Switzerland: Landlords Beware Of Tenant Lease Continuation Rights

Commercial tenants in Switzerland can defer a lease termination on the grounds of hardship, but a recent case extends previous interpretations of the law

The Swiss Code of Obligations (CO) governing lease contracts gives a commercial tenant the right to apply in court for a continuation of the lease "where termination of the lease would cause a degree of hardship for [the tenant] that cannot be justified by the interests of the landlord". This extension can be granted for up to six years.

In its constant jurisprudence the Federal Tribunal, Switzerland's highest court, affirms that the court needs to take into account all relevant circumstances of the case while determining whether and for what duration to extend the lease. The CO itself enumerates the primary interests, such as the duration of the lease, the personal, family and financial circumstances of the parties, as well as their conduct, any need that the landlord might have to use the premises for himself as well as the urgency of such need, and the prevailing local market conditions for residential and commercial premises.

Not all of the enumerated elements are relevant for the commercial lease to the same extent. The Federal Tribunal, however, has repeatedly reminded in its judgments that the courts need to weigh the specific interests of both parties, and also emphasises that the courts need to keep in their mind the extension's aim to "provide time in order to find an alternative location". An extension appears justified if it provides the chance that the hardship will be mitigated by postponing the relocation. A tenant is, however, obliged to prove sufficient efforts made to find an alternative location.

In a decision rendered last year (case reference 4A_699/2014) the Federal Tribunal appears, however, to have somewhat broadened the grounds on which it is ready to extend a commercial lease.

Facts of the case

The dispute concerned a family-owned fashion store at a prime location in Zurich. Founded in 1884 at the same place, later generations separated the ownership of the business and of the building and transferred both into separate companies. The last lease contract dated from the year 2000 and was terminated by the landlord in mid-2015.

The tenant started court proceedings asking for a first extension of the lease for the duration of four years. The fi rst instance court granted a one-year extension starting after the end of the contract, i.e. lasting till mid-2016. The second instance judgment confirmed this extension, an important element of the decision being that the tenant had been too selective in its search efforts and was thereby not able to claim a hardship from the fact that it was not able to find an alternative location.

Judgment of the Federal Tribunal

The Federal Tribunal, on appeal, went well beyond the judgment of the lower instances and granted a prolongation of the lease for three years, i.e. until mid-2018. Contrary to the second instance the Federal Tribunal came to the conclusion that the tenant had not been unwilling, but unable to find an adequate alternative for its premises. The Federal Tribunal accepted the tenant's argument that, in view of its specific needs, other locations on the market would not have been reasonably suitable.

The Federal Tribunal came to the conclusion that there was no reasonable chance that the tenant would be able find such a suitable alternative within the six years during which the lease could be extended at the maximum. In this situation the hardship justifying the extension for the tenant could not be based on a need for additional time to find a scarce alternative. Rather, the hardship consists in the fact that the tenant is forced to find and accept a solution with a different content, i.e. to change its business model.

Implications of the decision

Taking into account the formula that the Federal Tribunal most often uses in its judgments, it would not have been surprising if the court had decided that no particular extension should be granted. As the court had assumed that no valid alternative could be found in time, the extension of the lease seems, on the fi rst glance, only to postpone the hardship of leaving the premises, but not to mitigate it.

By expressly accepting a forced change of the business structure as a relevant hardship, and by clearly increasing the duration of the extension granted by the lower instances, the Federal Tribunal has now – although it referred to older jurisprudence – clarified and in fact expanded the commercial tenant's claim to an extension of the lease.

While the implications of this decision in local courts' practice remains to be seen, it is certainly advisable for a prudent landlord to keep in mind this jurisprudence when planning the termination or renewal of its leases.

Previously published in The Lawyer, April 2016

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions