Development Zone: Occupancy Requirement
On November 19, 2016, an amendment to the General Law on Development Zones (LGZD) took effect, bringing an end to a long political and legal saga concerning the sale of condominium units (PPE) in development zones in Geneva.
The development zone (ZD) specifically targets residential areas near the city center or major thoroughfares that are rezoned as building zones for the purpose of constructing residential buildings, with the goal of increasing the density of the city center. It may also apply to agricultural areas subject to the same type of rezoning (for example, the Communaux d’Ambilly).
The sale price of a home in a ZD zone, as well as the rent if the property is leased, is subject to government regulation for a period of 10 years following its construction. As a result, purchase prices are very attractive, often ranging from CHF 6,000 to 8,500 per square meter—well below open-market prices. In return, no capital gains may be realized upon resale during the control period.
It should be noted that the law, as amended, applies only to apartment sales that took place after November 19, 2016.
The Owner’s Obligation to Occupy the Purchased Apartment
The law now requires the owner to personally occupy the home they purchased in a ZD. The courts have interpreted this requirement as follows:
This requirement to occupy the dwelling is limited to the period of state oversight, which is 10 years
The owner may not leave the apartment vacant. He or she must occupy it personally
Only individuals may become owners of an apartment under the PPE regime; corporations may not, except in the case of purchases by real estate companies owned by tenant-shareholders or by cooperative companies
The same person may not own more than one PPE apartment located in a ZD zone
In very specific situations, the owner of the dwelling may personally occupy it while legally maintaining a residence elsewhere.
Through this reform, the legislature aims to ensure that these PPE dwellings are acquired by individual owners who have the firm intention of occupying them, rather than using them for purely speculative purposes.
Possible Exemptions from the Residency Requirement
However, the LGZD sets forth a (non-exhaustive) list of valid reasons that allow for an exemption from the requirement to reside in a home purchased in a ZD during the 10-year monitoring period:
Circumstances that were unforeseeable at the time of the home purchase, such as the buyers’ divorce, death, a temporary transfer to another work location, or a health condition that no longer allows them to continue living in the home
The fact that the landowner received the apartment(s) in question as payment for the land to allow for the construction of housing on it
The inability to find a buyer at the regulated price
However, the purchase by an individual to house another family member, or the purchase by a parent to house their children once they reach the age of majority, is not permitted.
Please note that any exemption will always be subject to approval by the Department of Planning, Housing, and Energy (DALE).
Penalties
Any person who violates the regulations set forth above is subject to an administrative fine not exceeding 20 percent of the total cost of the building as specified in the financial plan.
In addition to the fine, administrative measures may be ordered, such as:
Prohibition on using the apartment for rental purposes
Restoration of the original condition, including reimbursement of rent if the apartment was rented out
Finally, the owner faces an additional penalty if he or she rents out the apartment during the 10-year monitoring period—a penalty with significant consequences: the owner may be barred from selling the apartment.
Therefore, people who are fortunate enough to be able to purchase an apartment in a ZD at a capped price have every reason to comply with the occupancy requirement that has been in effect since November 19, 2016.
Alexandre Ayad
Attorney
15 Boulevard des Philosophes
1205 Geneva
+41 22 809 66 00
Development Zone: Occupancy Requirement