| RAMZI CHAMAT | OAKS GROUP SA
In Switzerland, the construction sector plays a crucial role in the economy, but it is often marked by legal and contractual challenges that affect buyers and project owners. Construction defects, unclear responsibilities, and complex contractual clauses make it difficult to protect the rights of individuals. In response to these issues, the National Council adopted a construction law reform on September 12, 2024, aimed at strengthening the position of buyers and imposing new obligations on real estate developers. This reform, which amends the Code of Obligations concerning sales and construction contracts, introduces key measures such as extending the timeframe for reporting defects and establishing a mandatory right to free repairs for buyers. This text delves into the changes introduced by this reform, their impact on industry stakeholders, and the prospects for a more transparent and fair real estate market.
On September 12, 2024, the Swiss National Council approved a major reform of construction law. This revision of the Code of Obligations, which addresses sales and construction contracts, aims to strengthen the rights of property buyers and project owners in the face of construction defects. The changes include extending the timeframe for reporting defects and introducing a mandatory right to free repairs for buyers, aimed at ending contractual practices deemed abusive by the Federal Council. This article analyzes the main elements of this reform, its implications for different stakeholders in the construction sector, and its expected impact on the real estate market.
Under the current law, buyers must inspect the property and report discovered defects within a very short period, often set at seven days. The Federal Supreme Court has noted that this period can be shortened if the defects risk causing further damage if delayed. This rule, borrowed from the sale of distant goods, is ill-suited to real estate, especially given the complexity of hidden defects that gradually become apparent.
It is widely acknowledged that the current reporting period is too short and puts inexperienced buyers at a disadvantage, as they often lack the knowledge needed to identify and properly report defects. The Federal Council has pointed out that these rules are particularly inadequate for contracts involving real estate works, where defects can insidiously appear over weeks or months.
To address these issues, the reform introduces a 60-day period for reporting defects, whether apparent or hidden. This period begins when the defects are discovered, allowing buyers to consult professionals for legal and technical advice before filing a report. Unlike current practices, this period cannot be contractually shortened, although longer periods, such as the two-year period provided under SIA Norm 118, remain possible.
Before the reform, buyers did not have an explicit right to repair defects. Contracts often included clauses transferring defect liabilities from developers to subcontractors, allowing developers to evade responsibility and posing many practical and legal problems. Buyers frequently had to approach multiple subcontractors to seek repairs, with significant risks related to identifying responsible parties and the companies' solvency.
These clauses are not only considered dubious and opaque by the Federal Council but are also legally problematic. They complicate the enforcement of buyer rights, who must often face challenges like identifying responsible companies and managing various contracts with differing liability clauses. Consequently, many buyers find themselves without effective recourse to repair defects in their property.
The reform now prohibits developers from excluding their responsibility through such clauses, requiring developers to directly repair defects at their expense. This mandatory right primarily applies to real estate intended for personal or family use. However, the National Council aims to extend this right to all constructions, regardless of use, creating a debate with the Council of States, which prefers to limit this right to personal and family properties. The final decision on this divergence will be made during the autumn 2024 session by the Legal Affairs Committee of the Council of States.
The reform also clarifies the notion of “sufficient securities” that property owners must provide to avoid the registration of legal mortgages by craftsmen and contractors. These securities must now cover not only the amount claimed by the contractor but also the default interest for a period of ten years. This clarification puts an end to a legal uncertainty that often complicated the establishment of such substitute securities, enhancing the protection of the parties involved.
For developers, this reform imposes additional obligations, requiring adjustments to their contractual and organizational practices. The prohibition of liability transfer clauses and the obligation to directly repair defects encourage stricter quality controls and the establishment of financial reserves to cover potential repair costs.
The construction law reform introduces profound changes that strengthen buyers' rights and impose new responsibilities on real estate developers. By extending the deadline for reporting defects and establishing a mandatory right to repair, the reform aims to protect individuals against construction defects and abusive contractual practices. For developers, these adjustments represent significant financial and organizational challenges. Developers must not only take responsibility for repairs but also enhance quality controls and allocate funds to cover defect-related costs.
Unlike some developers, OAKS GROUP, led by Ramzi Chamat and Luca Copercini, has been focusing on protecting buyers for over two years. For OAKS GROUP, this new reform is overwhelmingly positive as it confirms their commitment to ethical and transparent practices that put the buyer at the heart of their concerns. By maintaining high-quality standards and avoiding abusive clauses, OAKS GROUP continues to stand out in a market striving for greater security and fairness for property buyers.
