Debt Collection for Outstanding Commercial Rent – Procedure for Landlords

When is debt collection justified for commercial rent?

Debt collection comes into consideration when your tenant fails to pay the agreed rent despite receiving a warning. In the commercial sector, basically the same legal frameworks apply as for residential leases, but with a few important differences.

First, you should check whether there is an actual payment default. A tenant is in default if the rent payment is not made at the agreed time. In commercial leases, it is customary for the rent to be paid in advance – usually on the first day of the month or quarter. If your tenant does not pay by this date, they are automatically in default, unless otherwise agreed in the lease.

Before you embark on the path of debt collection, however, it is highly recommended to seek a dialogue first. Often there are temporary liquidity issues that can be resolved through a payment plan agreement. Debt collection can permanently strain the relationship with the tenant and should therefore be a last resort.

It is also important that you as the landlord have fulfilled your own obligations. For example, if you have not repaired defects in the property, the tenant might, under certain circumstances, be entitled to deposit or reduce the rent. In such cases, debt collection would not be justified and could even have legal consequences for you.

The debt collection process in Switzerland – Step by step

Once you have decided to initiate debt collection, the process follows a clearly structured procedure in accordance with the Federal Act on Debt Collection and Bankruptcy (SchKG).

Filing a demand for payment

The first step is to file a debt collection request (Betreibungsbegehren) with the competent debt collection office (Betreibungsamt). Usually, the office at the debtor's domicile or registered office is responsible. You must provide the following details:

• Name and address of the debtor (tenant)
• Name and address of the creditor (landlord)
• Amount of the claim (outstanding rent plus any accrued ancillary costs)
• Reason for the claim (unpaid rent)

The debt collection office will then issue a payment order (Zahlungsbefehl), which is served on the debtor. From the date of service, the debtor has 20 days to file an objection (Rechtsvorschlag).

Objection and setting aside of the objection

If the tenant files an objection, the debt collection is temporarily halted. You must then apply to the competent court to have the objection set aside (Rechtsöffnung). For this, you need an enforceable title – for rent claims, this is usually the signed lease agreement.

The court reviews the claim and, if the requirements are met, grants provisional or definitive setting aside of the objection. Following this, the debt collection process can be continued.

Seizure and liquidation

If no payment is made and no successful objection has been filed, you can submit a request for continuation (Fortsetzungsbegehren) to the debt collection office. The office will then schedule a seizure of assets, where the debtor's assets can be seized.

For commercial leases, this can also include business equipment, warehouse inventory, or other operational assets. The seized items are later liquidated to settle the claim.

Special considerations for the collection of commercial and business rents

Compared to residential leases, there are several special considerations to keep in mind for commercial and business leases.

Higher rents and ancillary costs

Commercial tenancies often involve significantly higher amounts than residential leases. Accordingly, a payment default can quickly become existential for you as a landlord. Debt collection should therefore be initiated swiftly if no amicable solution is found.

Business reputation

Debt collection is recorded in the debt collection register (Betreibungsregister) and can have serious consequences for the tenant – particularly if it is a company. Banks and business partners can view these records, which can negatively affect creditworthiness and business relationships.

For you as a landlord, this means: debt collection can mean the end of the business relationship. You should therefore think carefully about whether you are interested in continuing the lease in the long term, or whether you are considering termination anyway.

Rent deposition

For commercial spaces, depositing rent is less common than for apartments. However, this instrument is also available to commercial tenants if they believe there are justified defects in the property or that the landlord is failing to meet their obligations.

If your tenant has deposited the rent, you should seek legal advice before initiating debt collection. In such cases, debt collection could be considered unjustified.

Alternatives to debt collection – Solution-oriented approaches

Before you take the formal path of debt collection, there are several alternatives that are often faster and more cost-effective.

Payment reminder and grace period

First, send your tenant a written payment reminder with a reasonable payment deadline (e.g., 10 days). In the reminder, you should clearly communicate that further legal action will be taken if payment is not received.

Instalment agreement

If the tenant has run into financial difficulties, an instalment agreement can be a practical solution. Be sure to put this agreement in writing and define clear payment dates. This protects you and avoids further conflict.

Conciliation authority

In many cantons, it is possible to refer rent disputes to the conciliation authority (Schlichtungsbehörde). This authority attempts to reach an out-of-court settlement between the parties. Although the debt collection route is usually more direct for purely financial claims, conciliation can be useful for more complex issues.

Termination due to payment default in commercial leases

If your tenant repeatedly fails to pay the rent, you have the right, in addition to debt collection, to terminate the lease with immediate effect. Under Art. 257d CO (Swiss Code of Obligations), you can issue an extraordinary termination in the event of a significant payment default.

A default of more than one month is considered "significant" if payment is made monthly. For commercial premises, where billing is often quarterly, correspondingly longer periods apply. Important: You must first give the tenant a written grace period of at least 30 days and threaten that you will terminate the lease if payment is not made.

Only if this deadline passes without being utilized can you issue the extraordinary termination. This must also be done in writing and is only effective if you precisely adhere to the formal requirements.

In parallel to the termination, you can of course also initiate debt collection for the outstanding rents. Both measures are not mutually exclusive.

Conclusion and practical recommendations

Debt collection for outstanding commercial rent is an effective but also drastic measure. As a landlord, you should only choose this path if other solutions have failed.

Keep the following points in mind:

• Communicate early with your tenant and try to find an amicable solution
• Set clear deadlines and document all steps in writing
• Check whether you have fulfilled all contractual obligations yourself before initiating debt collection
• Seek legal advice in complex cases or for high claim amounts
• Consider termination in parallel to debt collection if the relationship of trust is permanently broken

The legal basis for debt collection can be found in the DEBA (SchKG), while the rental law provisions are regulated in the CO (specifically Art. 257d et seq. CO). Since each case is individual and cantonal regulations may vary, it is recommended to seek professional legal assistance if you are unsure.

By acting proactively and establishing clear structures as a landlord, you can minimize the risk of payment defaults and react quickly and effectively in an emergency.

This article is for informational purposes only and does not constitute legal advice. For specific legal questions or problems, you should contact a lawyer or a specialized advisory service.