How Does the 5% Rent Rule Work in Luxembourg?

In Luxembourg, the maximum annual rent for a dwelling cannot exceed 5% of the revalued capital invested by the landlord. This rule, established by Article 3 of the modified law of 21 September 2006 on residential leases, protects tenants against excessive rents while guaranteeing the owner a reasonable return on investment.

Invested Capital and Its Revaluation

Invested capital includes the purchase price of land and construction, deed costs, transformation and improvement expenses (excluding routine maintenance). This amount is revalued at the date of rent determination using revaluation coefficients published by STATEC, which reflect changes in construction costs. For example, a property purchased for €300,000 in 2005 with a revaluation coefficient of 1.45 gives a revalued capital of €435,000.

Maximum Rent Calculation

The maximum annual rent is strictly capped at 5% of the revalued invested capital (Art. 3 law of 21.09.2006). Formula: max annual rent = revalued invested capital × 5%. For our example (revalued capital of €435,000), the maximum annual rent is €21,750, or €1,812.50 per month. Service charges (water, heating, common area maintenance) are not included in this cap and must be billed separately based on actual costs. If a tenant believes their rent exceeds this threshold, they can refer the matter to their municipal Rent Commission.

Special Cases and Remedies

Some dwellings are exempt from the 5% rule: furnished accommodation (a supplement may apply), company housing, and leases concluded before the law came into force. For ongoing leases, the landlord can only increase rent if invested capital has been increased by improvement works. The reform under discussion (bill 8184) plans to reduce the cap from 5% to 3.5% for new leases from 2026, to better protect tenants against rising property prices.

By Erwan Bargain, REV TEGOVA · Updated: April 2026