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PROPERTY LAW
Types of right over real estate
Freehold ownership
Ownership right
• Freehold ownership (droit de propriété) is defined by the
Luxembourg Civil Code as the right to enjoy and dispose of
assets in the most absolute manner, subject to overriding
legal provisions or third party rights.
• Ownership of real estate includes the ownership of the land
and any buildings rerected on it. Both are registered on the
same title.
• Although private agreements will be binding upon the parties,
any transfer of ownership will require a notarial deed to be
enforceable against third parties.
• All transfers of ownership shall also be subject to a
registration (transcription) before the registrar of mortgages
(Bureau de la Conservation des Hypothèques). The land
surveying administration (Administration du Cadastre et de la
Topographie) also lists all parcels and buildings covering the
territory of the Grand Duchy of Luxembourg.
Co-ownership and division of a building
• The Law of 16 May 1975 regulates the co-ownership of
buildings (copropriété des immeubles bâtis).
• The co-ownership of buildings includes a freehold ownership
of the privately owned areas (parties privatives) and a co-
ownership of the common areas (parties communes) of the
building. The division shall be carried out through a “cadastre
vertical” approved by the land surveying administration
(Administration du Cadastre et de la Topographie).
• The management of the building and obligations of the
co-owners are provided in the rules of the co-ownership
(règlement de copropriété).
• The appointment of a representative of the co-owners (syndic
de copropriété) is required.
Long term lease (droit d’emphytéose)
• Long term leases are rights in rem whose beneficiaries enjoy
all rights which an owner would enjoy (including the right to
assign and mortgage the property).
• The beneficiary is not entitled to depreciate the value of the
property (and is usually required to make improvements
thereto).
• The minimum term is 27 years and the maximum term is
99 years.
• The beneficiary will pay a rent, as well as taxes and
other costs.
• Long term leases must be notarized and registered in the
land registry before the registrar of mortgages (Bureau de la
Conservation des Hypothèques).
Building right (droit de superficie)
• A building right is a right over a land entitling its beneficiary to
construct and own a building on such land.
• The maximum term is 99 years.
• The beneficiary will pay taxes and other costs on the land.
• Buildings rights must be notarized and registered before
the registrar of mortgages (Bureau de la Conservation des
Hypothèques).
Rights in rem affecting ownership
Easement (servitude)
• An easement is a encumbrance imposed upon a property,
for the use and enjoyment of another property belonging to
another owner.
• Easements are created naturally, by law or by contract. The
latter must be notarized and registered before the registrar of
mortgages (Bureau de la Conservation des Hypothèques).
Usufruct (usufruit)
• The usufruct of a property is a right to the use and enjoyment
of the fruits or profits of another’s property.
• Usufructs are statutory or contractual. Contractual usufructs
are notarized and registered before the registrar of mortgages
(Bureau de la Conservation des Hypothèques)
Mortgage (hypothèque)
• A mortgage is a security encumbering the asset, which
entitles the beneficiary to a preferential right over other
creditors in the event of a forced sale of the concerned
property.
• The mortgage will follow the property irrespective whose
hands it is in. The creditor benefiting from the mortgage will
acquire a right of pursuit and a right of preference.
• Mortgages can be established by law (statutory mortgage),
by court order (judicial mortgage) or by agreement
(contractual mortgage). contractual mortgages are notarized.
To be enforceable towards third parties, the notarial deed
shall be registered before the registrar of mortgages (Bureau
de la Conservation des Hypothèques).
Pre-emption right
• The pre-emption right is the statutory option provided to
certain public authorities to substitute an acquirer in a real
estate transfer for purposes of general public interest.
• It prevails over any rights of pre-emption which may be held
by private persons.
ACQUISITION PROCESS:
KEY STAGES
• No prior authorisation is required from foreign investors
wishing to enter into real estate transactions in the Grand
Duchy of Luxembourg.
Asset deal vs. share deal
• Many acquisitions are carried out through share deals.
Legally, the owner will remain the same and no registration
duty will be due.
Negotiations
• The transaction will usually start with negotiations under the
terms of a confidentiality agreement in order to allow access
to various information and documentation related to the
property.
• The negotiations will generally lead to the signature of a letter
of intent (indicative or binding and exclusive or not).
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Investors Guide to Europe 2015