The buyer of building land usually intends to realize a construction project and it’s utilization once completed or to sell it. Purchasing building land entails a number of obstacles, economical and legal problems. Often uncertain is whether or not the building permit will be granted and whether the planned construction project can be realized within a reasonable timescale.
When evaluating a plot of land the first thing to verify is whether it is actual building land. A plot is only considered ripe for developing if it is improved land within the building zone and is free of natural obstacles. Realisation of a development project can also be hindered by other obstacles of which the buyer only becomes aware after consulting the various civil and public registers as well as the public building authority.
The prospective buyer needs to verify whether acquisition restrictions apply: for building land intended for living purposes the foreign buyer must fulfill the legal requirements or respectively obtain the appropriate permit; funds and real estate investment foundations need to observe the restrictions applicable to them for building land.
Disposal restrictions may apply according to provisions in public-law (e.g. contaminated site, expropriation ban and developable land subject to the rural property laws); a right of pre-emption or purchase of a third party registered as priority notice in the rank of real rights can be a strong impediment to any disposal of the property.
Recently various federal acts were passed by parliament (total and partial revision of the Federal Spatial Planning Act (Raumplanungsgesetz; RPG), partial revision of the Water Protection Act (Gewässerschutzgesetz; GSchG), partial revision of the Environmental Protection Act (Umweltschutzgesetz; USG) and the popular initiative concerning second residences) and are being implemented. They are aimed at reducing the size of the building zones, better utilization of building land, the levy of planning gains, cost coverage respectively cost bearing of contaminated site remediation and the restriction of second residences esp. in tourist regions. Furthermore, Acts on a communal and cantonal level, e.g. the cultivated-land-initiative in Canton Zurich, can have an aggravating effect.
Today, apart from the land register a number of public information platforms exist (Geographic information system (GIS), National pedological information system (NABODAT), Cadastre of public-law restrictions on land ownership (ÖREB), Cadastre of contaminated sites (KbS)). Ground and subsurface contamination represent high legal, economical and financial risks for buyers (recourse for costs, construction delays, restrictions on usage etc.). The Cadastre of contaminated sites (KbS) provides – without any claim to accuracy – information about existing contaminations. It is highly recommended for the prospective buyer to perform a thorough due diligence investigation in any event.
Easements appurtenant dominating a plot of building land can present land use restrictions (building ban, building restrictions), usage restrictions (commercial restrictions for the purpose of immission prevention, preservation of view) and other restricting encumbrances (right of superficies held by neighboring property, right to build closer to or upto the boundary, utilities easement, access easement, water easement etc.). Furthermore, deleted property descriptions and encumbrances can provide valuable information on prior usage. The introductory acts of the cantons to the Civil Code (EGzZGB) should also be consulted. These may contain legislation on distances to boundaries or between buildings, easements by necessity and boundary enclosures and may restrict or prevent land use.
Land purchase agreements are only valid if notarized by a notary public. The usual standards for drafting real estate purchase agreements apply. The purchase object is basically the “property description” (nature of the property, area, local place name) as contained in the land register, except if part of a larger plot is to be partitioned off as building land; in such cases rather than an aggregate purchase price a price per square meter is determined that is adjusted accordingly after the mutation is concluded. The payment conditions are defined depending on whether the land purchase is to be registered in the ground register immediately or at a later date. The land purchase agreement contains “further provisions”, i.e. the agreement of the date of transfer of ownership, consequences of default, transfer of possession along with the transfer of rights and obligations, transfer of benefits and risks, property tax lien, distribution of fees (notary public, land register) and dues. Special attention should be paid to drafting the warranty clause (assurances, warranty according to law or to special agreement or exclusion of liability (waiver) and the consequences of ground and subsurface contamination according to public-law.
A prudent buyer will under certain circumstances only buy building land when a valid permit for a construction project has been granted; the land purchase agreement can be concluded under a condition precedent. When the building permit becomes final the condition is fulfilled and the parties are committed to fulfill their obligations (payment of the purchase price vs. registration in the land register). If the building permit is denied the condition is not met and the parties are no longer bound.
The final building permit, timely realization provided, can take all public-law building restrictions into account. Civil-law restrictions may still apply: despite a valid building permit beneficiaries of easements and neighbors can, due to provisions in the civil neighbor law of the cantons, prevent or delay construction.
It is strongly recommended that the buyer of building land examines the quality of the property on a material level as well as with respect to public- and private-law. Careful evaluation of construction readiness, possibilities of development and the reasons for failure of prior sales attempts should bring handicaps of the object to light. Property sales law is comprised of default rules. The buyer of building land can negotiate assurances on physical properties as well as have the execution in the land register delayed in his favor so that soil examinations can be performed. Particularly cautious buyers only purchase the land under the condition that a valid building permit is granted. An alternative to delaying the execution is to secure a registered purchasing right. Limiting the expenditure when examining the object of sale often induces a higher risk and higher investment costs. Furthermore, the newest amendments to the laws show that buying building land and leaving it “unattended” is increasingly becoming less profitable.