Appropriate Return on Investment in Rent Increases

Facts

This case dealt with the question of whether the purchaser of a property can increase rents in order to achieve an appropriate return on their investments.

C. AG had constructed apartment buildings in Basel in 1973 and 1978 and sold these to a pension fund. In 1988, K. acquired these properties. K. then notified the tenants of rent increases in order to achieve an appropriate gross return in accordance with Art. 15 para. 1 lit. c of the Federal Act on Measures against Abuses in Residential Tenancies (BMM).

Individual tenants challenged the increases, whereupon K. filed a claim with the Civil Court President of Basel for a declaration that the increases were not abusive. The Civil Court President and the Court of Appeal dismissed the claim.

Considerations

The Federal Supreme Court came to the following conclusion

1. The investment costs within the meaning of Art. 15 para. 1 lit. c BMM are to be understood as the investments of the original builder or the first purchaser after completion. However, K. had not provided any information on the investment costs of the original builder or first purchaser, so the application of Art. 15 para. 1 lit. c BMM was excluded.