Preemption right: Procedure under the Law ‘Pacte Logement’

The amended Law of 22 October 2008 ‘Pacte Logement’ ("Law") granted a right of preemption to certain legal persons governed by public law designated by the Law, such as municipalities. Pursuant to this Law, municipalities can validly substitute themselves in an onerous transaction between a purchaser and a seller by taking the place of the purchaser and consequently acquiring the property under the same conditions as initially planned between the purchaser and the seller.

However, this preemption right can be implemented only for specific and defined properties subject to onerous transactions and only if the preemption pursues specific purposes, which are defined by the Law: housing works, road and public facilities works, collective facilities works.

In an important judgment dated 5 January 2021, No. 44939C, the administrative court of Luxembourg specified some of the implementation procedures (“modalities”) of the right of preemption within the meaning of the Law.

Firstly, when a municipality wants to implement its right of preemption, the college of the mayor and aldermen (“collège des bourgmestre et échevins”) can validly decree a decision implementing the right of preemption, provided the municipal council (“conseil communal”) endorses this decision.

Secondly, when a municipality wants to implement its right of preemption, the municipality must clearly and precisely express the purpose it pursues when implementing its right of preemption by referring to one of the above specific purposes defined by the Law. Consequently, a municipality decision implementing the right of preemption has to state if this preemption right is implemented for the purpose of housing works, or for the purpose of road and public facilities works,or for the purpose of collective facilities works. Through its judgment, the administrative court of Luxembourg overruled the administrative tribunal jurisprudence, which required the municipality to express a tangible project when implementing its right of preemption.

Even if this solution seems to confer more flexibility on municipalities, they have to comply with precise obligations stated by the administrative court of Luxembourg: municipalities are required to indicate the purpose when the notary is notified of the municipality decision to implement its right of preemption; furthermore, municipalities have to carry out works according to the purpose they indicated without undue delay.

Ultimately, in its Circular No 3951 dated 19 January 2021, the Minister of Home Affairs advised Luxembourg municipalities to comply with the judgment of the administrative court of Luxembourg.