Government to strengthen provisions for rental stores (L'essentiel)

After a scandal that resulted into 15 shops filing for bankruptcy, the Council of Government recently approved a draft law specifically devoted to commercial properties available for rent. 

The fifteen shops that recently filed for bankruptcy in Luxembourg are still in the spotlight. The Council of Government recently approved the draft of a law on commercial properties for rent in order to end what they have called a “speculation wave”.

“It turned out that the lack of protection for the lessee could lead to abuses. In order to safeguard the investments made by lessees, our Ministry has drafted a series of provisions” is stated in a press release issued by the Ministry of Middle Classes and Tourism. As per this draft, the duration of a commercial lease agreement would be extended from three to nine years; that agreement may be renewed twice. Retailers may also terminate the lease at any time during the first two years of their activities. “This helps protect both tenant and landlord from the risks of a pre-planned bankruptcy,” adds the Ministry.

Key money

The Ministry also wants to ban the so-called key money and replace it with a “rental deposit” whose amount would correspond to three monthly rents. Just to clarify, the key money is an entry fee that tenant pays to landlord by the moment they come to a commercial lease agreement. The amount of this key money currently stands at 2 million € for some shops located in Luxembourg City! It has been rumored that the key money paid by Cartier for their boutique would stand at 2.5 million €. Some 15 years ago the payment of key money was relatively unknown in the Grand Duchy but it has dramatically developed throughout the past decade and this practice was widely criticized after fifteen shops recently filled for sudden bankruptcy.

This draft law is specifically conceived for retail stores and thereby its application for shops situated in shopping centers or malls was ruled out by the Government. Offices and professionals also won’t be affected by the endorsement of this law.