The correct way to terminate a tenancy agreement

Author: Bernhard Bircher-Suits, FundCom AG

In your tenancy agreement, you can, for instance, prohibit the keeping of large animals in your property. If a tenant disregards this prohibition and still keeps a large dog without your consent, then this is a ‘serious breach of duty’ according to a 1994 Federal Court decision. You can therefore terminate the tenancy agreement extraordinarily for ‘good cause’.

To do this, you must first send a warning to the tenant. If the tenant continues to keep the animal even after a warning has been sent, then termination may take place with a 30-day notice period to the end of a given month. However, despite the justified termination, you have to expect that the tenant may not agree with it and will challenge your decision.

In the event of a dispute, a free arbitration hearing is mandatory

But did you know that it’s a legal requirement to hold a free arbitration hearing first? This is actually a good thing, as arbitration bodies ensure the tenant does not go straight to court. This can save you time, money and stress.

It’s also good to know that out-of-court, fee-based mediation can only replace the compulsory arbitration procedure if all parties request it in the arbitration request or at the arbitration hearing. But how often do disputes arise in the case of terminations under tenancy law?

Terminations are a common reason for arbitration proceedings

A glance at the annually published statistics from the conciliation authority is a warning to all landlords. This is because the number of disputes under tenancy and lease law reached a new high at the end of 2023, with around 25,500 pending cases.

By comparison, there were only around 14,300 cases in 2013. In 2023, rent increases were the most common reason for arbitration proceedings. ‘Ordinary terminations of contracts’ are in second place and ‘extraordinary’ terminations for good cause come third. In short: termination is a common reason for legal disputes with tenants.

Freedom of termination applies under Swiss tenancy law

If you want to avoid time-consuming and costly disputes before conciliation authorities or courts, you should follow the proper legal process in the event of termination. Nevertheless, even a legally proper termination is no guarantee that your termination will not be contested. However, following the proper procedure increases your chances of success. 

It’s reassuring to know that a termination contested by the tenant will only be reversed by a court in exceptional cases if the termination was wrongful on your part.

You also benefit from freedom of termination under Swiss tenancy law. This means that you can essentially terminate a tenancy for any reason, as long as you adhere to the contractual and statutory notice periods and cut-off dates and observe all the required formalities and the termination is not improper. But what do you need to consider when terminating a tenancy? 

Formal requirements for termination for residential and business premises

You must give tenants notice of termination for residential or business premises in writing using a form approved by the canton. A regular letter is not sufficient. Notice of termination must always be received by the party being given notice of termination at the latest on the last working day before the start of the notice period. If the notice of termination is sent by registered post and cannot be received due to the absence of the recipient, the date on which the notice of termination can first be collected from the post office will be deemed the date of delivery.

For family properties, you must send the notice of termination to each tenant separately. The official form can usually be found at the relevant offices in the canton in question. You will have to sign it yourself. You need to give written notice of termination even if you only agreed the tenancy agreement verbally. If you do not comply with these formalities, then your termination is ‘null and void’. From a legal perspective, the tenancy has therefore not been terminated and will continue under the previous conditions.

In the case of ordinary termination, giving reasons is not mandatory, but it makes sense. If necessary, tenants may also ask you to explain why. It is important that your reason for termination is clear and comprehensible in order to be on the safe side from a legal standpoint. As evidence, you should always send notice of termination under tenancy law by registered post.

Raphael Butz, lawyer and partner at the law firm Vischer AG, warns: ‘If, for example, in the course of arbitration or court proceedings, it turns out that the termination is null and void or improper, this triggers a blocking period of three years. During this time, a new termination is only possible under certain conditions, such as if the tenant is in arrears. So it is important to comply with the formal requirements.’

Special rule for late payment

The statutory notice period for you as the landlord of residential space is at least three months (commercial premises: six months). For furnished rooms and parking spaces, the period is two weeks. In your tenancy agreement, you can agree longer – but not shorter – notice periods. If termination dates are not stipulated in the agreement, then the customary local dates always apply. These can be requested from the conciliation authorities.

Termination without observing the three-month notice period is also possible ‘for good cause’ (commercial premises: six months). You can terminate a tenancy prematurely, for instance, if the tenant ‘intentionally causes serious damage’ to the rental property. In any case, the tenant can contest the termination with the local conciliation authority within 30 days, or can request that the lease be extended. 

Lawyer Raphael Butz also points out a special rule in the case of late payment: ‘If the tenant does not pay their rent on time, the landlord can set a period of 30 days in writing for the subsequent payment and at the same time threaten the tenant with the prospect of termination if payment is not made. If payment is not made on time thereafter, termination takes place with a further notice period of at least 30 days to the end of a given month.’

Grounds for ordinary termination or termination without notice

You can terminate a tenancy for a variety of reasons. The most common reasons for termination include the owner’s own use, late payment, breach of the house rules or a material breach of contract on the part of the tenant(s).

An important note: your tenants must use the rental property carefully and be considerate of neighbours. Managers do not have to put up with repeated disruptions or careless or non-contractual use of the rental property. Conduct of this nature – if necessary after a warning – is also a legitimate reason for ordinary termination when renting residential and commercial premises.

In serious cases, you can also terminate the contract at short notice or without notice. For example, repeated noisy marital disputes involving police intervention can be a reason for termination after a warning. Though a threat of termination is not necessary, it is advisable in order to make tenants aware of the seriousness of the situation.

David Knecht, lawyer at Prof. Giger & Partner Rechtsanwälte, says: ‘For the purposes of evidence, the warning must also be sent by registered post.’ In David Knecht’s legal experience, the frequency of termination disputes with the conciliation authorities means that it is to be expected that even a legally secure termination does not automatically result in the tenant(s) having to move out on the termination date. This is because the rental agreement remains in place during arbitration or court proceedings.

As a result, someone can spend months or even years in the property, regardless of the outcome of the proceedings. Experts in Switzerland refer to this as a ‘cold extension’.

Check landlord legal protection insurance

Termination is a complex process that requires careful planning and compliance with legal requirements. By carefully observing the notice periods, grounds for termination and formal regulations and seeking legal advice if necessary, you can ensure that your termination is legally proper and effective. 

Managers can, for instance, take out landlords’ legal protection insurance for their properties in order to obtain support from their insurance provider in the event of legal disputes with tenants. Michael Grütter, lawyer at Protekta Rechtsschutz-Versicherung AG, a Mobiliar Versicherungsgesellschaft company, says: ‘Protekta supports insured landlords if, for example, a notice of termination has been contested by the tenants.’

Tip: If you want to terminate the tenancy as amicably as possible, ideally approach the tenant before serving the written notice and explain to them your reasons for terminating the lease. You can also offer tenants alternative accommodation or an extended notice period to make termination of the rental agreement more convenient and avoid arbitration and court proceedings.