New regulations on commercial leases other than those for office premises (leases for ‘liberal activities’) and leases for less than one year came in on 1 March 2018 in Luxembourg following adoption by the EU Chamber of Deputies.
The principal changes include:
- Where a lease does not specifically set the period, it will be of unlimited duration and there is no mandatory minimum. Current UK commercial practice is for leases to run in three-year multiples and to have break clauses each three years;
- Rent guarantees are capped at six months’ rent and may be given in the form of an insurance policy or similar guarantee;
- The payment of ‘entry fees’ (pas-de-porte) by way of additional rent is prohibited;
- Tenant renewal rights are modified somewhat, with the landlord able to terminate a lease at six months’ notice on various grounds including not wishing to let the property for the purpose set out in the current lease. The notice given to terminate a lease must be at least six months except in the case of a breach of contract by the tenant.
There are a number of other changes relating to compensation for eviction, subletting arrangements and tenant’s pre-emption rights under the lease (but pre-emption rights apply only if the tenant rents the whole building).