Home ownership: points for cohabiting couples | key4.ch

Home ownership: points for cohabiting couples to observe

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28.01.2021 | 2 minutes

No marriage certificate, but joint home ownership: when couples in Switzerland plan their future together, they should settle all the important financial and legal aspects of their future cohabitation before buying real estate – so that they can look to the future with peace of mind. We explain what needs to be considered.

Concubinage is the cohabitation of two persons who are not married to each other, of opposite sex or of the same sex. To acquire residential property as a couple without a marriage certificate, no separate cohabitation agreement is necessary. However, the law governing the purchase of residential property by this type of couple is very fragmented, so it’s advisable to settle some important points yourself before signing the purchase contract.

Determine the ownership conditions

Unmarried couples generally have a choice of three forms of ownership when purchasing property. The pros and cons of these three options must be carefully weighed up before deciding on the best solution.

Option 1: sole ownership

In the case of sole ownership, only one partner acts as the buyer of the property and is entered accordingly in the land register as the sole owner. This means that all rights and obligations rest with this person. They can therefore make all decisions concerning the residential property independently without consultation. The second partner, on the other hand, has no rights to the property. In theory, sole owners should even sign a rental agreement with their partner.

Option 2: co-ownership

In the case of co-ownership, both cohabiting partners are owners of the property and can be listed in the land register according to their share in it. The ownership ratio can be defined individually. The proportions are given in the form of fractions, for example ⅔ to ⅓. As a rule, the division corresponds to the financial participation in the purchase. With this form of ownership, each partner can freely dispose of their share.

Co-ownership as a form of ownership is mandatory if mortgage borrowers decide to contribute part of their pension provision to the financing, i.e. sums from their second or third pillar, in other words from their pension fund or private pension provision. For some people, this measure is necessary to meet the 20 percent equity requirement for a mortgage. At least ten percent must comprise their own, privately saved funds. The remainder may generally come from the pension fund. If, for example, one partner makes an early withdrawal of pension fund assets, this must also be documented in the land register.

Option 3: joint ownership

In the case of joint ownership, both cohabiting partners buy the property together. Both are entered in the land register as owners. In contrast to co-ownership, however, no pro-rata share is specified. The property automatically belongs equally to both partners, even if one cohabiting partner invests more equity.

With joint ownership, both owners can only make decisions regarding their residential property by mutual agreement, for example if a sale is up for discussion. However, in the case of joint ownership, it is not possible for an unmarried couple to withdraw pension funds to finance the purchase of the property.

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Settling debt liability between cohabiting couples

Cohabiting couples can take out a mortgage regardless of the chosen form of ownership and the corresponding ownership relationships. The bank accepts either a sole debtor or a joint and several debtor when granting the mortgage. If both partners take out the mortgage together, both are jointly and unrestrictedly liable.

Therefore, as well as defining the terms of ownership, it’s advisable to obtain clarity regarding the division of debt liability. For example, if one partner contributes 25 percent of the funds but is liable for 50 percent as a mortgage borrower, discrepancies are likely to arise if the worst comes to the worst. Therefore, in this type of situation, it may be a good idea for the partners to balance out varying equity shares, for example with the help of a private loan agreement.

A safety net for couples without a marriage certificate: a cohabitation agreement

Although the Swiss Civil Code (CC) contains numerous provisions on marriage, there are virtually no rules on the rights and obligations of cohabiting couples. Therefore, each couple should specify their individual obligations by having a cohabitation agreement drawn up by an expert. The agreement should be made in writing and signed by both partners. Notarization is not a requirement. This agreement should address all the essential issues relating to home ownership and mortgages so that the couple can rely on binding agreements if something were to go wrong between them. The following points are especially important:

  • Property: it is important to set out the exact division of ownership, in particular the form of ownership, quotas and voting rights of both partners, and to indicate the origin of the contributed capital.
  • Costs: agreement on the distribution of all current expenses such as interest, incidental expenses, maintenance, renovations, etc. – in equal shares or according to income.
  • Separation: how would residential property and assets be divided up if the couple were to separate? Under what conditions can one of the partners take over the residential property?
  • Inheritance: there are no provisions for cohabitation in Swiss inheritance law. Therefore, couples should draw up a will as well as a cohabitation agreement. This regulates the inheritance, taking into account all compulsory shares of other heirs (parents, children). Regulations with further heirs can be determined in an additional inheritance contract.
  • Death: cohabiting couples can protect themselves with a death risk insurance policy in addition to a will. This allows them to cover the financial risks of the surviving partner. The insured sum should correspond to an amount that would allow the insured person to continue to financially afford the home.

Conclusion: it’s best to obtain professional advice

For all the joy and happiness that comes with buying a home – the financing and ownership arrangements require serious planning. Failing this, unmarried couples in particular run the risk of unpleasant surprises because the legal regulations for cohabiting couples are very incomplete. In order to avoid any unpleasant surprises later on, the drafting of documents with such far-reaching implications should always be left to an expert.

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