SWITZERLAND Law and Practice Contributed by: Francis Nordmann, Johannes Bürgi, Christian Eichenberger, André Kuhn and Sabrina Kunz, Walder Wyss Ltd
for holiday apartments, serviced apartments, inherited real estate, etc. If there is any doubt, rulings from the competent Lex Koller authorities are sought for con - firmation and legal certainty. Political initiatives aim to further tighten the Lex Koller restrictions by proposing mandatory permits for non- EU/EFTA nationals purchasing primary residences, resale obligations upon relocation abroad, further restrictions on foreign investment in commercial prop - erties and a full ban of foreign investments in stock- listed real estate companies and investment funds. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate While Swiss and foreign institutional investors (eg, pension funds, sovereign wealth funds and insurance companies) invest and hold significant real estate portfolios that are financed without external financing, other investors typically finance through a mix of equi - ty and external funding sources (secured term loans, sometimes revolving loans, development financings). Traditionally, Swiss banks have held the lion’s share of the domestic real estate financing market, but new refinancing methods may make it more attractive for foreign banking and non-banking lenders to re-enter the market – eg, following international investors. 3.2 Typical Security Created by Commercial Investors A typical security package would consist of a secu - rity interest in mortgage notes ( Schuldbriefe ), which can take the form of mortgage notes in paper form ( Papierschuldbriefe ) or registered mortgage notes ( Registerschuldbriefe ). In addition, rent, insurance claims and other receiv - ables are typically pledged or assigned for security purposes. Pledges over the shares of the borrower and security interest in bank accounts are customary. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are no restrictions on granting security to for - eign lenders with respect to Swiss commercial real
estate financing transactions, nor are there any regu - latory restrictions on cross-border lending in general. However, political initiatives aiming at tightening the Lex Koller may increase scrutiny on foreign lender financing of commercial properties. The financing of residential real estate by foreign lenders will have to be analysed carefully under the applicable Lex Koller legislation restricting the acquisition of residential real estate in Switzerland by foreigners. However, financing structures typical in the Swiss residential mortgage market (standard security pack - age, standard terms of the loan agreement, LTV below 80%, etc) should not usually raise concerns. If there is any uncertainty, Lex Koller ruling confirmations are available from the competent cantonal authorities for individual cases; for formal reasons, the Swiss Fed - eral Office of Justice no longer seems to be willing to issue general letter confirmations on covered bond programmes or the like, for example, but has not changed its general view on the permissibility of such structures. It would be desirable – de lege ferenda – for the legislature to exempt such financing transac - tions from the applicability of the Lex Koller legislation in the first place, to further enhance legal certainty for debt capital market transactions and novel origination structures that will rather involve lenders other than Swiss banks. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Small registration fees apply to the registration of hold - ers of a mortgage note in the creditor register ( Gläu- bigerregister ) of the competent land registry. However, such registration is only a perfection requirement for the mortgage security in the case of a registered mort - gage note ( Registerschuldbrief ). For a mortgage note in paper form ( Papierschuldbrief ), such registration rather serves administrative purposes. There are special withholding taxes on interest pay - ments at both federal and cantonal levels, to the extent foreign lenders are involved. A refund of the Swiss source tax (or reduction at source) will be sub - ject to any applicable double taxation treaty protec - tion. General federal withholding tax on interest pay - ments may also have to be considered, depending on the exact funding structure (banks, non-banks, double
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