On 17 January 2018, the Chamber of Deputies adopted the new legislation on commercial lease agreements, which modifies the legal regime applicable to the leases of premises concluded for the exercise of commercial, industrial or craft activities.
The new legislation will enter into force the first day of the month following its publication in the Luxembourg official gazette. It is important to note that, save for a couple of exceptions, the new legislation will apply to the existing lease agreements.
The key changes are as follows:
Do qualify as commercial leases and thus are governed by the new legislation, leases of buildings concluded for the exercise of a commercial, industrial or craft activity.
Commercial leases concluded for a duration of less than 1 year (e.g. Pop-Up Stores) are excluded from the scope of the new legislation.
The amount of the guarantee to be provided by the tenant for securing its obligations under its lease agreement may now not exceed 6 months of rent.
Amounts other than the rent
Any amount paid in addition to the rent by the tenant for the conclusion of the lease agreement (e.g. "pas de porte" practice) and any obligation by the tenant to engage a broker chosen by the landlord for a subletting or a lease assignment are now expressly prohibited by the law.
To be noted that the relevant legal provisions will only apply to commercial lease agreements concluded after the entry into force of the new legislation (as opposed to the immediate application of the new legislation).
The new legislation has amended the legal provisions with respect to the renewal of the commercial lease such as f.i.:
- the subtenant (provided the subletting is not prohibited by the lease) may ask for a renewal of the lease agreement;
- the landlord may refuse the renewal of a lease after 9 years of occupation (without reason) if he pays an eviction indemnity to the tenant. That compensation can be also paid by a third party (e.g. a new tenant who will occupy the premises);
Certain new provisions have been added with respect to the tenant's right to sublease (e.g. obligation to notify the sublease agreement). To be noted that it is expressly stated that the amount of rent paid by the sub-tenant to the tenant may not be higher than the rent paid by the tenant to the landlord.
Reprieve periods/ suspended eviction
The commercial reprieve (sursis commercial) has been replaced by a suspension of eviction following a court decision of eviction (sursis à execution du jugement de déguerpissement). The suspension will be allowed for a period between 1 and 9 months and provided (i) all the rents and charges payable as of the day of request have been effectively paid and (ii) the suspension is granted for allowing the tenant to have sufficient time to find other premises to continue his activity and perform his obligations under the employment agreements concluded with his employees.
Right of first refusal
The new legislation has introduced a right of first refusal in the case of a sale of the rented premises in favour of the tenant whose lease has already run for a period of at least 18 years.
The new legislation has been adopted so as to somewhat rebalance the rights of the landlords and the rights of the tenants but also to protect the tenants from practices that have developed throughout the years due to the lack of premises to let (in particular in the City centre).