What is a DDP?
09.01.2024
What is a DDP?
In Switzerland, the "droit de superficie distinct et permanent" - "distinct and permanent surface right" (DDP) offers a hybrid solution for becoming a homeowner without necessarily acquiring the land. In the face of high property prices, this model enables buyers to access home ownership by paying rent to the landowner, while benefiting from a degree of economic stability. This concept was first used by the Société Coopérative d'Habitation Lausanne (SCHL) in 1920 to build homes on land owned by the City of Lausanne. Today, many residents' cooperatives, including the SCHL, prefer this model. To protect these cooperatives, the law requires a minimum 30-year contract, which can extend to 100 years.
The DDP is also being extended to condominium apartments in French-speaking Switzerland. This system offers cost advantages, although its implementation is legally complex. All parties involved, including buyers, banks and sellers, benefit from this model. However, the main winners remain the landowners, who receive rent based on the inflation-adjusted value of the land. This hybrid model can be a success for cooperative housing and affordable PPE apartments, but can be more difficult to apply to luxury housing requiring considerable equity. Despite this, the PDD is attracting growing interest, particularly among the younger generation of buyers, due to rising property prices. In addition, local authorities view this solution positively, as it enables them to retain ownership of their land, thereby strengthening their control over long-term economic or social development.
3 Advantages of the Distinct and Permanent Right of Superficies (DDP):
3 Disadvantages of the Distinct and Permanent Right of Superficie (DDP):
Source
rts - Article
In Switzerland, the "droit de superficie distinct et permanent" - "distinct and permanent surface right" (DDP) offers a hybrid solution for becoming a homeowner without necessarily acquiring the land. In the face of high property prices, this model enables buyers to access home ownership by paying rent to the landowner, while benefiting from a degree of economic stability. This concept was first used by the Société Coopérative d'Habitation Lausanne (SCHL) in 1920 to build homes on land owned by the City of Lausanne. Today, many residents' cooperatives, including the SCHL, prefer this model. To protect these cooperatives, the law requires a minimum 30-year contract, which can extend to 100 years.
The DDP is also being extended to condominium apartments in French-speaking Switzerland. This system offers cost advantages, although its implementation is legally complex. All parties involved, including buyers, banks and sellers, benefit from this model. However, the main winners remain the landowners, who receive rent based on the inflation-adjusted value of the land. This hybrid model can be a success for cooperative housing and affordable PPE apartments, but can be more difficult to apply to luxury housing requiring considerable equity. Despite this, the PDD is attracting growing interest, particularly among the younger generation of buyers, due to rising property prices. In addition, local authorities view this solution positively, as it enables them to retain ownership of their land, thereby strengthening their control over long-term economic or social development.
3 Advantages of the Distinct and Permanent Right of Superficies (DDP):
- Accessibility to home ownership: the DDP offers buyers an alternative to partial home ownership, even in areas with high property prices. This enables a greater number of people to become homeowners, while reducing the need to raise substantial equity capital.
- Economic stability for landowners: landowners benefit from stable, long-term income in the form of rents, generally indexed to the value of the land and adjusted for inflation. This provides financial security for landowners, and can be an incentive to participate in this type of transaction.
- Flexibility for municipalities: municipalities can retain ownership of the land while allowing real estate development. This gives them leverage over long-term planning and development, which can be particularly advantageous for implementing economic or social development policies.
3 Disadvantages of the Distinct and Permanent Right of Superficie (DDP):
- Legal complexity: DDP involves a complex legal framework, which can make transactions more complicated to implement. This may discourage some buyers or investors who prefer simpler, more straightforward real estate transactions.
- Limitations for luxury homes: this model may be less suited to luxury homes requiring substantial equity, limiting its applicability to a certain category of property. Buyers targeting high-end properties may prefer more traditional options.
- Dependence on the property market: the profitability of DDPs is highly dependent on property market conditions. If property prices fall, this can affect land values and, consequently, the financial benefits for landowners and buyers. There is therefore a degree of dependence on the economic climate.
Source
rts - Article