Rent increase: Is it justified?

Last Updated on 2 months by David Bergmann

Are you affected by a rent increase and want to know whether it is justified? In this article, you will find out everything you need to know about rent increases, the reference interest rate and your rights as a tenant. We also look at the cases in which a rent increase is permissible and how you can contest it in the event of a dispute.

1. What does a rent increase mean and what are the reasons for it?
2. What is the reference interest rate and what role does it play?
3. When is the landlord allowed to increase the rent?
4. How can a rent increase be contested?
5. What is a rent calculator and what is it useful for?
6. What steps need to be taken in the event of a rent increase?

1. What does a rent increase mean and what are the reasons for it?

Simply said, a rent increase is a rise in the rent that the tenant has to pay to the landlord each month.

There are various reasons why a landlord can demand a rent increase. These include, for example, increased operating costs, maintenance fees or general inflation (see also the national consumer price index)

The cost of a modification that increases the value of the apartment can also be passed on as a rent increase (e.g. installation of an energy-saving heating system, upgrading the windows with sun protection, etc.). It is important to understand, which reasons for a rent increase are allowed and which are not.

In Switzerland, there are certain rules and regulations that determine how and when a rent increase can be implemented. Very often, an increase in the rent is based on an increase in the reference interest rate (see point 4), which is set by the Federal Office for Housing.

Tenants and landlords have certain rights and obligations when it comes to a rent increase. For example, the landlord must notify the tenant within a certain period and in the correct form, while the tenant has the right to contest the increase if it appears unjustified.

2. What is the reference interest rate and what role does it play?

Briefly explained, this is an “average interest rate” calculated by the Swiss National Bank on the basis of interest rates for mortgage loans. Rents have been linked to this since 2008 in order to standardize them across the country.

Increase in reference interest rate

The reference interest rate is an important factor in the calculation of rent increases. It is set by the Federal Housing Office and is based on the interest rates for mortgages. An increase in the reference interest rate can also lead to an increase in rents.

However, there are exceptions that make an increase in rent null and void despite an increase in the reference interest rate:

• Tenants who have agreed a fixed-term contract, a “graduated rent” or an “index-linked rent”.
• Tenants whose rent has not been adjusted since June 2017 based on a lower reference interest rate and are therefore already paying the “more expensive” rent.

The tenants affected can contact the competent conciliation authority of the tenants’ association and contest the unjustified increase.

3. When is the landlord allowed to increase the rent?

The landlord may only increase the rent under certain conditions. In addition to the increase in the reference interest rate, this also includes certain other cost increases (e.g. increased operating costs). It is important to know that the landlord may not arbitrarily pass on all costs to the tenant and that certain rules must be followed. In any case, it is advisable to take a look at the rental agreement and read up on “rent changes” and “general cost increases”.

Renovation or modification

A special case is the “rent increase after renovation”. Here, the landlord increases the rent by a certain amount (e.g. 200 euros/month) to cover the costs of modification or renovation work. This includes, for example, installing a modern heating system, renovating the bathroom, upgrading the kitchen with a dishwasher, etc. In general, landlords may increase the rent in the event of additional services or an increase in value. However, the extent to which this is possible or reasonable must be decided on a case-by-case basis.

Good to know: Maintenance work to keep up the value of the property must not be billed to the tenant, as these fees are already included in the rent!

General inflation

Inflation can be an important factor in rent increases. If the general cost of living rises, this can result in rent increases. To compensate for inflation, the rent may be increased by 40 percent of the inflation rate. The basis for this is the national consumer price index. Example: The general inflation rate is 10%, so rents may be increased by 4%.

Increased maintenance/operating costs

Increased operating fees can also contribute to a rise in rent. Landlords or property managers can claim these either on a flat-rate or actual basis. If billing is based on a “flat-rate inflation charge”, the increased costs are already included in the monthly service charges. The percentage of inflation may vary from canton to canton and can be obtained from the competent arbitration authority.

If the increased maintenance/operating costs are not compensated in a lump sum, the actual accumulated costs are charged to the tenants in the course of the annual statement.

4. How can a rent increase be contested?

If you suspect or feel that your rent has been increased too much or unjustifiably, you can contest this (or have it contested by the conciliation authority).

This may be the case, for example, if the landlord has not complied with the statutory regulations or if the increase appears disproportionately high. There are certain steps tenants can take to challenge a rent increase, including submitting a request for arbitration.

First of all, you should ask the tenants’ association for legal provision and find out, if the rent increase is justified in your case or not. If the new contract issued by your landlord is legally permitted, you still have the option of terminating your lease on the next possible termination date, taking into account the notice period (note: it is essential to give notice by registered letter!). More information on the topic “Termination of tenancy agreement”
you can find here.

If the legal situation is not clear or your landlord is clearly in the wrong, the tenants’ association can call in the arbitration authority. The conciliation authority is an independent body that can mediate in rental disputes between tenants and landlords.

5. What is a rent calculator and what is it useful for?

A rent calculator is a useful tool that can help tenants to calculate the current rent and future cost increases. Tenants can use it to find out quickly and easily how an increase in rent will affect their monthly expenses.

However, please note: In Switzerland, the rent calculator is for your information only, the calculation does not constitute a legal basis and therefore cannot replace any legal advice you may need. However, it can serve to better assess whether a request for conciliation or a conciliation hearing has a chance of success.

6. What steps must be taken in the event of a rent increase?

When increasing the rent, there are certain steps that both tenants and landlords must follow. This includes, for example, timely notification of the increase, the possibility of contesting it and compliance with the statutory provisions.

The landlord must inform the tenant by official form at least 10 days before the start of the notice period that the rent will be increased and for what reason or reasons.

If the rent increase is not communicated and justified using the legally required form, or if it is not announced at least 10 days before the next termination date (start of the notice period), it is null and void.

If the announcement of the rent increase is formally in order but appears unjustified or excessive, the tenant has 30 days from receipt to contest the change to the contract with the arbitration authority in their residential district.

Conclusion

• There may be various reasons for a rent increase, but it must always comply with the statutory provisions.
• Tenants have the right to challenge a rent increase if it appears unjustified.
• The reference interest rate plays an important role in the calculation of rent increases.
• The conciliation authority can play an important role in rental disputes and help to find a fair solution.

We hope that with this information you are well equipped to protect your rights as a tenant in Switzerland and to react appropriately in the event of a rent increase.

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