Passage of Bill of law 7642 entitled "Lease reform – apartment-sharing – invested capital regime".

On 10 July 2024, the Luxembourg parliament passed the law based on the Bill of law No. 7642 entitled "Lease reform – apartment sharing – invested capital regime" (hereinafter the "Law"). The Law recasts the Law of 21 September 2006 on residential leases and amending certain provisions of the Civil Code (the "21 September 2006 Law"), and amends Article 1714 of the Civil Code. It will come into force on the first day of the month following its publication in the Journal Officiel, i.e. probably on 1 August 2024.

The main changes introduced by the Law are as follows:

The residential lease becomes an exclusively written lease

The new Article 5 of the Law of 21 September, 2006 (formerly Article 4) stipulates that, under penalty of nullity, a residential lease must be drawn up in writing. Article 1714 of the Civil Code has been amended to stipulate that, as an exception to the general principle that leases may also be verbal, residential leases must be in writing. The same article contains a list of stipulations that must be included in the lease contract. In this respect, it should be noted that the requirement to state the amount of invested capital in the lease contract was not retained in the end, following the latest amendments by the government.

The introduction of an apartment-sharing regime

Article 2bis of the Law of 21 September 2006 introduces an optional system of apartment sharing between the landlord and several tenants occupying the premises. The apartment sharing agreement must be signed no later than the date on which the lease contract is signed. This is intended to formalise relations between the various parties involved in the apartment sharing, and sets out the practical provisions, including the allocation and amount of rent, joint liability and end-of-tenancy arrangements.

A new allocation of real estate agent costs

The new Article 5 of the Law of 21 September 2006 (formerly Article 4) stipulates that the remuneration (costs and fees) of a real estate agent or any other third party involved in the rental of an accommodation for residential use, are shared equally between the lessor and the lessee. 

The end of luxury accomodations (logements de luxe)

The Law simply repeals the regime for luxury accommodation, i.e. a category of accomodation for which certain provisions of the Law of 21 September 2006, were not applicable (including, in particular, rent cap, rental guarantees and rental charges). 

Rental guarantee

Intended to guarantee all the tenant's obligations under the lease until the vacation of the premises and delivery of the final statement of charges, the maximum amount of the rental guarantee has been reduced from an amount corresponding to three months' rent to two months of rent. Above all, the lessor will no longer be able to withhold the entire guarantee: a first half will be returned to the lessee in the month following the handover of the keys, except in the case of damage or rent arrears. The balance is paid after the amount set out in the final statement of charges has been settled.

The unchanged element: rent cap

Highly ambitious, the initial Bill of law provided for a fundamental reform of the current rent cap regime. In order to achieve a fair balance between the interests of tenants and landlords, the Government, which took office following the elections held on 8 October 2023, decided to remove the section on the new rent cap from the Bill of law No. 7642. Apart from a few minor modifications, the existing regime remains unchanged. However, the subject of a reform of the rent cap regime is still on the table, insofar as the Luxembourg parliament, in a motion concomitant with the Law, has invited the Government to present to the parliament a reform of the current rent cap regime by 30 June 2025.

For further information or assistance with your project, please do not hesitate to contact the Real Estate department of Elvinger Hoss Prussen, and in particular partner Michel Nickels and senior associate Aurélie Petersen.