Service Charges and Ancillary Costs

Service Charges and Ancillary Costs in Switzerland

In Swiss property rental, the distinction between base rent and ancillary costs regularly raises questions for both tenants and landlords. Swiss law precisely governs what the landlord may invoice as charges and ancillary costs, as well as the methods for their accounting. This regulation, primarily derived from the Code of Obligations (CO), aims to guarantee the balance between the parties to the lease agreement. Our law firm assists landlords and tenants daily in understanding and correctly applying these legal provisions, which are often a source of disputes due to their complexity and the financial stakes they represent.

Legal Framework for Service Charges in Switzerland

In Switzerland, service charges are governed primarily by articles 257a et seq. of the Code of Obligations. Article 257a CO defines ancillary costs as the landlord's actual expenses for services related to the use of the leased property. A fundamental principle is established by law: only charges expressly mentioned in the lease agreement may be invoiced separately from the rent.

Swiss law clearly distinguishes between:

• Net rent (or base rent), which represents the remuneration due for the use of the leased property
• Ancillary costs, which correspond to the landlord's actual expenses for services related to the use of the leased property

This distinction is crucial because costs that are not expressly designated as ancillary in the contract are deemed included in the rent. This means that the landlord cannot separately invoice charges that have not been explicitly agreed upon as ancillary costs.

The Ordinance on residential and commercial leases (OBLF) provides additional details, notably in its article 4, which lists the main services that may be considered as ancillary costs.

The Federal Supreme Court's case law has regularly clarified the interpretation of these legal provisions, establishing guiding principles that are now well established. For example, the ruling ATF 135 III 591 clarified that administrative costs related to charge management may only be invoiced to the tenant if expressly provided for in the contract.

Table of Admissible and Inadmissible Charges

Types of Admissible Charges and Ancillary Costs

Swiss law authorises the separate invoicing of certain costs, provided they are correctly stipulated in the contract. Here are the main categories of admissible charges:

Energy and Water Supply Charges

• Heating and hot water costs
• Cold water consumption
• Electricity for common areas
• Operating costs of common installations (lifts, ventilation)

These charges must correspond to actual consumption or be allocated according to an objective allocation key, generally based on the surface area of the dwellings or the number of rooms.

Routine Maintenance Costs

• Caretaking
• Maintenance of green spaces
• Cleaning of common areas
• Snow clearance
• Routine maintenance of common installations

These costs may be invoiced as ancillary charges only if they correspond to periodic services necessary for the maintenance of normal use of the premises.

Public Taxes Related to Use

• Refuse collection taxes
• Wastewater treatment taxes
• Fees for the use of collective antennas

It should be noted that certain costs can never be considered as ancillary charges, even if they are mentioned in the contract. These include:

• Property taxes
• Building insurance premiums
• General building administration costs
• Renovation or major repair costs

Billing Methods and Charge Accounting

The billing of service charges in Switzerland follows strict rules aimed at guaranteeing transparency and protecting the rights of tenants. Two main systems coexist in Swiss practice:

The Advance Payment System

Under this system, the tenant pays periodic advance payments (generally monthly) for charges. At the end of the accounting period (usually annual), the landlord prepares a detailed statement of actual charges. If the advance payments made exceed the actual charges, the landlord must reimburse the difference to the tenant. Conversely, if the advance payments are insufficient, the tenant must pay the balance.

Article 257b para. 1 CO specifies that the landlord must prepare this statement at least once a year and present it to the tenant. This statement must be sufficiently detailed to allow the tenant to verify its accuracy.

The Flat-Rate System

In this case, a fixed amount is agreed between the parties, regardless of actual costs. This system has the advantage of simplicity, but it carries risks for both parties: the landlord may find themselves bearing charges in excess of the flat rate, while the tenant may pay more than the actual charges.

It is essential to clearly distinguish in the contract whether charges are invoiced on an advance payment or flat-rate basis. In the event of ambiguity, case law tends to interpret the clause in favour of the advance payment system, which is more protective for the tenant.

Regarding the annual statement, several requirements must be met:

• The statement must be detailed and allow the tenant to verify the invoiced amounts
• Supporting documents (invoices, statements) must be made available to the tenant upon request
• The allocation key used to distribute charges among the various tenants must be clearly indicated

Rights and Obligations of the Parties Regarding Charges

The tenancy relationship in matters of ancillary charges involves specific rights and obligations for both the landlord and the tenant.

Landlord's Obligations

The landlord is required to:

• Clearly detail in the contract the charges that will be invoiced separately from the rent
• Prepare an accurate annual statement of actual charges, within a reasonable time after the end of the accounting period
• Make supporting documents available to the tenant upon request
• Promptly reimburse any overpayment of advance payments
• Use a fair allocation key to distribute common charges among the various tenants

Tenant's Rights

The tenant has several fundamental rights:

• Right to consult the supporting documents for invoiced charges
• Right to contest the statement within a reasonable time after receipt
• Right to reimbursement of excess advance payments
• Right to refuse to pay charges that have not been expressly agreed upon as ancillary in the contract

In the event of a dispute over the charges statement, the tenant must act within a reasonable timeframe. Although the law does not set a specific deadline, case law generally considers that a contestation must occur within 30 days of receipt of the statement.

Resolution of Disputes Relating to Service Charges

Disputes concerning service charges are among the most frequent in Swiss tenancy law. Several avenues of resolution are available to the parties when a disagreement arises.

Amicable Contestation

The first step generally consists of an attempt at amicable resolution. The tenant may address a written complaint to the landlord, precisely detailing the contested points of the charges statement. This approach often makes it possible to clarify misunderstandings or correct material errors without resorting to a formal procedure.

A registered letter clearly stating the grievances and requesting rectification of the statement constitutes a prudent first step. It is advisable to set a reasonable deadline for obtaining a response (generally 30 days).

Referral to Conciliation Authorities

In Switzerland, referral to the tenancy conciliation authority is a mandatory preliminary step before any judicial action. This procedure has several advantages:

• It is free for the parties
• It is relatively fast compared to a judicial procedure
• It frequently leads to an amicable agreement

The conciliation authority, generally composed of representatives of landlords and tenants under the presidency of a jurist, attempts to bring the parties' positions closer together. If a conciliation is reached, a record of agreement is drawn up, having the force of an enforceable judgment.

Judicial Procedure

In the event of failure to reach conciliation, the authority issues an authorisation to proceed allowing the applicant party to refer the matter to the competent court within a deadline of 30 days. The judicial procedure then follows its normal course, with exchange of written submissions, taking of evidence and judgment.

It should be noted that the burden of proof is distributed in a specific manner in matters of service charges:

• The landlord must prove that the invoiced charges correspond to services provided for in the contract
• They must justify the amount of charges with supporting evidence
• The tenant must demonstrate the inaccuracy of the statement if contesting it

Frequently Asked Questions About Service Charges