The Blocking Period for Termination in Tenancy Law

Landlords involved in a tenancy dispute with a tenant should be aware of the consequences of an amicable settlement: a settlement—whether reached before the conciliation authority, before a court, or out of court—generally triggers a three-year blocking period for termination to the detriment of the landlord. Overlooking this results in the landlord losing the ability to terminate the tenancy by ordinary notice for three years. This may, not least, constitute an obstacle in the event of a sale.

Trigger and Legal Consequence

Pursuant to Art. 271a para. 1 lit. e of the Swiss Code of Obligations (CO), an ordinary termination by the landlord is contestable if it is given within three years after the conclusion of a tenancy-related conciliation or court proceeding in which the landlord has been unsuccessful to a considerable extent, has withdrawn or substantially reduced its claim or action, has waived recourse to the court, or has entered into a settlement or otherwise reached an agreement with the tenant. According to Art. 271a para. 2 CO, the same applies where the tenant can demonstrate by written evidence that a corresponding out-of-court settlement regarding a claim arising from the tenancy has been concluded.

Ordinary terminations issued during the blocking period are deemed so-called retaliatory terminations and are abusive. If the tenant challenges the termination before the conciliation authority within 30 days of receipt (Art. 273 para. 1 CO), the termination will be set aside. The economic risk is borne solely by the landlord.

Exceptions

Notwithstanding the blocking period, terminations remain permissible under Art. 271a para. 3 CO in the following cases: urgent personal need of the landlord or close relatives; tenant’s default in payment (Art. 257d CO); serious breach of duty (Art. 257f paras. 3 and 4 CO); bankruptcy of the tenant (Art. 266h CO); sale of the property (Art. 261 CO); and termination for good cause (Art. 266g CO). In practice, these grounds are interpreted narrowly, i.e. the threshold is high. In the event of a dispute, the burden of proof lies with the landlord.

Practical Significance

In conciliation proceedings, a settlement is typically sought. Even a settlement favourable to the landlord triggers the blocking period (Art. 271a para. 1 lit. e no. 4 CO). Both parties should therefore be aware of the implications of an amicable resolution: for the landlord, any settlement entails a three-year bar on termination; for the tenant, conversely, it provides reliable protection against retaliatory terminations. This asymmetry shapes the parties’ willingness to settle and should be taken into account in negotiation strategy. It should also be noted that even a written out-of-court settlement of a justified tenant claim may trigger the blocking period, without any conciliation or court proceedings having taken place.

For example, if the landlord issues an ordinary termination and the tenant challenges it before the conciliation authority while requesting an extension of the lease on grounds of hardship (Art. 272 CO), the prohibition of termination under Art. 271a para. 1 lit. d CO initially applies during the proceedings. If the landlord subsequently enters into a settlement—e.g. to shorten the duration of the proceedings—this triggers the three-year blocking period, even where the tenant’s prospects of obtaining an extension were low. Such a blocking period may, in particular, stand in the way of an intended sale if the prospective purchaser wishes to occupy the property personally. In that case, the purchaser would have to wait for the blocking period to expire if the tenant insists on remaining.

Change of Parties and New Lease

In its decision 4A_488/2018 of 20 February 2019, the Swiss Federal Supreme Court clarified that a blocking period arising from a previous tenancy does not carry over to a newly concluded lease, even if the leased premises and the parties are largely identical. When a tenant leaves—for example, following a separation—the landlord is therefore generally better advised to conclude a new lease agreement rather than agree to a transfer of the existing contract. The new tenant’s right to challenge the initial rent (Art. 270 CO) must nevertheless be taken into account.

Conclusion

The blocking period under Art. 271a CO is a powerful instrument of protection against termination. Before entering into any settlement, landlords should assess whether a termination within the next three years is realistically foreseeable and consider whether the advantages of a settlement outweigh the consequences of the blocking period. The strategic choice between settlement, acknowledgment of the claim, withdrawal of the claim, and conclusion of a new lease ultimately determines the landlord’s freedom of action under tenancy law for years to come.