Brexit and its impact on UK citizens and on the Swiss property market

Following the United Kingdom’s exit from the EU, the Agreement on the Free Movement of Persons (FMOPA) with the EU will no longer apply between Switzerland and the United Kingdom (UK). Switzerland and the UK signed an Agreement on Acquired Citizens’ Rights on 25 February 2019 (new FMOPA). This agreement intends to protect the residence rights (and other rights) of Swiss and British citizens acquired under the FMOPA and covers – inter alia - the purchase and retention of real estate by UK citizens in Switzerland and vice versa. Therefore, the agreement applies only to those UK and Swiss citizens who acquired rights under the FMOPA; it does not apply to nationals from the UK wanting to immigrate into Switzerland and vice versa after the FMOPA no longer applies.

Foreign investments in Swiss real estate are governed by the so-called Federal Law on the Acquisition of Real Estate by Persons Abroad (so called “Lex Koller”) and by cantonal regulations. According to the Lex Koller, the acquisition of residential real estate by persons abroad is restricted, while the acquisition of business premises is possible without limitations.

“Persons abroad” are considered to be (i) citizens of the EU and the European Free Trade Association (EFTA) with no legal or actual Swiss residence and (ii) citizens of other states with no permanent Swiss residence permit. Such “persons abroad” are subject to the Lex Koller restrictions and may acquire Swiss residential property only in limited cases and only with formal approval by the competent authority.

Today, UK citizens are citizens of the EU and, therefore, are not considered to be persons abroad according to the Lex Koller if they have a legal or actual Swiss residence, but irrespective of whether they have permanent residence permit (cf. i) above).

Following Brexit, UK citizens will no longer be citizens of the EU or of an EFTA member state. Therefore, UK citizens with a legal or actual Swiss residence will then also need a permanent Swiss residence permit in order not to be subject to the restrictions of Lex Koller (cf. (ii)) above).

The new FMOPA safeguards the rights acquired under the FMOPA and provides for a grandfathering in specific situations:

UK citizens who have acquired Swiss residential real estate in accordance with Swiss law before Brexit shall retain the right to hold that property. Brexit has no effect on the legal situation regarding their Swiss residential real estate.
UK citizens who have already taken up a legal or actual Swiss residence when Brexit takes place will, for the purpose of acquiring Swiss residential property, keep their current status after Brexit. There is no requirement for a permanent resident permit.
UK citizens who were already cross-border commuters in Switzerland prior to Brexit and who have retained this status thereafter will, for the purpose of acquiring Swiss residential property, keep their status after Brexit. They will be entitled to acquire a secondary home in the region of their workplace.

UK citizens who have, prior to Brexit, neither already acquired Swiss residential property, nor have already taken up a legal or actual Swiss residence, nor qualify as cross-border commuters will be considered as persons abroad and will be subject to the restrictions of Lex Koller.

The new FMOPA will come into force as soon as the FMOPA no longer applies between Switzerland and the UK. In case of a withdrawal agreement between the EU and the UK, this will be after the end of the transition period agreed between the parties (during the transition period, the FMOPA applies). If the UK leaves the EU without an agreement (No Deal Brexit), the AACR shall apply as of the day after the UK will have left the EU (subject to former approval by the Swiss Parliament).

Please note that the above information will require further clarification and review in each individual case.