Early repayment penalty for a mortgage not disbursed after exercise of a statutory right of pre-emption by the canton

A couple concluded a notarized purchase agreement for a villa with a price of over CHF 2 million and signed a mortgage contract with the bank for CHF 1,800,000 to finance the purchase. The canton then exercised its statutory right of pre-emption at a significantly lower price, causing the real estate purchase to fail. The concluded mortgage could not be paid out. The bank demanded an early repayment penalty of around CHF 50,000 from the clients. The clients turned to the Ombudsman and claimed that they had received incorrect advice from the bank. After reviewing the documents and mediation by the Ombudsman, the parties agreed to reduce the early repayment fee to half of the amount claimed.

The clients had a contract for the purchase of a property notarized in September 2022. The purchase price amounted to over CHF 2 million. To finance the property, they concluded a mortgage with the bank for CHF 1,800,000 after a consultation, which was divided into five instalments. Four of these tranches were fixed-rate mortgages with different maturities, one tranche was structured as a Saron mortgage.

The purchase contract expressly referred to the statutory pre-emption right of the canton. Before the execution of the purchase agreement, the canton informed the seller and the clients that it would exercise its right of first refusal at a price of CHF 1,600,000. The seller of the property lodged an appeal against this, but it was rejected by the competent court. Due to the exercise of the right of first refusal by the canton, it was impossible for the clients to complete the planned real estate purchase.

Despite this development, the bank insisted that the clients must fulfil their contractual obligations under the mortgage agreement. As this was not possible, the bank charged the clients’ account with an early repayment fee of approximately CHF 50,000. The clients, represented by a lawyer, were of the opinion that it had been impossible for them to fulfil the obligations under the mortgage agreement for reasons beyond their control. They also claimed that they had not been adequately advised by the bank about the consequences of a possible exercise of the statutory right of first refusal. The clients turned to the canton with a request for compensation for the financial consequences of the exercise of the pre-emption right. The canton declared its willingness to cover part of the costs incurred, but not the early repayment penalty demanded by the bank. With regard to this, he referred the clients to the bank.

Since the parties failed to reach an agreement and the dispute escalated to the point where the bank terminated the entire client relationship and refused further discussions with the clients, they filed a complaint with the Ombudsman. The bank initiated debt collection proceedings against the clients. The clients filed an objection against the debt collection.

The Ombudsman initially asked the clients to supplement the file and submit additional documents, particularly regarding the alleged incorrect advice. After the clients had provided the requested information, the Ombudsman approached the bank with questions.

In its statement to the Ombudsman, the bank took the view that the duty to inform about the possible consequences of the pre-emption right lay with the notary and that it had fully fulfilled all its obligations under the mortgage contract. The bank emphasized that the clients had wanted to fix the interest rates because they feared rising interest rates. After exercising the right of first refusal, the bank granted the client the opportunity to transfer the mortgage to another suitable property. The bank pointed out that, based on the mortgage contracts, an early repayment fee of approximately CHF 100,000 would actually have been owed, which would also have included its interest margin. However, she had already reduced the compensation to around CHF 50,000, which only covered the costs for the dissolution of the refinancing without any margin.

The Ombudsman reviewed the documents and arguments submitted by both parties. He found that the dossier contained only a few, and moreover contradictory, specific pieces of information regarding the advisory situation. At the same time, it was apparent that the exercise of the right of first refusal represented an extraordinary and unexpected situation for both parties. The canton had already granted itself the right by law years ago to exercise a pre-emption right on properties in certain zones in the event of a sale. In the past, however, he had hardly made use of it. The Ombudsman basically shared the bank’s view that it would have primarily been the notary’s duty to inform the clients about the consequences of exercising the right of first refusal. There is no comprehensive duty to advise when granting loans. Under the specific circumstances, however, he would have expected the bank, as the professional party to the contractual relationship, to make clients aware of the consequences of an exercised pre-emption right on the conclusion of mortgages with fixed terms. The Ombudsman mediated between the parties with the aim of finding a pragmatic solution.

During the mediation talks, the bank eventually offered a further reduction of the claim to CHF 25,000. The bank declared its willingness to withdraw the debt collection proceedings against the clients after payment of this amount and to arrange for its deletion in the register of the debt collection authority. In addition, the bank signaled its willingness to enter into discussions regarding a possible continuation of the client relationship, although it did not wish to make any firm commitment in this regard.

The clients accepted this offer. The Ombudsman summarized the agreement in a declaration of consent, which was signed by the clients. With the payment of CHF 25,000 by the clients and the withdrawal of the debt collection proceedings by the bank, the case was closed. The parties then also held discussions about continuing the client relationship.