The Right of First Refusal in Switzerland: A Complete Guide

Learn how the right of first refusal works in Switzerland, its legal basis, types, and key implications for owners, buyers, and rights holders

Introduction

The right of first refusal (also known as the right of pre-emption) is a legal instrument that often plays a decisive role in transactions involving real estate, co-owned property, agricultural land, or even business shares. It ensures that a designated individual or group is given the opportunity to acquire an asset before it can be sold to outsiders.

In Switzerland, this concept is well defined in the Civil Code and the Code of Obligations, with additional provisions applying to agricultural land. Understanding how the right of first refusal works is important not only for property owners, but also for potential buyers and beneficiaries. This guide explores the legal foundations, practical consequences, and typical use cases of the right of first refusal in Switzerland.

General definition

At its core, the right of first refusal is about priority. If a property or asset is to be sold, the holder of the right must be given the option to purchase it before anyone else. Only if they refuse can the transaction proceed with a third party.

This concept balances the interests of several parties:

• Owners may want to secure continuity (e.g., keeping an asset in the family).
• Rights holders benefit from a privileged position in the purchase process.
• Third-party buyers face a potential risk that their agreed purchase will be taken over by someone else.

Unlike an option to purchase, the right of first refusal does not force the owner to sell. It only comes into play once a sale is about to be completed. 

Statutory right of first refusal in Switzerland

Statutory rights of first refusal are embedded directly in Swiss law. They apply automatically, regardless of whether the parties involved have made any specific agreements. Their purpose is to protect people with a special legal or economic relationship to the asset.

Typical examples:

1. Co-owners of property: If a co-owner of a property decides to sell their share, the remaining co-owners automatically have the right of first refusal. This helps avoid unwanted third parties entering into co-ownership arrangements, which could lead to conflicts or complications in property management.
2. Holders of a ground lease: The law also protects relationships between landowners and holders of ground leases (Baurecht). A right holder has the right of first refusal to purchase the underlying land, while the landowner has a right of first refusal for buildings constructed on their land.
3. Agricultural land: Agricultural property enjoys particularly strict protections. Under the Federal Law on Agricultural Land Rights (BGBB/LDFR), leaseholders and close relatives of the seller have statutory rights of first refusal. This is designed to preserve family farming structures and prevent speculative transfers.
4. Municipalities/state: In some municipalities, the government has a statutory right of first refusal on certain properties. 

Characteristics of statutory rights

• They cannot be transferred or inherited.
• They never expire; they remain valid as long as the relationship (co-ownership, building right, leasehold) exists.
• They can override contractual rights if both exist simultaneously.

It is worth noting that tenants, even long-standing ones, are excluded from statutory rights of first refusal in Switzerland. Unlike in some other jurisdictions, renting does not create this legal privilege.

Contractual right of first refusal

In addition to statutory rights, Swiss law permits parties to establish contractual rights of first refusal. Thus, an owner may voluntarily grant another person the priority to buy an asset should a sale take place.

Common scenarios include:

• Parents granting children the right to buy a property before it is sold on the open market.
• Landlords granting long-term tenants the security of being able to purchase their rented home.
• Business partners granting each other rights of first refusal for shares in a company.

Legal structure and limits

• Duration: Valid for the agreed term, but never more than 25 years.
• Form: Must always be in writing; if a fixed price is agreed, the contract must be notarized.
• Registration: For real estate, an entry in the land register is highly recommended to ensure enforceability against third parties.

Limited vs. unlimited contractual rights

• Limited right of first refusal: The purchase price and conditions are predetermined in the contract. Even if the market value increases, the rights holder can acquire the property under the agreed conditions.
• Unlimited right of first refusal: The rights holder can acquire the asset under the same terms as those agreed between the seller and a third-party buyer.

Contractual rights may be inherited, unless explicitly excluded in the agreement. This differs significantly from statutory rights, which are always personal and non-transferable.

Legal framework

The legal basis for the right of first refusal in Switzerland is distributed across several codes:

• Swiss Civil Code (ZGB/CC): Articles 681–681b cover statutory rights.
• Swiss Code of Obligations (OR/CO): Articles 216–216a regulate contractual rights.
• Federal Law on Agricultural Land Rights (BGBB/LDFR): Articles 42–50 include specific rules for farmland.

This layered system ensures that both automatically arising rights (statutory) and voluntarily agreed rights (contractual) are legally binding and enforceable.

Practical consequences for owners

Granting a right of first refusal can be advantageous, but also involves risks.

Advantages:

• Continuity: Property or business shares can be kept within the family or a close circle.
• Stability for tenants or partners: Granting tenants or associates preferential purchase rights can strengthen long-term relationships.
• Flexibility in planning: A right of first refusal can be part of succession planning or used to prepare for a sale at a later date.

Disadvantages:

• Long binding periods: Up to 25 years for contractual rights can create inflexible situations if relationships change.
• Reduced market value: Assets burdened with a right of first refusal are generally less attractive to buyers, as a third party can step in at any time.
• Complex sales processes: Owners must carefully follow notification obligations to avoid legal disputes.

How the right of first refusal is exercised

The right of first refusal only becomes relevant once a purchase contract is signed with a third party. Negotiations or letters of intent are not enough.

Procedure:

1. The seller concludes a purchase contract with a third party.
2. The seller must notify the rights holder(s) in writing of the contract and its conditions.
3. The rights holder has three months to decide whether to step in and accept the contract.

If the seller neglects to notify, the rights holder may still claim their right later, particularly if the right is registered in the land register. In such cases, the new owner may even be forced to transfer the property to the rights holder without compensation.

The right of first refusal applies only to sales or sale-equivalent transactions (transactions involving fungible consideration, such as money). It does not apply to gifts, inheritances, or exchanges that do not qualify as sales.

Implications for buyers

For buyers, the existence of a right of first refusal can create uncertainty. Imagine negotiating a purchase, agreeing on conditions, and signing the contract — only for a rights holder to step in and take over the deal.

What buyers should do:

• Check the land register: For real estate, this is the only way to identify registered contractual rights.
• Ask directly: Confirm with the seller whether any statutory or unregistered contractual rights exist.
• Plan for risk: If a right exists, understand that your purchase may be contested or even canceled.

The greatest risk lies in rights registered in the land register: if the rights holder acts, they can take over the contract without compensating the original buyer. It's key to check the land register carefully before proceeding with any real estate purchase. 

Role of the rights holder

For rights holders, the right of first refusal is a privilege but not an obligation.

• Decision window: They have three months from notification to act.
• Financial means: To exercise the right, they must be able to pay the agreed or market-driven price. This can be a challenge in the case of unlimited rights if the market value has risen sharply.
• Flexibility: They can waive their right at any time, either in advance or upon notification of a sale.

Broader applications beyond real estate

Although often discussed in the context of real estate, the right of first refusal also appears in other domains:

• Company shares: Co-shareholders may grant each other rights of first refusal to prevent outsiders from acquiring stakes.
• Art collections or valuable assets: Owners may grant rights of first refusal to museums, institutions, or family members to secure the legacy of assets.
• Succession planning: Families may use it to ensure that assets pass to the next generation in an orderly manner.

This illustrates the flexibility and importance of the concept across many areas of Swiss private law.

👉 Whether you are planning to sell, buy, or secure a right of first refusal, being fully informed about the rules and consequences in Switzerland is essential. Careful preparation and, where necessary, legal advice can help avoid costly disputes and ensure smooth transactions.