Challenge to the initial rent based on the conditions in the local housing market

Facts

C. AG (the landlord) acquired two properties in Zurich on December 6, 2001. On March 20, 2013, A. and B. (the tenants) rented a 3 1/2-room maisonette apartment in one of these properties. The initial rent was set at CHF 3,900.- plus CHF 300.- in ancillary costs per month.

The tenants approached the conciliation authority with the request to declare the initial rent as abusive and to reduce it by CHF 1,100.-. The conciliation authority issued the authorization to file a lawsuit due to the lack of agreement.

The Zurich Rental Court dismissed the lawsuit. The Cantonal Court of Zurich confirmed the first-instance judgment. It justified this by stating that the tenants had to prove not only the housing shortage, but also a personal state of compulsion.

By way of a civil law appeal, the tenants requested the Federal Supreme Court to set aside the judgment of the Cantonal Court and to remand the case for a new assessment.

Considerations

The Federal Supreme Court upholds the appeal and remands the case to the lower court for a new assessment.

According to the interpretation of the Federal Supreme Court, Article 270 paragraph 1 lit. a CO provides for three alternative grounds that entitle the challenge of an initial rent as abusive: a personal or family emergency, the conditions on the local housing market, or a significant increase in the rent compared to the previous tenant.

For the challenge based on the…