Residential lease agreements between tenants and landlords

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Summary:

To rent a residential property (dwelling), the landlord (i.e. the owner of the property, or their representative) and the tenant (i.e. the person renting the property) must formalise the rental by signing a residential lease agreement. The residential lease agreement sets out the rights and obligations of both parties.

A residential lease – or residential tenancy lease – is an agreement between the owner of a residential property and the tenant of the property in which the term of the rental arrangements and the conditions governing those arrangements are freely set by the parties. The lease is a means of protecting both the owner/lessor (hereinafter referred to as the 'landlord') and the tenant should any disputes arise between the parties.

Before renting or renting out a residential property, you should consider the following points:

  • certain criteria must be satisfied before renting out a residential property;
  • certain information must be provided beforehand;
  • the form and term of the agreement;
  • the amount of the rent and rental charges;
  • the security deposit:

Who is concerned

Parties involved

Any natural or legal person who wishes to rent a residential property (dwelling) to a natural person.

The following categories of individuals may not enter into a lease agreement:

  • minors; or
  • legally incompetent adults without the legal capacity to manage their own assets; or
  • individuals who have been declared bankrupt.

Excluded properties

The type of lease referred to above – i.e. for the rental of a residential property (dwelling) – may not be used for the rental of the following types of properties:

  • properties used for:
    • commercial activities;
    • administrative activities;
    • industrial activities;
    • craft activities; or
    • the practice of a liberal profession;
  • secondary residences;
  • premises that belong to but are separate from a main residential property (dwelling) – such as a garage that is not attached to a house;
  • hotel rooms;
  • shelters for temporary accommodation of applicants for international protection, refugees, etc.;
  • furnished or unfurnished dwellings in special accommodation facilities (old people's homes, integrated centres for the elderly, etc.);
  • furnished or unfurnished dwellings made available to natural persons as part of a social assistance programme implemented by a commune, an association of communes, etc.

 

Prerequisites

Property inventory at the start of the lease

In most cases, the property inventory is completed jointly by the landlord and the tenant, or by their representatives, to avoid having to pay fees for the services of a third party. The inventory is generally completed at the end of the lease (outgoing inventory, 'check-out'), but completing an inventory at the start of the lease as well (move-in inventory, 'check-in') is highly recommended.

Landlord's obligation to provide information beforehand

Landlords who put up for rent or rent out one or more rooms must:

  • file a declaration with the mayor of the commune, specifying the rooms that they are renting out, and the maximum number of people that they can accommodate;
  • include with their declaration a plan of the premises;
  • maintain a register of their tenants with, for each tenant, the following details (which must be countersigned by the tenant):
    • surname, first name;
    • ID card or passport number;
    • room number;
    • the lease or rental start date.

Condition of the rental property (dwelling)

Rental properties must satisfy certain regulatory requirements in terms of:

  • sanitation and hygiene: surface area, humidity, ventilation, condition of wall and air, and tenants' general health condition; and
  • safety: access, stability, electricity, heating, gas, and fire prevention measures; and
  • livability: height of rooms, basic fixtures and fitting, etc.

In the case of a joint tenancy, the dwelling must have at least one living room or one bathroom that is shared by all joint tenants.

Note that:

  • the floorspace of a single room may not be less than 9 m² per tenant; and
  • the landlord must equip the dwelling with one or more CE-marked smoke detectors. The tenant is responsible for their maintenance.

The mayor of the commune may inspect the dwellings to ensure that they satisfy the sanitation, safety and livability criteria. Such inspections may be carried out between the hours of 8.00 and 18.00 only. For such inspections, the landlord must be given at least one day's notice. Upon receiving notification of an inspection, the landlord must immediately inform the tenant.

The mayor may order the closure of a dwelling if it fails to satisfy, for example, the sanitation criteria. In that case, the landlord must relocate the occupants of the dwelling. If the landlord is unable to relocate the tenants, the mayor will do so, but at the landlord's expense.

The landlord will have to bear the cost of the relocation, but for no more than 3 months.

Building's energy performance rating

Residential property sale and rental advertisements must specify:

  • the energy performance rating of the property; and
  • the thermal insulation rating of the property.

Anyone who is interested in renting a residential property is entitled to consult the energy performance certificate.

The landlord must give all new tenants a certified copy of the energy performance certificate.

How to proceed

Form of the agreement

The lease agreement must be drawn up in writing. If it is not, it will be considered null and void. It must specify:

  • the full identity of each contracting party;
  • the lease start date and the term of the lease;
  • the name of each room in the dwelling and of the different parts of the building, as well as the address and land registry reference (cadastral information) of the dwelling;
  • the amount of rent excluding rental charges, and the payment frequency;
  • the amount of the advance payment for rental charges, or the flat-rate amount for rental charges, if applicable;
  • the rental surcharge for furniture, for furnished accommodation;
  • the amount of the security deposit, if applicable; and
  • the fact that the contracting parties may refer any rent-related disputes to the Rent Committee (Commission des loyers).

The lease agreement must be produced in as many copies as there are parties.

Certain optional documents may also be included in a lease agreement, such as an inventory report.

If a real estate agent or another third party is involved in the rental, their fees must be equally shared by the landlord and the tenant.

Term of the lease

The parties are free to:

  • set the term of the lease to be specified in the lease agreement; or
  • opt for an open-end lease.

Fixed-term leases renew automatically at the end of the period specified in the agreement.

Accordingly, if either the landlord or the tenant does not wish to extend the lease at its term, they must:

  • expressly inform the other party; and
  • comply with the notice period requirement specified in the agreement (3 or 6 months, or more if specified in the agreement).

Rent

Amount of the rent

The amount of the rent must be specified in the lease agreement.

The maximum annual rental amount that the landlord may charge may not exceed 5% of the amount that they invested in the building.

The notion of 'invested capital' includes:

  • the price of the land on which the dwelling is built;
  • the cost incurred to erect the building and its outbuildings;
  • the amounts invested in improvement works.

This restriction does not apply to social housing units rented out by communes or by the Housing Fund (Fonds du logement) of the National Affordable Housing Company (Société nationale des habitations à bon marché).

In the case of furnished dwellings, the landlord may charge, in addition to the rent, a monthly surcharge for furniture, which:

  • must be specified separately from the rent in the lease agreement;
  • may not exceed 1.5% of the total cost of the furniture in the dwelling (substantiated by invoices dated no more than 10 years earlier).

The rent or the surcharge for furniture is set at the time of signing the lease.

Note: the Ministry of Housing (Ministère du logement) provides 2 tools to help users calculate maximum rental amounts, namely:

  • a brochure entitled 'Le plafond légal du loyer' (Legal caps on rent), which makes applying and checking legal caps on rent easier, transparent and consistent for landlords and tenants. It describes:
    • the different stages of the process used to determine the capital invested in a dwelling, and thus its maximum rent;
    • the valuation adjustments to be made, and the valuation discounts for obsolescence;
    • how the surcharge that a landlord can charge when renting furnished accommodation is calculated, based on the capital invested in the furniture;
  • an Excel spreadsheet, which guides the user through the different stages of the process used to determine the invested capital, and thus the legal cap on the rent for an unfurnished dwelling.

Rent review

The rent may only be reviewed once every 2 years. This 2-year period:

  • is reset whenever the tenant changes;
  • continues to apply even if the landlord changes.

The rent may not be increased by more than 10 %.

If the rent is increased by more than 10 %, the tenant should lodge a claim with the landlord (by registered letter). In that case, the proportion of the rent that exceeds the 10 % cap will no longer be due as of the first month following the tenant's claim.

If the lease includes what is known as a 'value clause' – i.e. a clause that stipulates that the rent varies based on the cost-of-living index, for instance – the tenant simply needs to lodge a claim with the landlord (by registered letter) and the clause will automatically lose its effect one month after the date on which the claim was lodged.

Rental charges

Composition

Rental charges are expenses that the landlord may charge the tenant, namely:

  • costs incurred for:
    • energy consumption;
    • routine maintenance of the rented accommodation and common areas;
    • minor repairs;
  • fees incurred for the use of the dwelling.

The following expenses must be borne by the tenant:

  • water consumption charges; 
  • heating/gas consumption charges; 
  • electricity charges; 
  • sewage charges; 
  • rubbish collection charges; 
  • chimney sweeping charges; 

routine central heating cleaning charges.

On the other hand, the landlord must pay the property tax and any other property-related taxes.

Advance payment of rental charges

The landlord may require the tenant to pay the rental charges in advance in reasonable instalments. The amount of the advance payments may be adjusted based on the actual rental charges paid by the tenant in previous years.

The rental charges are not included in the monthly rent.

The landlord must send the tenant an annual breakdown of rental charges, along with receipts/invoices – or copies of the latter – for the expenses advanced by the landlord, as proof of the rental charges to be borne by the tenant. The annual breakdown should show the rental charge instalments that the tenant pays every month, as well as the expenses actually incurred.

The parties may also agree to set the advance payments for rental charges as a flat-rate amount, if this flat-rate amount covers the tenant's normal utilities consumption and rental charges. The flat-rate advance rental charge may be adjusted during the term of the lease.

During the term of the lease, the parties may replace the rental charge instalment arrangement by the flat-rate rental charge arrangement, and vice versa.

Security deposit

Amount

At the time of signing the lease, the landlord may require the tenant to pay a security deposit. The security deposit may not exceed the equivalent of 2 months' rent.

The security deposit is intended to serve as a guarantee for the payment of the rent, the rental charges, and any damages to the rented property caused by the tenant.

If a security deposit is required, a move-in inventory must be signed no later than the day the tenant takes possession of the rented accommodation.

Form

The security deposit may take any one of the following 5 forms:

  • a bank guarantee, with a distinction being made between:
    • a so-called 'first demand' guarantee (à première demande): the guarantee amount is blocked for the term of the lease in a special account held by the tenant. Should the tenant default on payment, the landlord can obtain all or part of the blocked amount from the bank, on demand, without the tenant's prior consent and without having to justify their demand; or
    • a simple bank guarantee: the guarantee amount is also blocked for the term of the lease in a special bank account held by the tenant. However, in this case, the bank will only release the amount claimed by the landlord if the latter can prove the existence of the debt owed to them by the tenant. As proof of the debt, the landlord may provide, for example:
      • a court ruling requiring the tenant to pay a specified amount; or
      • a written statement by the tenant acknowledging that they owe the landlord the amount in question;
  • a bank transfer paid into the landlord's account;
  • a cash payment: this option may only be proposed by the tenant; it may not be imposed by the landlord;
  • a deposit paid by the state;
  • a security deposit insurance policy: provided that the landlord agrees to this kind of security deposit, the tenant can take out an insurance policy whereby, if the rent is not paid, the insurance company will indemnify the landlord directly. This type of insurance may include an indemnification arrangement comparable to that of the first demand bank guarantee.

Repayment

If, at the end of the lease, the move-out inventory matches the move-in inventory – except for normal wear and tear – and the landlord has no claims for outstanding rent payments or damages to the property, the security deposit must be returned to the tenant. This is done in 2 stages:

  • half of the security deposit must be returned no later than one month after the keys to the property are returned to the landlord, or their representative, by hand or by registered letter with acknowledgement of receipt; and
  • the rest of the security deposit is returned (less any sums owed to the landlord) and the matter finally settled no later than one month after:
    • the receipt of the statement of rental charges that the landlord is required to apply for from the various services and administrative authorities no later than one month after the end of the lease; or
    • the annual accounts of the building are approved at the next general meeting of co-owners.

If the move-out inventory does not match the move-in inventory – discounting normal wear and tear – or if the landlord has any outstanding claims, the landlord may deduct from the security deposit:

  • any sums that are still owed to them; and
  • any sums that the landlord may be required to pay on behalf of the tenant, provided that the landlord substantiates the payment of said sums with supporting documents within no more than one month.

If the landlord fails to return the security deposit within the required time frames, and the tenant has sent the landlord a formal notice to pay, by registered letter with acknowledgement of receipt, an amount equivalent to 10 % of the monthly rent shall be added to the outstanding part of the security deposit every additional month, or part thereof, that the payment is due.

However, this increase shall not apply if the security deposit is not returned within the required time frame for reasons attributable to the tenant.

If the landlord fails to return the security deposit after receiving a formal notice to do so, the tenant may initiate legal proceedings against the landlord and file a petition for relief with the competent magistrate's court.

In the event of a full or partial transfer of ownership of the rented property, the security deposits will be automatically transferred to the new owner.

Special case of joint tenancy

Joint tenancy agreement

Several tenants, known as joint tenants, may decide to rent the same accommodation, with the landlord's consent.

To do so, the joint tenants must be bound beforehand by a written joint tenancy agreement, which must be signed by all of the joint tenants by no later than the date on which the lease is signed. The date on which the joint tenancy agreement was signed must be specified in the single lease agreement binding the joint tenants and the landlord.

The landlord may rent out part of their own dwelling without being a joint tenant. In that case, the landlord must specify in the lease the amount of their share in the expenses to be borne by the joint tenancy.

The joint tenancy agreement formalises the aspects that are specific to living in a shared dwelling and the practical arrangements for this form of rental.

At the very least, the joint tenancy agreement must specify:

  • how the rent is divided among the joint tenants, if this is not specified in the lease; and
  • how the common-expense charges are divided among the joint tenants; and
  • the inventory of moveable assets, along with their owners; and
  • the arrangements with regard to utilities contracts and housing insurance; and
  • the arrangements governing the arrival, departure and replacement of joint tenants, including how the other joint tenants are given notice; and
  • the conditions governing each joint tenant's contribution to the security deposit, and how much they will recover when it is returned; and
  • the arrangements governing the resolution of disputes among the joint tenants.

The joint tenancy agreement should also specify what actions should be taken when a joint tenant leaves before the lease expires. These include:

  • carrying out an intermediate inventory to determine the responsibility of each joint tenant, and their contribution to repair costs; and
  • updating the joint tenancy agreement accordingly and having it signed by the other joint tenants.

If the joint tenancy agreement makes no provision for each joint tenant's responsibility with regard to fulfilment of the obligations under the lease, the joint tenants will be equally responsible for the fulfilment of the obligations. The joint tenants will be jointly and severally liable to the landlord.

End of the joint tenancy

Termination by several joint tenants

If all of the joint tenants terminate the lease at the same time, they must all:

  • sign the letter of notice; and
  • send it to the landlord by registered letter with acknowledgement of receipt; and
  • give the landlord at least 3 months' notice.

If at least half of the joint tenants give notice within a period of 3 months, the landlord may terminate the lease. In that case, after receiving the last letter of notice, the landlord must wait one month before sending their letter of termination to each joint tenant (by registered letter with acknowledgement of receipt). The landlord must give the joint tenant 3 months' notice of termination.

Termination by one of the joint tenants

If one of the joint tenants wishes to leave the joint tenancy before the lease expires, they must:

  • give the landlord and the other joint tenants 3 months' notice; and
  • send the notice of termination to the landlord by registered letter with acknowledgement of receipt; and
  • find another joint tenant to replace them before the expiry of their notice period or, failing that, demonstrate that they had actively attempted to find a new joint tenant (e.g. by publishing a 'tenant wanted' ad in at least 2 media that publish classified ads, with a section featuring ads for the Luxembourg real estate market, within 15 days of the start of their notice period).

When the new joint tenant arrives, they and the other joint tenants must sign a rider to the joint tenancy agreement and a rider to the initial lease agreement.

The outgoing joint tenant will no longer be bound by their obligations under the initial lease or the joint tenancy agreement, as of:

  • the date on which the rider formalising the arrival of the new joint tenant is signed; or
  • the date on which their 3-months' notice expires, provided that they have demonstrated that they had actively attempted to find a new joint tenant; or
  • the date on which their 3-months' notice expires, plus no more than 3 months.

The guarantee given by the person who stood surety for the outgoing joint tenant extinguishes on the same date.

Who to contact

Related procedures and links

Procedures

Links

Further information

Legal references

  • Code civil
  • Loi modifiée du 21 septembre 2006

    sur le bail à usage d'habitation et modifiant certaines dispositions du Code civil

  • Loi du 5 août 2015

    modifiant la loi modifiée du 21 septembre 2006 sur le bail à usage d'habitation et modifiant certaines dispositions du Code civil

  • Loi du 6 décembre 2019

    relative à l’installation obligatoire de détecteurs autonomes de fumée pour les immeubles comprenant au moins un logement et modifiant la loi modifiée du 27 juillet 1997 sur le contrat d’assurance

  • Loi du 20 décembre 2019

    relative aux critères de salubrité, d’hygiène, de sécurité et d’habitabilité des logements et chambres donnés en location ou mis à disposition à des fins d’habitation

  • Règlement grand-ducal du 5 mai 2012

    modifiant 1. le règlement grand-ducal modifié du 30 novembre 2007 concernant la performance énergétique des bâtiments d'habitation; 2. le règlement grand-ducal du 31 août 2010 concernant la performance énergétique des bâtiments fonctionnels

  • Règlement grand-ducal du 20 décembre 2019

    déterminant les critères minimaux de salubrité, d’hygiène, de sécurité et d’habitabilité auxquels doivent répondre les logements et chambres donnés en location ou mis à disposition à des fins d’habitation

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