part of your living costs, i.e., household insurance premiums, electricity, hot water and heating costs.

Depending on your initial situation, it may be sensible for you to make capital repayments indirectly. Although the mortgage amount will not be reduced, this has tax benefits. The capital repayments are then paid, for example, into a pillar 3a account at the bank.

Life as a condominium owner is inescapably bound up with various roles and responsibilities. If you know them, you can plan better financially, and also integrate into the community life more easily – the condominium owners’ association.