Commercial Lease Agreements are Changing (in Luxembourg)

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).