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• The buyer will then usually carry out due diligence in order to
assess the risks attached to the acquisition.
• The due diligence will usually cover the following aspects:
legal (including corporate file, ownership title, rights
affecting ownership and guarantees), administrative, tax,
environmental, technical and financial.
Share deal
• In a share deal (instead of a direct acquisition of real estate),
the company holding the real estate will be acquired through
an agreement on the sale of the shares.
Asset deal
• In an initial phase, the parties enter into an unilateral
undertaking to sell or, most often a preliminary agreement
(compromis de vente). Such agreement will bind the
purchaser and the seller and the ownership transfer will be
valid between them. However, such private agreement will not
be enforceable against third parties.
• Preliminary agreements usually contain specific conditions
precedent (e.g. obtaining the necessary funding or
administrative authorisations).
Notarial deed of sale
• Although private deeds are bindings between the parties,
acquisition of real estate assets require a deed according
to which the ownership of a property is transferred from
the seller to the buyer; it is necessarily notarised and is the
fulfilment of the preliminary agreement (compromis de vente).
• There should be no re-negotiation of the terms and conditions
of the sale which have been agreed at the stage of the
preliminary agreement.
• The notarial deed shall be registered before the registrar of
mortgages (Bureau de la Conservation des Hypothèques).
The registration.
COMMERCIAL LEASES
• Commercial leases relate to premises used for a commercial
activity, which will result either from a contract or from the
nature of the activity.
• Under Luxembourg law, leases are regulated by the provisions
of Title VIII, Article 1708 to 1778 of the Luxembourg Civil
Code. Although no specific legal framework exists under
Luxembourg law for commercial leases, Articles 1762-3 et
seq. of the Luxembourg Civil Code are specific to leases of
properties intended for the practice of trade.
Length of term
• Commercial leases are not regulated as to their duration.
In practice, commercial leases are mostly entered into on a
3-6-9 year basis, with a break option for both the tenant and
the landlord at the end of the third and sixth year. However,
the parties are free to agree on a different duration and
mechanism of termination.
Rent increases
• Rents are adjustable each year in line with the cost of living
index. If the parties cannot agree on the amount of the rent
for the renewal period, one or more experts will be designated
by the most diligent party or by the president of the civil court
where the property is located.
Tenant’s right to sell or sub-lease
• Unless otherwise provided for in the lease agreement, a
tenant has the right to sub-lease or (partially) transfer the
lease.
• Most leases restrict this right by requiring the prior approval
of the landlord. Luxembourg law does however offer
protection under certain circumstances, where businesses
(fonds de commerce) are transferred, in order to allow the
continuity of the business operations as a whole.
Right of preferential renewal
• For business protection purposes, Luxembourg law provides
for a special procedure for preferential renewal. Such right
requires that the tenant has operated a business in the
premises for at least 3 years and lasts until the 15th year of
the lease.
• Any request for a renewal must be notified at least 6 months
prior to the expiry of the lease and the landlord shall make its
decision within 3 months from notification.
• Any refusal of the landlord shall be justified by one of the
following grounds: serious complaints against the tenant,
personal occupation by the landlord, no further rental activity,
transformation of the premises or a higher firm offer from a
third party (with a preferential right for the tenant if it agrees
to pay the higher rent).
Repairs
• Repairs incumbent upon the tenant relate, inter alia, to
utilities, such as water, electricity, gas and fuel oil, minor
maintenance repairs (light bulbs, etc.), regular inspection of
heather, maintenance of joints and sanitary installations. As
for the landlord, it is responsible for major repairs (e.g. roof,
ceiling, boiler).
TAX
Direct acquisition of a property
• The acquisition of a property located in Luxembourg –
or related rights – is subject to registration duties (droits
d’enregistrement). However, it is in principle exempt from
value added tax (VAT).
• Registration duties applicable to properties located in
Luxembourg are assessed on the higher of the purchase
price and the effective value of the property. In principle,
registration duties are levied at a rate of 6%, subject to
exceptions in specific cases. In respect of construction sites
(i.e. land upon which constructions may be erected under
local or municipal planning rules) the registration duties are
assessed only on the land (unless a VAT option at the normal
rate has been exercised). The registration duties are payable
upon registration of the transfer of the property with the
register of mortgages.
• A transcription tax (droit de transcription), levied at the rate
of 1%, is also due on the notarial deed. For Luxembourg-City,
a surcharge of 50% is added to the amount of the registration
duties levied by the Luxembourg Registry (Administration
de l’Enregistrement et des Domaines) for the properties
transferred other than residential housing.
• In principle, the acquisition of a property located in
Luxembourg – or related rights – is exempt from VAT.
However, the acquisition of properties that are under
construction is subject to VAT on the completed part of the
72 Investors Guide to Europe 2015