Luxembourg Real Estate – Legal Developments On Commercial Leases

This brief report provides a summary of the most important amendments of the legal provisions applicable to commercial leases, introduced in Luxembourg through the law dated 17 January 17, 2018 on commercial lease and amending certain provisions of the Civil Code (the "Law").

Reform of the commercial lease legal provisions

After more than two years, the bill of law n°6864, filed by the Ministry of Economy on 3 September 2015, has finally been adopted, further to the vote of the law on 17 January 17, 2018.

The main amendments brought by this reform, reinforce to some extent the protection of tenants, although not all amendments foreseen by the initial text of the bill of law have been ultimately adopted.

Definition and duration

The Law now defines a commercial lease as any lease of a building for use of commercial, industrial or craft activities. However, the provisions relating to commercial leases, introduced by the Law, will not be applicable to leases of a duration of one year or less and commercial leases may be concluded for a limited or unlimited period. The emergence of pop-up stores, discussed during parliamentary sessions, would therefore not be negatively impacted.

Ban on certain practices

The practice of paying an entry fee ("pas de porte") is clearly covered by new legal provisions and will be forbidden. The new Law declares that any additional payment on top of the rent paid to the landlord or to a third party intermediary as null and void. Likewise, it prohibits a landlord from imposing on a tenant a specific third-party intermediary for the assignment or sub-letting of the lease. This ban obviously does not concern commissions paid to real estate agents for transactions.

However, the provisions which provided tenants with the ability to require the reimbursement of any amounts paid in breach of this rule, for an unlimited period, have been discarded.

Rental guarantee

Rent guarantees will be limited to an amount equivalent to a maximum of six months' rent. The landlord may also be obliged to accept the rental guarantee in the form of an insurance policy or other type of guarantee (such as a parent guarantee for example), as long as it covers an amount equivalent to six months' rent.

Assignment - subletting: avoid speculation

The new legal provisions specifically seek to avoid speculation on subleases. In the case of subletting, the sublease contract must be notified to the lessor and the new Law indicates that the rents paid...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT