Rent: what you need to know about the reference interest rate, rent reserve, and more

Landlords cannot charge whatever rent they feel like. Comparis explains what the cost of your rent depends on – and how you can take action against excessive rent.

Roman Heiz Foto
Roman Heiz

09.01.2024

A key with a blue keychain on a rental agreement.

iStock/gopixa

1.What determines the cost of rent?
2.How does the reference interest rate affect my rent?
3.How does the National Consumer Price Index affect rent?
4.How do general cost increases affect rent?
5.What does “rent reserve” mean in a rental agreement?
6.Initial rent check: how it works
7.How should my landlord notify me of a rent increase?
8.When does the rent increase apply from?

1. What determines the cost of rent?

The following factors can affect the cost of rent:

2. How does the reference interest rate affect my rent?

The reference interest rate is the average interest rate for existing mortgage loans in Switzerland. It has been used as a factor in calculating rent since 1983.

Currently, the reference interest rate is 1.75%, valid since 2 December 2023.

Good to know:

  • If the reference interest rate increases by 0.25 percentage points, your landlord may increase your rent by 3% (Art. 13 VMWG).

  • If the reference interest rate drops by 0.25 percentage points, you can request a rent reduction of 2.91%.

Important: these values only apply if the reference interest rate is below 5% and the rent was based on the previous reference interest rate.

Calculating rent increases: what applies to my rental agreement?

Depending on the tenancy, your rent might be based on an outdated reference interest rate. Based on the reference interest rate set by the federal government, you can see which reference interest rate was in effect at the time you entered into your rental contract.

This table provides an overview of possible changes to your rent:

Rent based on a reference interest rate of Right to change the rent
1.25% 6% increase
1.5% 3% increase
1.75% (= current reference interest rate) No adjustment
2% 2.91% decrease
2.25% 5.66% decrease
2.5% 8.26% decrease

Example of a reference interest rate increase: what does this mean for my rent?

The federal government increased the reference interest rate from 1.25% to 1.50% as of 2 June 2023. On 2 December 2023, there was a further increase from 1.5% to 1.75%.

  • For leases based on the previous reference interest rate of 1.5%, a rent increase of 3% is allowed.

  • For tenancies based on the outdated reference rate of 1.25%, a rent increase of 6% is allowed.

With a monthly rent of 2,000 francs, an interest rate increase of 6% based on the new reference interest rate will lead to additional costs of 1,440 francs per year.

3. How does the National Consumer Price Index affect rent?

Landlords can use general inflation as a basis for a rent increase. Inflation can be determined on the basis of the National Consumer Price Index.

Important: the landlord may only pass on up to 40% of the costs of inflation to the tenant. Indexed leases are the exception to this.

Is your rental agreement directly linked to the National Consumer Price Index? In this case, landlords can pass inflation onto the tenant at 100%. This is only permissible for rental contracts with a minimum rental period of five years. This is referred to as an indexed lease.

However, the landlord cannot claim any additional costs for indexed rental contracts. A change in the reference interest rate or increasing maintenance and operating costs therefore have no effect on the rental costs.

4. How do general cost increases affect rent?

In addition to the reference interest rate and inflation, landlords can claim a general increase in costs. Cost drivers include:

  • Property taxes

  • Fees

  • Maintenance and administration costs

  • Insurance premiums

The landlord must be able to prove the increase in costs. Flat rates of 0.5% to 1% are often applied.

5. What does “rent reserve” mean in a rental agreement?

Look out for a mention of a rent reserve in your lease. If it is mentioned, the lease expresses in advance that there is an intention to raise the rent. If a rent reserve is clearly stated, it is legally valid.

It can either be a set amount in Swiss francs or a percentage. If a reservation is defined in the contract, the increase can be made later at any time. However, as the tenant, you can challenge the increase and have it checked

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6. Initial rent check: how it works

initial rent checked. Landlords are not allowed to freely determine how high the rent should be. Tenancy law states that landlords may only generate a reasonable return.

If your rent is too high, you can dispute it. And that applies even after signing the contract – and up to 30 days after handing over the keys.

But when is the rent considered too high? As a tenant, it’s usually difficult to determine this. However, a warning sign is if your rent is significantly higher than that of the previous tenant.

How much did the previous tenant pay?

In some cantons you will find out automatically. In Basel-Stadt, Geneva, Lucerne, Neuchâtel, Vaud, Zug and Zurich, there is a compulsory form. This means the landlord must show you how much rent for the apartment has cost so far. This form comes together with the rental agreement. However, the compulsory form only applies if the amount of empty apartments falls below a certain number.

In all other cantons, you must ask for it yourself. The landlord must provide this information on request. However, often the easiest way to obtain it is from the previous tenant.

If the landlord has significantly increased the rent, it might be worth challenging it. Tenants can dispute the rent increase in writing within 30 days of receipt of the notice of increase at the competent conciliation authority of their residential district. Many conciliation authorities provide a form for this. Learn more from the Tenants’ Association (link only available in German).

Is a landlord trying to tempt you with gifts such as iPhones, iPads, moving vouchers, or a free first month of rent? Gifts are usually not a good sign – and ultimately they come at a price.

This kind of benefit is usually used to make unfavourable deals look more appealing. With attractive rental properties, there are plenty of interested potential tenants.

7. How should my landlord notify me of a rent increase?

Your landlord must disclose rent increases using an official form. This form must state

  • for what reason,

  • on what basis,

  • from when

  • and by what amount the rent is being increased.

The rent increase is null and void if the landlord does not announce it using the prescribed form, does not justify it, or threatens or declares termination with the notification.

8. When does the rent increase apply from?

A rent increase is permitted at the earliest on the next possible termination date. Your landlord must notify you of the increase no later than ten days before the start of the termination period. These ten days should give the tenant time to think.

If neither an acceptance of the rent increase nor a challenge are involved, tenants can terminate the rental contract.

The contractually agreed notice period shall apply. If it is not included in the rental agreement, the statutory minimum notice period counts:

  • Three months for housing

  • Six months for business premises

  • Two weeks for furnished rooms

If no termination date is specified in the lease agreement, the statutory dates, i.e. the usual termination dates in the place of residence apply.

Example termination notice

In theory,the tenancy of an apartment can be terminated as of 30 September 2024 with three months’ notice. Then the notice of rent increase must be received by the tenant by 20 June 2024 at the latest (three months plus 10 days). The new rent will apply from 1 October 2024.

To ensure there is evidence of this, the landlord is usually notified by registered letter. Delayed notifications of rent increases will not take effect until the next possible termination date.

This article was first published on 09.01.2023

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