What is index-linked rent in Switzerland?

When determining the rent for office and commercial spaces in Switzerland, the parties can generally agree on the rent freely, although it is subject to judicial review for abuse (Art. 269 CO). In addition to the usual adjustments (relative method), there are special models such as the index-linked rent in Switzerland (Art. 269b CO) and the staggered rent (Art. 269c CO), which are largely independent of the ordinary reasons for adjustment. Particularly for long-term commercial lease agreements involving tenant investments, index-linked rent is a relevant mechanism.

What is Index-Linked Rent?

Index-linked rent, regulated in Article 269b CO, ties the rent to the development of the National Consumer Price Index (CPI), which is published by the Federal Statistical Office (FSO).

Two mandatory requirements must be met:

1. Minimum contract duration: The contract must be concluded for at least five years (non-terminable for the landlord).

2. Index basis: Only the CPI may be used as the index.

The tenant can be granted an earlier right of termination by contract. The landlord's five-year commitment is the consideration for being allowed to pass on inflation in full (100%) via the CPI, unlike the relative method (max. 40%).

Rent Indexation: How Does the Adjustment Work?

With index-linked rent, the net rent is adjusted 100% to the changes in the CPI. If the CPI rises by 2%, the rent can be increased by 2%; if it falls, the rent must be reduced accordingly (Art. 17 Para. 2 VMWG). This differs from the relative method (Art. 269a CO), where inflation is only creditable up to 40% and the reference interest rate as well as cost increases also play a role. With index-linked rent, these other factors are irrelevant during the indexation period. The adjustment is based on the percentage change between the base index (when last determined) and the current index level.

Requirements for a Valid Index Clause

For a valid index clause, the following conditions must be met:

1. Minimum contract duration of 5 years: Non-terminable for the landlord.

2. Reference index CPI: Exclusively the CPI of the FSO.

3. Written agreement: The clause must be in the contract and clearly define the base index.

4. No combination with staggered rent: Index and staggered rent must not be combined (BGE 124 III 57).

If these requirements are not met, the clause is void. An increase that is formally correctly notified (official form, justification) but based on a void clause must nevertheless be contested within the deadline so that it does not become valid.

The National Consumer Price Index (CPI)

The National Consumer Price Index (CPI) is Switzerland's official instrument for measuring inflation. It is calculated and published monthly by the Federal Statistical Office (FSO). The CPI is based on a so-called basket of goods containing a representative selection of goods and services consumed by private households in Switzerland. This includes expenditures for food, housing, energy, transport, healthcare, leisure, and much more.

The development of the CPI is expressed as an index number. A specific point in time (month/year) is set as the base period, and its index level is set to 100 points. If the index rises to 105 points, for example, this means an inflation rate of 5% compared to the base period. The FSO publishes the CPI on various bases (e.g., December 2020 = 100, December 2015 = 100, etc.). For the calculation of rent adjustments, it is crucial that the same index base is used for both the base index (at contract conclusion or last adjustment) and the new index value.

The following table shows the development of the CPI on the current basis of December 2020 = 100 for the last few months up to the latest available status (March 2025 and basis December 2020 = 100):

The exact definition of the base index in the lease agreement – i.e., the specific CPI value (e.g., 101.5 points as of December 2021 on the basis of Dec 2020 = 100) and its base period (Dec 2020 = 100) – is of crucial importance. This value specified in the contract serves as the unchangeable starting point for all future calculations of rent adjustments. Inaccuracies in this determination can lead to disputes later, as the entire development of the rent depends on it.

Calculating the Rent Adjustment: A Practical Example

The calculation of a rent adjustment based on an index clause follows a clear formula. Assuming a commercial lease agreement was concluded with a monthly net rent of CHF 5,000. The index clause refers to the CPI with the base December 2020 = 100. The relevant index level at the last rent determination (base index) was the level of March 2024 with 107.1 points. The landlord now wants to adjust the rent based on the index level of March 2025 (new index), which is at 107.5 points.

The calculation is carried out in two steps:

1. Calculation of the percentage index change:
   The formula is: ((New Index - Base Index) / Base Index) * 100.
   Inserting the values: ((107.5 - 107.1) / 107.1) * 100 = (0.4 / 107.1) * 100 = 0.3735%
   
   

2. Calculation of the new rent:
   The formula is: New Rent = Previous Rent * (New Index / Base Index).
   Inserting the values: New Rent = CHF 5,000 * (107.5 / 107.1) = CHF 5,018.67
   

The new monthly net rent would thus amount to CHF 5,018.67. The increase is CHF 18.67 per month.

Although the calculation is mathematically simple, the devil is often in the details. It is crucial to use the correct index values (same base period, correct month) and to correctly identify the base index specified in the contract or at the last adjustment. Errors here can invalidate the entire adjustment. The timing is also important: The landlord may only announce the increase after the new index level has been officially published by the FSO. A retroactive claim for missed increases is excluded; the adjustment always takes effect only for the future. Careful documentation and observance of the FSO publication dates are therefore essential for landlords.

Formal Requirements: Agreement and Notification

Agreement in the contract: The index clause must be in writing and state the CPI as well as the exact base index (value, level, base period).

Notification of adjustment: Every adjustment must be made using an officially approved form. The form must contain the old and new rent, the effective date, a clear justification (index clause, base and new index), and a reference to the possibilities for contesting it (Art. 19 Para. 1 VMWG). The delivery must take place at least 30 days before taking effect at the end of a month and may only occur after the publication of the new CPI. Formal errors lead to the nullity of the adjustment.

Pros and Cons of Index-Linked Rent for Commercial Properties

Advantages for Landlords:

• Inflation protection.

• Objective basis for adjustment (CPI).

• Long-term commitment (5 years).

Disadvantages for Landlords:

• Other costs (interest, etc.) cannot be passed on separately.

• Minimum commitment of 5 years.

• No increase in case of CPI stagnation/decline.

• No retroactive claims.

Advantages for Tenants:

• Transparency through CPI.

• Protection against other reasons for increases (interest, costs).

• Long-term location/planning security (5 years).

• Right to a reduction in case of a CPI decline.

Disadvantages for Tenants:

• Full inflation risk (100% CPI).

• No profit from interest rate cuts.

• Limited contestation (only calculation, Art. 270c CO).

• Budget uncertainty during volatile inflation.

Index-Linked Rent in Comparison: Differentiation from Alternatives

• Staggered rent (Art. 269c CO): Rent increases by fixed amounts at fixed times. Minimum duration of 3 years. Absolute predictability, detached from CPI/interest rates. Combination with index-linked rent is impermissible.

• Relative method (Art. 269a CO): Adjustment upon change of reference interest rate, costs; inflation (CPI) only up to a maximum of 40%. Applies to open-ended contracts or after the expiration of fixed terms. Reflects costs, but more complex.

Use Cases for Office and Commercial Spaces

Index-linked rent in Switzerland is widespread for commercial premises (office, retail, etc.) for the following reasons:

• Customary long contract terms (≥ 5 years).

• High tenant investments (fit-out) require amortization time and secured duration.

• Perceived predictability due to CPI coupling.

• Attractive for investors (inflation protection).

For residential properties, index-linked rent is used less frequently.

Current Case Law on Index-Linked Rent

Important points from case law:

• Contestation during term: Only possible due to incorrect calculation (Art. 270c CO).

• Flexibility for tenants: Right of termination for tenants before 5 years is permissible (BGE 112 II 69).

• Prohibition of combination: Index-linked and staggered rent cannot be combined (BGE 124 III 57).

• After expiration of the indexation period: Transition to the relative method. The tenant can then no longer claim the absolute method (yield review) (BGE 147 III 32). Requests for adjustment must be made in good time before the end of the indexation period in order to claim full interest rate changes since the beginning (BGer 4A_252/2023).

Conclusion

Index-linked rent in Switzerland (Art. 269b CO) is an important instrument in commercial leases. It requires a minimum term of five years (for landlords) and ties the rent 100% to the CPI. Strict formal requirements for agreement and adjustment must be observed. It offers predictability and inflation protection, but also carries risks in times of high inflation. The differentiation from the staggered and relative method is clear. Due to its long-term nature and financial implications, diligence in contract drafting and adjustment is essential.