COVID-19 | Commercial and Residential Lease Arrangements
On 18 March 2020, the Luxembourg government adopted a Grand-Ducal Regulation declaring a state of emergency, allowing it to take urgent measures to deal with the crisis linked to Covid-19. By a law voted on 24 March 2020, the state of emergency was extended for a maximum period of three months.
With regard to commercial and residential leases, the only measure taken so far by the government concerns the suspension of the eviction orders. However, two bills have been tabled with a view to introducing aid measures in the context of the current health crisis.
The suspension of the eviction orders
On 25 March 2020, the Government issued a regulation suspending the time limits for jurisdictional matters and temporarily adapting other procedural arrangements. Article 5, paragraph 1 of the regulation states that “Evictions ordered in respect of leases for residential use and commercial use shall be suspended”. Thus, the lessor is no longer authorised to proceed with the eviction process whilst the state of emergency is in place.
Bill 7549 instituting transitional provisions concerning rental leases in the context of the COVID-19 health crisis
This draft law excludes unilateral termination of the lease contract by the lessor, in the event that non-payment of rent occurs in the period from April 1, 2020 to June 30, 2020, if and only if this non-payment is directly related to the consequences of the COVID-19 pandemic.
The proposed legislation includes both residential and farm leases.
Bill 7551 suspending for the duration of the state of crisis rents relating to commercial and professional leases and amending the amended law of 4 December 1967 concerning income tax
Two measures are proposed:
- The suspension of the obligation to pay rent during a state of crisis. This suspension is accompanied by the prohibition of the right of termination with immediate effect which the lessor has in normal times. However, it is specified that this deprivation concerns only the non-payment of rent due or to fall due during the period of the state of crisis.
Limit:
- If the tenant refrains from paying the rents falling due after the end of the state of crisis, the landlord regains his full rights.
- If the tenant does not pay the rent arrears accumulated during the state of crisis by June 30, 2021 at the latest. At that time, the rules governing leases and in particular those relating to commercial leases apply.
Note:
- Beneficiaries of this measure would be requested not to cumulate this measure with aid measures in favour of undertakings in temporary financial difficulty.
- The possibility for both parties to revise downwards the rent due during the state of crisis and the possibility for the lessor to simply waive the rents in question remain intact.
- Adaptation of tax legislation accordingly
It should also be noted that in a press release dated 23 March 2020, the Luxembourg Confederation of Commerce recommends, as far as possible, that both public and private landlords of commercial premises grant extended payment terms of several months, or outright cancellation of part of the rent due. Indeed, due to the containment measures taken in Luxembourg, most shops have to remain closed, resulting in a complete loss of turnover.
With this in mind, the cities of Luxembourg, Esch-sur-Alzette, Ettelbruck and Dudelange have already announced that they are suspending the obligation to pay rent for premises belonging to them and used for commercial or catering activities for the duration of the health crisis. Furthermore, in a spirit of solidarity, several large shopping malls have also made a gesture in favour of their tenants by writing off the payment of rent for a specific period or by postponing its payment date.