«How to have your cake and eat it”: Or, in other words, donating or selling your home with the right of residence, but continuing to live there, even if it no longer belongs to you. Find out how this works in our interview with notary and lawyer Christine Boldi-Goetschy.
When you own property, there will always come a time when you start to reflect on the future of your home. It often becomes a burden in old age: maintenance or paying off the mortgage interest are just two examples of the great and long-term responsibility that home-owning entails. Under circumstances like these, leveraging the right of residence could make sense. Christine Boldi-Goetschy, lawyer and notary, sets out exactly what this means and the key pointers to bear in mind. She is a leading expert and speaker at the Swiss Real Estate Association (SVIT) and lectures at the Zurich University of Applied Sciences (ZHAW). As well as real estate law, health law is another area she knows inside out. More on Christine Boldi-Goetschy at the Swisslegal website.
Christine Boldi-Goetschy: “Basically, whether you donate a home or sell it, the bottom line is that the transfer of a property is involved. Selling a house with the right to abode means that you sell your property but are still allowed to live there. In other words, you pass on the ownership rights.
When you donate rather than sell, with the right of residence, the same principle applies, but with one key difference: those receiving the gift pay nothing for the upkeep of the property. Such donations including this right tend to take place within families. For example, when the parents transfer the house to their own children prematurely, but still want to keep living there until they pass away. You can also configure it as a kind of hybrid package, where the children receiving the home pay a purchase price below the actual market value.”
“Well, the right of usufruct accords people the right to remain in the property free of charge. And over and above that, they are also allowed to rent it out and generate income from it. So usufruct does not impact other financial aspects as much. When passing on the right of usufruct, for example, the mortgage interest remains the responsibility of the parents, but when the right of residence is transferred, it becomes the responsibility of the children.”
“We can sum up the answer to this question like this: A tenancy involves payment of a predefined rent, but when it is a right of residence, no rent is payable as a general rule. You can, of course, agree on different arrangements for the latter if you prefer.
That aside, however, both these concepts overlap considerably. For example, you can also record a tenancy in the land register. And like the right of residence, the tenancy, if recorded in this way, will also be preserved in the event that the property is transferred.”
“Many parents see it as a huge weight off their mind to transfer the house to the children ahead of time. No more millstones around their neck: keeping the house in good condition, paying the mortgage interest, the responsibility.… These are now all the tasks of the new owners. The only things those entitled to live there remain responsible for are payments of ancillary utility costs, as well as small repairs that come under wear and tear.
So it offers parents a way to relinquish their responsibility, but still remain in surroundings familiar to them right until the end, continuing to call the four walls in which they’ve probably spent so many years home.”
“You've already secured the house, no matter what. After all, who knows what crazy turns life may take. Besides, particularly when siblings are involved, it might be unclear at first who should get and take over the parents' house.
Soaring property prices are a further plus. The house you bought 15 years ago for CHF 800,000 may well be worth over CHF 1 million today. The earlier you get a house, the more you benefit from its increase in value.”
“Personally, I have not come across any temporary residential rights in practice and they would usually make little sense. If you want to give someone the right to live in your property for a limited period, a tenancy agreement is the better solution.”
“The right of residence must be publicly notarised via a notary's office and entered in the land register. This is the only way those entitled to it can also enforce their right against third parties. This is crucial in the event of a sale above all. Simply put: entering details in the land register gives parents the peace of mind that the right of residence will remain, even if their children sell the house on to third parties.”
“That is a very complex question, which varies according to the canton you live in. As such, it’s best answered in the particular cantonal area to which the right of residence will apply. One general rule that does apply, however, is this: As owners, the children must declare the house as an asset in their tax bill. The age of the parents as residents is also key here: the younger they are, the longer they are likely to stay in the house. The longer the parents remain in the house, the lower the house value on which the owners have to pay tax. A so-called valuation table helps determine the exact value.”
“In theory, yes! In practice, however, it appears somewhat implausible. Who would want to buy a property that you can neither live in nor rent out for an indefinite period? When houses are sold with rights of residence, it is most likely to happen within the family, e.g. when the brother sells the parents' house to the sister.“
“ That depends entirely on the agreement with the entity that provided the mortgage, more often than not the bank. If the bank having financed the mortgage has expressly agreed to this in advance, the right of residence can survive foreclosure, in which case the beneficiaries may remain in the house, even after the auction.
If the bank has not agreed to such an arrangement, the right of residence may be rendered null and void in the course of a compulsory auction. In this case, the persons previously entitled to reside there do not receive monetary compensation and the right expires without consideration.”
“ The right of residence is usually granted for life and usually only expires upon the death of the persons entitled to the residence. This also applies if the beneficiaries move out: They may return to the house or flat at any time if they wish.
It is important to underline, however, that the right of residence is non-transferable. As a personal right, it is bound inextricably to the person named in the land register. Mrs. Müller may not allow her neighbour to claim her right of residence during her trip around the world, no matter how nice he may be.”
“Absolutely. Especially under circumstances where parents enter a nursing home, returning home again is probably out of the question. In this case, retaining the right of residence makes little sense.
Early termination must be by mutual agreement or unilaterally by the person entitled to reside. In other words, the parents can renounce the right of residence and submit a deletion permit to the land registry. Conversely, however, they cannot be forced to move out by the children.”