What is the pre-emption right?

When buying a property (house, apartment, land), you may find that a third party has a right of pre-emption on this property which can cause your transaction to fail. Whether you are a buyer or a seller, you’d better know what this word means and what it implies.

The right of pre-emption gives a private person or a public authority the right to acquire a property in priority over any other person, in the event that the owner puts it up for sale and at the prices and conditions set in the deed of sale or promise to sell. (Note that the right of pre-emption cannot be exercised if the property is bequeathed to an heir or if it is the subject of a forced sale – an auction for example).

In other words, if X wishes to buy his property from Y but a pre-emptive contract has been established between Y and a third person, the latter has the right to be the first to acquire this property. If he/she decides to buy it, X will therefore not be able to buy the property in question. A right of pre-emption may result from a contract between the owner and the pre-emptor (pre-emption pact or contract); it may also be provided for by law (legal right of pre-emption).

The pre-emption pact

A pre-emption pact in real estate is concluded by an deed passed before a notary. It is annotated in the Land Registery for a maximum period of 25 years and it is transmitted in the case of a succession. Given the evolution of real estate prices and its 25-year duration, a pre-emption pact is obviously never based on a price fixed in advance.

Legal pre-emption rights

These are the rights provided by law. Rural land rights on the sale of a farm property allow descendants, siblings and the farmer to preempt. In matters of co-ownership, the Civil Code grants the right of pre-emption to other co-owners if one of them sells his share. In the case of Geneva, for example, a right is granted to the canton or the municipality to have priority of ownership over properties located in a development zone.

Seller’s obligation

The seller is required to inform the beneficiary of the pre-emptive right about his intention to sell. This information is officially transmitted to whom it may concern by the notary who takes care of the transaction. The beneficiary of the right is free to exercise it or not. He/She has a 3-month period from the day he became aware of the contract to inform the seller of his decision. Beyond this period, another potential buyer can finalize the transaction.

Who benefits from the right of pre-emption ?

Excluding pre-emptive pacts (contract between two people), it is the law which sets the beneficiaries of a pre-emption right:

– Descendants, brothers and sisters when it comes to a family home

– A farmer when it comes to the sale of a farm building

– The owner of land endowed with a surface right against any purchaser of the house

– The holder of a surface right (see box below) against any purchaser of the endowed land

– A co-owner in relation to any person who does not hold a share of the co-ownership. However, to be exercised, this right must appear in the Land Registery.

Does the tenant have a pre-emption right?

The question is often asked to the Swiss Association of Tenants (ASLOCA) which replied in the following way: « No! Despite the encouragement of real estate circles in favor of home ownership, these same circles opposed the introduction of a pre-emptive right in favor of the tenant. Consequently, the lessor has no obligation to inform you of his intention to sell the property. He/She is not obligated to make a purchase offer before offering it to third parties. »

A right which can bring complications to the purchase of real estate

The legal aspect of a sale where there is a right of pre-emption can sometimes be very complex. Your notary will be able to inform you precisely about the situation which concerns you. Indeed, if the existence of such a right on his/her property does not necessarily change the seller’s plans – as in any case the property will be sold at the price he/she asks for, unless if for personal reasons he/she wants to prevent pre-emption and withdraws his/her property from sale – it can radically change the buyer’s plans who sees the property that interests him slip through his fingers.