Reform of Luxembourgish Law on commercial lease agreements finally adopted
The Luxembourg Parliament has finally voted the bill of Law No 6864 on commercial lease agreements – two years after its deposit, and a series of amendments. The genesis of the bill was mainly influenced by a couple of liquidations and bankruptcies of shops in Luxembourg that happened in 2012. Thus, the intention of the legislator was to limit real estate speculation and rebalance the relations between lessees and lessors. After its first approval on the 17th of January 2018 by the Luxemburgish Parliament, the Council of State granted the waiver of the second approval by the Parliament on the 30th of January 2018, thus the bill will soon become law.
The commercial lease regime applies to rented buildings which are intended for commercial use but is also extended to buildings used for industrial or craft activities. Thus office lease agreements or lease agreements related to liberal professions are not covered by the bill. Furthermore, the bill shall not apply to lease agreements of a duration of less than one year.
The Bill’s Key Amendments
Until now, the duration of the leases amounted usually to 3, 6 or 9 years. The bill will allow leases to be concluded both for a limited and for an unlimited period of time. This modification shall notably facilitate the opening of pop-up stores.
Furthermore, the so-called practice of the “pas-de-porte” is not allowed anymore. The “pas-de-porte” is an amount paid by the lessee as an entry fee for taking possession of the premises.
The bill states that any supplement amount added to the rent paid to the lessor or to the intermediary shall be null and must be repaid.
The bill limits the amount of the rental guarantee to a maximum of six months of the rent. In addition, and in view of limiting the speculation with excessive leases, the bill sets out that the sub-lessee is not required to pay to the lessee a rent than the sum of the rent paid already by the lessee to the lessor. Exceptionally, a higher rent can be agreed from the sub-lessee if specific investments have been made by the lessee.
Another aspect of the bill is the introduction of a compensation in case the Lessor wishes to terminate or not to renew the lease after a period of nine years. This compensation can be determined either in the contract or by the judge; however, the minimum amount is of 12 months of lease.
Another change consists of the abolishment of the current possibility for the lessee or the sub-lessee to request a judicial suspension before the end of the lease contract. Once the new law is adopted. It will only be possible to request the suspension of the execution of the eviction order.
Finally, the bill foresees a preemption right for the lessee who has held the lease for at least 18 years.
With the exception of provisions on the “pas-de-porte” and the limitation of the amount of sub-lease, the new law will apply to all the existing agreements as of its entry into force.