As is currently the case in the canton of Zurich and the cities of Lausanne and Lucerne, several cantons and cities already have a right of first refusal in place or are planning to introduce one for the benefit of the public sector. In doing so, they are influencing the real estate market – in some cases selectively, but increasingly also in a more comprehensive manner
Definition and Purpose of the Right of First Refusal
The local authority’s right of first refusal enables local authorities to acquire land on a priority basis when it is put up for sale, in order to fulfil public duties such as housing construction or infrastructure projects. It serves the purposes of land policy and urban development.
Practical Examples
In the city of Lucerne, the right of first refusal has been incorporated into the housing policy debate. The City Council intends to create or commission the construction of additional, and above all, social housing in the coming years. Preparations are currently underway in the political arena to introduce a municipal right of first refusal for properties. The City Council’s counter-proposal to an initiative by the SP City of Lucerne provides that the city may enter into the purchase contract in the event of sales of larger properties, particularly where the vacancy rate is 1.5% or lower. The referendum on this will take place on 14 June 2026. If approved, the right of first refusal would take on significantly greater importance in the city of Lucerne in future.
The city of Lausanne already has concrete experience in this area: there, the right of first refusal has been exercised in at least 14 cases to date. Even if this figure appears small in relation to around 500 transactions, it shows that the local authority can use it to influence the property market. In the cases concerned, private or commercial prospective buyers were also bypassed.
Right of First Refusal in Private Law
In private law, too, the right of first refusal is a well-known security instrument in connection with the acquisition of real estate and residential property. It may be agreed by contract and must be notarised to be valid (Art. 216(2) of the Swiss Code of Obligations). The right of first refusal may be exercised if the property is sold or if a legally equivalent transaction takes place (Art. 216c para. 1 CO).
Impact on the Property Market
Given current developments, the right of first refusal is taking on greater significance. Its introduction can have a lasting impact on existing market and power dynamics in favour of the public sector. The fact that only a few public bodies can exercise the right of first refusal and that these possess considerable financial resources gives them a clear advantage. Given the ongoing housing shortage and political initiatives to promote affordable housing, the already challenging competitive situation in the property market is being further affected.
For any questions relating to the sale or purchase of a plot of land or a flat, and in particular regarding rights of first refusal, the attorneys-at-law of Pilatushof AG will be happy to assist you.
