Luxembourg commercial lease: law 03.02.2018, 9-year term
The complete legal framework for commercial leases in Luxembourg: term, termination, rent, indexation and renewal right.
01Legal framework and contract type
Commercial leases in Luxembourg have been governed since 1 April 2018 by the law of 3 February 2018 on commercial leases. This law replaced the application of the Civil Code alone and modernised the framework: minimum legal term, renewal right, eviction compensation, regulated indexation. It applies to leases of premises used for a commercial, craft or industrial activity carried out professionally.
Excluded: residential leases (law of 21.09.2006), agricultural leases (specific regime), leases of intangible assets (business goodwill without premises), and short-term leases (< 6 months for seasonal activities). The lease must be in writing (preferable but not mandatory); without writing, evidence of occupation and payment proves the lease's existence but with a heavier burden of proof in case of dispute.
02Term and triennial termination
The legal minimum term is 9 years (Art. 2). Parties may agree a longer term (e.g., 12, 15 or 25 years for major fit-out investments), but never shorter. If the lease provides less than 9 years, the term is automatically extended to 9 years by law.
The tenant has a triennial termination right: they may end the lease at the expiry of each 3-year period (3, 6, 9 years) with 6 months' notice served by extrajudicial act or registered letter (Art. 4). The landlord, however, may only terminate during the lease for limitatively listed reasons: serious tenant breach, personal business need, or full demolition/reconstruction works.
03Rent, indexation and key money
Commercial rent is NOT capped by the 5% rule (which applies only to residential leases). It is freely set between parties according to market conditions and the premises' rental value. For LU commercial premises, prime LU City rents typically range from €80 to €250/sqm/month depending on location and use.
Indexation is linked to the Consumer Price Index (CPI) published by STATEC. The indexation clause must be expressly provided in the lease; otherwise, rent remains fixed throughout. Rent review may be requested by either party at the end of each 3-year period if the rent no longer corresponds to actual rental value (Art. 7). Key money (pas-de-porte) is lawful in Luxembourg, in exchange for the location's commercial advantages, and is freely negotiated.
04Renewal right and eviction compensation
The commercial tenant has a lease renewal right at term (Art. 5). It is exercised by notifying the landlord of a renewal request at least 6 months before the term. A landlord refusing renewal without legitimate grounds must pay the tenant eviction compensation covering the loss: clientele loss, moving and reinstallation costs, business goodwill loss compensation.
The landlord may refuse renewal without compensation only for serious grounds: tenant's contractual or legal breach, building condition requiring full demolition and reconstruction, or personal business need (the landlord must then operate the premises in the same or related activity for at least 2 years). Assignment of the commercial lease is possible unless otherwise stipulated, generally tied to the goodwill assignment; the landlord must be informed.
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Short answers to the most common questions on this topic.
What is the minimum term of a commercial lease in Luxembourg?
9 years (Art. 2 of the law of 3 February 2018). The tenant may terminate at each triennial period (3, 6, 9 years) with 6 months' notice. The landlord may only terminate for serious breach, personal business need or demolition/reconstruction.
Is commercial rent capped in Luxembourg?
No, unlike residential leases (5% cap on invested capital), commercial rent is freely set between parties. Indexation uses STATEC CPI if an express clause provides for it.
What is key money and how to negotiate it?
Key money (pas-de-porte) is an initial payment by the tenant to the landlord in exchange for the location's commercial advantages. Lawful in LU, unregulated, freely negotiated (typically 1 to 6 months' rent for an average location, up to several years for prime). Can be amortised by the tenant over the lease term.
How does the renewal right work?
The tenant notifies a renewal request at least 6 months before the lease term. A landlord refusing without legitimate grounds (breach, demolition, personal business need) must pay eviction compensation covering clientele loss, moving and goodwill loss. The amount is set amicably or by a judge.
Can the landlord block the lease assignment to a buyer?
No, unless an opposite clause in the lease. Commercial lease assignment is free, generally tied to the goodwill assignment. The landlord must be informed but cannot oppose if the lease conditions (rent, use) are respected by the buyer. Provide an approval clause if the landlord wants oversight.
What to do in case of serious tenant breach?
The landlord sends a formal notice by registered letter specifying the breach (unpaid rent > 2 months, prohibited subletting, change of use, major damage). Without remedy within 30 days, the landlord can refer the matter to court for judicial termination with eviction and arrears/damages claim.
Official sources
Statutes, circulars and publications consulted for this guide.
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