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Finding closing prices in Luxembourg

A common question we get at houser is “Where are the closing prices?”. Unlike many other countries (Canada, US,UK, Nordic countries to name but a few), finding the final selling price for property in Luxembourg is a bit more intensive than a quick visit to a website or government repository. To our knowledge there is no easy way to gaining this information (Even government research institutes such as CEPS use property listing data for their analysis). There IS a process for getting the latest sale price on a SINGLE specific property within Luxembourg. It’s manual and paper driven (you get printed documents as an output). Here’s the process in a nutshell: 1) Find the property you’re interested in. You’ll need either the street address or the cadastral plot number (cadastral number can be found here: http://map.geoportal.lu/).

* For this example I’m going to use a property that I’m very curious of. If you’ve traveled along the river between Luxembourg city and Hesperange you’ll have seen this property before. It’s definitely fallen on hard times and at one point featured broken windows and doors: 66 Rue de la Montagne, Hamm

2) Head to the Cadastre office that covers the property you’re interested in and ask for the “provenance” of the property. This will give you the history of the property and information on the owners (important for the next step!). The price is 3 EUR per page and they are typically 2-3 pages in length. You can find the list of cadsatral and opening hours (they’re not work friendly hours!) here: http://www.act.public.lu/fr/index.html. Below is the document we retrieved

* you can see here the history of the property. The format is pretty simple to understand. The current owner of the property is kimono sa. the previous owner was Charlotte Ronck and they sold it in 2007 to kimono sa (as can be seen that it is a “vente” action) and the notaire is Mr. Molitar 3) Now that you have the history of the property you can head to the Bureaux d’hypotheque (http://www.aed.public.lu/functions/contact/bureaux_hypotheque.html) and request the property information - this will produce a photocopy of the original document and costs you some money (the fee structure seemed a bit weird to me but expect to pay ~5-6 EUR). You’ll need to speak with the person and request a specific document. from the provenance I requested for the sale document between Charlotte Ronck and Kimono sa in 2007. 

* The output document is the notarial document that confirms the sale. There’s a lot of historical information on the property. We can skip to the bottom of page 4 and see that the price for sale is considered 950,000 EUR. That’s quite a price to pay! and look at the condition it’s in now! Well everyone I hope we haven’t bored you too much on the process of finding the property prices. We’re going to have a couple more writeups regarding what can be done with this information once you have it.

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Rental Charges: who pays what?

Who pays what when you rent a property in Luxembourg? Claire Aumont from Monde Avenir discusses what the tenant and landlord obligations are for different rental fees.

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Rental charges are an essential part of any rental agreement. The current rental legislation, the “Bail à loyer” (issued in 2002) lists them and stipulates, for each, whether it is up to the landlord or to the tenant to pay for them.

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Charges

Borne by the Landlord

Borne by the Tenant

1) Consumption charges:

Electricity, gas, heating, water,

Are excluded: the costs of reading the consumed units, which are borne by the landlord.

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2) Costs related to the maintenance of the rented property and of the communal space (when the rental property is in a residence)

- The tenant must take care of all maintenance jobs; they rank from the general cleaning and upkeep of the inside and of the outside (for instance cutting the lawn and trimming the edges) to annual tasks such as the revision of the boiler and the changing of the ventilation filters.

- Are also included the maintenance of the fireplace, the letterbox and the lift inside the residence (if the tenant does not live on the ground floor).

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3) Costs for small repairs

Caused to the floors, walls, windows, doors, fireplace, kitchen appliances, …

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4) Local taxes

Water (as seen above) and waste management

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5) Management fees

Unless some of them relate specifically to a task commissioned by the tenant

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6) Replacement due to wear and tear, dilapidation and Force Majeure (Act of God)

Replacement of wallpaper:

Careful here! Marks on walls are not treated as wear and tear, they fall in the category 2 above.

Are also included in this section the maintenance and replacement of the floor coverings, the roof, gutters, pavement outside the property.

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Comments:

All costs usually endorsed by the landlord can be charged to the tenant instead if the latter clearly is the person responsible for the damage. The reversed situation is also applicable.

A rental contract, duly agreed and signed by both parties, may overrule some of the abovementioned information. However, in absence of such mentions, all parties must refer to the legislation.

In a residence, the management company is the recipient for most invoices. At the end of each calendar year, it allocates the total costs to each landlord (based on the surface owned) and the landlord in turn passes on the relevant costs to the tenant. This may happen some time after a tenant has left and it justifies why the landlord has up to 6 months to release the tenant’s bank warranty

In light of the above and in order to facilitate the process, the landlord may elect to invoice the tenant for a fixed monthly amount; these advances must be adjusted with the actual costs at some stage during the following year. So-called ‘actual costs’ must also be justified.

It is advisable to go through the description of each charge with a fine-tooth comb ahead of the signature of the rental contract; many tenants are expatriate and one often does not realise that rental conditions can differ greatly from one country to the other.

The rental contract templates available via the internet are generic and unspecific; the estate agent is there to draft a rental contract that relates specifically to a given property with a listing of all the relevant charges and the details of who is responsible for what. Also do not hesitate to ask ahead of the contract signature how the maintenance should be dealt with: some landlords do not want the tenants to paint the walls themselves but insists on professionals to do the job.

As always, these articles are a summary presentation of various topics on real estate. These topics ought to be reviewed with a professional when approached for an individual case.

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How to exit a residential rental contract

When the tenant wants to exit the rental contract:About to sign a new rental contract? Claire Aumont from Monde Avenir discusses the important points that you should have in your lease to make things go as smoothly as possible if you have to leave.

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Not so surprisingly the exit of a rental contract is something that you must anticipate while you negotiate your lease; its terms are important, they must be agreed and written down in the agreement.

By law the exit of a contract requires a minimum of 3 months’ notice regardless of who initiates the request, whether it is the landlord or the tenant. This minimum notice can be longer than 3 months and the extended notice is valid and law-abiding, once it is mentioned in the contract and once the contract has been signed by both parties.

When the tenant wants to exit the rental contract:

If a contract is due to end on a specific date, the tenant is simply obliged to complete his/her duties until that date.

However if the contract is tacitly renewable and if the tenant does not want to stay on, a notification must be sent to the landlord ahead of the 3 months’ notice.

In the instance when the rental agreement is tacitly renewed year on year, the tenant is expected to comply his/her duties until the end of the current contract year regardless of the given notice.

Some landlords are more flexible and will accept an earlier exit provided that the tenant or the appointed estate agent is able to find a new tenant to take over the rental property. This does not mean that the new tenant will “finish off” the existing contract, usually a new one is drafted.

The so-called “clause diplomatique” is often included in the contract. It allows the tenant to leave the property earlier than the set date on the one condition that he/she is relocated to another branch of the company, outside of Luxembourg. It does not apply when changing employer or when being let go. The 3-month-notice rule still applies and if the tenant leaves before the notice is up, payments and obligations must still be met until the end of it.

When the landlord wants to exit the rental contract:

This instance is strictly regulated so as to avoid any abuse; the landlord can request the exit if only one of the 3 following reasons can be brought forward and justified:

The landlord or one of his/her close relatives wants to move in the rental property; he/she will need to elect it as his/her new domicile.

The landlord wants to refurbish the property to such extend that it would be impossible for the tenant to stay in.

The current tenant does not comply with the obligations stipulated by the terms of the lease.

When a rental property is put on the market:

The tenant has the possibility to stay and even benefits from a pre-emptive right in the buying process, if he/she has been renting the property for more than 18 years.

If the rental contract was duly registered, the new landlord cannot oppose it and he/she can only evict the tenant if one of the 3 reasons above-mentioned apply. It is worth noting that the legislation does not specify who must pay for the registration of a rental contract. In order to avoid any confusion, the current practice is to mention on the legal document that the responsibility is on the tenant.

Termination notice must be acknowledged:

Contracts usually stipulate that termination notices must be made in writing and must be sent by registered letter. It is also wise to request an acknowledgement of receipt. If the landlord is out of the country and does not receive the letter on time (if undelivered, the registered letters are kept by the post office for a duration of only one month), it could be argued that the notice of exit was not communicated properly.

At this point in time, it is worth mentioning that the acknowledgment of a contract termination must occur before the notice period kicks in.

Keys must be handed back properly:

The keys to the rental property must be handed back properly. Again it is wise to notify the handing back on the exit inventory so there is a written record that the landlord or the estate agent has received the keys back. If communication has broken down between landlords and tenants, the latter may be tempted to leave the keys in the letter box on their way out but the landlord could complain that the rental contract was not terminated properly.

The current legislation relating to rental properties was published in 2006 and it can be found following this link:

http://www.guichet.public.lu/citoyens/fr/publications/logement/bail-loyer-legislation/index.html

When the above legislation does not answer your question, you need to refer to the Code Civil.

As always, these articles are a summary presentation of various topics on real estate. These topics ought to be reviewed with a professional when approached for an individual case.

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HABITABLE SURFACE: what’s in the new law and are the changes enough?

How do real-esate agents work out the ‘habitable surface’ or ‘living space’ of a property? Why do different agents give different sizes? Claire Aumont from Monde Avenir explains the proposed habitable surface legislation and how it aims to standardise living space measurements.

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Have you ever wondered why sometimes advertisements for the same property show contradicting measurement data? Vendors, landlords and estate agents alike are hardly to blame; until now, any approach in measuring property and in defining what is ‘habitable’ was perfectly acceptable, as no guidelines existed. However, the days of the Wild West should be over since the norm-setting institute, the ILNAS (“Institut luxembourgeois de la normalisation de l’accréditation, de la sécurité et qualité des produits et services”) has issued guidelines, soon to be voted and enforced as a national norm. The advantages for the residential market will be substantial:  all properties will be measured according to the same guidelines therefore allowing consistency between advertisements and an easier comparison of the various properties on the market. Here is a summary of the proposed legislation:

The rooms that constitute habitable surfaces are all the main rooms (living rooms, bedrooms, …), bathrooms (including separated W.C.), corridors and staircases.

The following spaces are excluded: technical rooms, cellars, garages, balconies and non-heated verandas.

If the height of the ceiling is below 2m, the surface is to be excluded.

Measurements are taken inside each room; wall thicknesses, door and window frames are excluded but not the spaces used for integrated storage.

The total habitable surface of a property is calculated by adding together the surfaces of each room to be considered.

While this new method is definitely a step in the right direction, it remains to be seen whether it is sufficiently detailed. One question comes to mind: how to treat, for instance, a basement room, which has a window, is heated and is used as a playroom? Is it a proper room or should it remain a cellar on the basis that it is located in the so-called “cold area” of the building (as defined for the Energy Rating)? It also remains to be seen whether this harmonisation effort should not be pushed further. The habitable surface, as it is here defined, is different from the “surface utile” which we find on the Land Registers for apartment buildings which includes all surfaces, wall thicknesses and even balconies! So there is definitely room for further improvement to clear up the remaining areas of confusion.

The full document can be found on the governement website.

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LUXEMBOURG REAL-ESTATE REGISTRATION TAX & THE BËLLEGEN AKT

When you’re buying a house you need to know how much tax you’ll pay on top of the price you pay for the property. Claire Aumont from Monde Avenir explains what Luxembourg property Registration Tax is and how it affects different types of property buyer.

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In the previous article, we concentrated on the VAT and its application when dealing with real estate transactions. We noted that, when purchasing a property, VAT is only applicable to buildings yet to be built. When the purchase relates to a piece of land or an existing dwelling, the Registration tax is applicable instead, so we explain below the important points relating to this tax.

The Registration Tax when buying a residential property

The Registration Tax is due on the day of the signature of the Sales Agreement ‘Acte de Vente’

The Registration Tax is applicable whether the purchased property will be a primary residence, a secondary home or an investment property. It represents 7% of the property purchase price as mentioned on the Acte: 6% relates to the registration tax itself and 1% relates to the so-called transcription tax, which is for the transcription of the new ownership, i.e.to ensure the transaction is not challengeable by a third party. The tax also applies when the property has a commercial purpose but the rate is increasted by 50% when located in Luxembourg-Ville 

The above-mentioned rate goes up to 8.2% (7.2 + 1) when the Acte de Vente stipulates that the purchase is a speculative transaction. In this instance, if the property is sold on within the 2 years following its acquisition, the buyer can apply for a reimbursement of 6% of the tax previously paid.  If, instead, the property is sold on within the 3rd and 4th years following its acquisition, the buyer can apply for a reimbursement of 4.8% of the tax previously paid

The Bëllegen Akt

Buyers can avail of a generous discount on the registration fees through the Bëllegen Akt, which allows a reduction of the tax up to a maximum of 20 000€ per buyer (40 000€ for a couple purchasing jointly).

To be eligible, they must take up primary residency in the property they purchase, therefore the Act does not apply when buying a secondary home, an investment property or a commercial dwelling. They have 2 years after the date of the signature of the Act to move in, or 4 years if the instance when the house is being built.

The reduction comes with another constraint: the owner has to stay at least two years in this property and during this time the property is to remain his/her main residence

Let’s look at an example:

Purchase value (as shown on the Acte): 500 000€

The Registration portion of the tax will be: 500 000€ * 6% = 30 000€

The Transcription portion of the tax will be: 500 000€ * 1% = 5 000€

Total Tax to be paid on the day of the signature of the Acte: 35 000€ (on the top of the purchase value of 500 000€ and of the Notary Fees)

If the buyer benefits from the Bëllegen Akt:

the total tax to be paid will be: 35 000€ – 20 000€ = 15000€

If the buyers both benefit from the Bëllegen Akt, the tax to be paid will not be nil (35 000€ – 40 000€) but it will be an arbitrary 100€

If the property is an investment property, the tax will be 41 000€

If the property is sold on within the 2 years following its acquisition, the reimbursement that can be claimed will be 500 000€ * 6% = 30000€ (the state therefore holds on to 11 000€)

If the property is sold within the 4 years following its acquisition, the reimbursement that can be claimed will be 500000 * 4.8% = 24000€ (the state therefore holds on to 17000€)

The Registration Tax when renting a property

This tax is less known as currently it is not enforced as strictly as the one above. The rental contracts are signed privately and therefore the Tax Office is not automatically notified. Nevertheless a tax of 0.6% is applicable to the total rent payable under the conditions of the rental contract.

So for a rental contract of 3 years, with a monthly rent of 1500€, the total tax to pay is

0.6% x 1500€ x 12 months x 3 years = 324€

It is the responsibility of the tenant to come forward with the payment.

As always, these articles are a summary presentation of various topics on real estate. These topics ought to be reviewed with a professional when approached for an individual case.

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Luxembourg real-estate VAT Part 2: the VAT changes

Whether you’re a first-time buyer, buying a second home, or buying to-let, you need to know which VAT rate you’ll pay on your property. Claire Aumont from Monde Avenir explains what you need to know. For Part 1, the VAT Rates, click here.

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A few years ago, the reduced rate was introduced to stimulate construction work across the country. In 2015, the legislation was further amended on two aspects:

1. Increase of the standard VAT rate from 15% to 17%

The ceiling amount of the fiscal favour, i.e. 50000 €, is now reached quicker. Before the change, it took an initial investment of 416 666.67 € to use up the savings. Now it takes an investment of only 357 142.86 € to reach this limit.

Your money does not go such a long way anymore.

2. Limit the application of the super rate to the creation of private residence only if used by the owner.

The investment properties are now excluded even if the tenants use the property as their own principal residence.

The increase of the standard rate, from 15% to 17%, together with the change in its application have been strongly criticized and perceived as counter-measures to the original intention. It also fuels the constant argument that property prices have reached an all-time high that only wealthy foreign investors can afford while the need for creating housing units has never been so critical.

For a complete presentation and to download all the relevant claim forms, please go to the governmental website: http://www.aed.public.lu/tva/logement/

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Luxembourg real-estate VAT Part 1: the VAT rates and what they mean for different types of buyer

Whether you’re a first-time buyer, buying a second home, or buying to-let, you need to know which VAT rate you’ll pay on your property. Claire Aumont from Monde Avenir explains what you need to know.

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The different VAT rates in use in Luxembourg for different types of property can sometimes seem impenetrable when you’re redirected from one Government portal to another. We’ve brought all the information to one place and tried to make it as clear as possible which rate of VAT you should expect.

When dealing with real estate, there are only 2 applicable VAT rates: the standard 17% rate and the 3% so-called super-reduced rate. We outline below the conditions for using the 2nd rate over the 1st one.

Here is a quick overview of the various scenarios:

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When the property will be the Principal Residence of the buyer When the property will be (for its buyer) either a Secondary or an Investment Residence Purchase of land VAT exonerated – registration tax instead VAT exonerated – registration tax instead Purchase of an existing building VAT exonerated – registration tax instead VAT exonerated – registration tax instead Purchase of a - or part of a - building not built yet Super reduced rate of 3% Standard rate of 17% Renovation work Super reduced rate of 3% applies for some renovation works; otherwise standard rate of 17% applies Super reduced rate of 3% applies for some renovation works; otherwise standard rate of 17% applies

It is irrelevant whether you are a first time buyer or not as the VAT is a property-related tax and not a person-related tax. The onus is therefore on whether you buy the property to make it your main residence or an investment/secondary property.

The conditions for the application of the super-reduced rate of 3% are as follows:

As the 3% rate applies only to principal residences, reverting to a 17% rate is automatic for areas used for professional purposes, if they cover more than 25% of the total area. If the professional space remains under 25% of the overall surface, there is no adjustment.

Renovation works which benefit from the super rate of 3% include most types of structural works but exclude, for instance, the fitting of integrated furniture - such as kitchens and wardrobes, some internal woodwork, the installation of an alarm system and the landscaping of the garden (outside of the direct path to reach the house or the garage entrances).

The renovation work must take place within the 5 years following the acquisition of the property. If the property is more than 20 years old, the renovations work must not last more than 2 years.

Builders and other construction-related companies (tilers, plumbers, electricians, etc) can apply for the authorization to invoice with the 3% rate, before the physical work starts. If they do not, clients will be invoiced at 17% and they will need to apply for the reimbursement of the savings (see paragraph immediately below) once the invoices have been paid. The first instance is obviously easier and avoids all possible delays in being compensated at a later stage.

The application of the super-reduced rate is limited to a maximum saving of 50 000€. This fiscal subsidy is calculated as being the difference between what you would pay in VAT if charged at 17% and what you will pay when taxed at only 3%. So, for an amount of 100 000 €, the 17% VAT is 17 000 €, the 3% VAT is 3 000 € therefore your saving is 14 000 €. As long as your initial investment does not exceed 357 142.86 € (before VAT) you can be taxed at 3% only. Any spending above this amount will be taxed at 17%.

The property must remain a principal residence for 2 years after the 01/01, which follows the completion of the building work (either for creating the property or for renovating it). Otherwise the savings are reimbursable.

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The paperwork you need to sell your property in Luxembourg

Selling your property? Wondering what information you need to give the buyer and what forms you need to fill in? Claire Aumont from Monde Avenir explains what you need to know.

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Sellers should gather the necessary paperwork at the time they decide to put their property on the market as most information is to be made available to the prospective buyers ahead of the signature of a “Compromis de Vente”.

The necessary documents have two broad aims:

to provide the prospective buyers with an in-depth survey of the property,

to prove the fact that the sellers are indeed the current owners of the property.

Namely the documents are as follows:

The Energy Pass is an energy report established upon the survey of the property by a certified assessor. A valid Pass is necessary to put a property on the market and it is valid 10 years. It rates the efficiency of the heating system and that of the thermal insulation. It also advises on the possible improvements, which could be considered in order to improve on the existing efficiency.

The “Extrait Cadastral” shows the measurements of the property and, if the property is located in an apartment block, the percentage given to each of the private units (for the purpose of voting and allocating the communal charges). The measurements indicated on this document are the official ones and they are the ones to mention in the selling advertisements and documents. It also indicates the details of the owners.

Prospective buyers may order a technical survey of the property by an architect or another expert, but often the technical information made available to them is sufficient. It includes:

Technical drawings of the property prepared at the time of the building,

Technical drawings showing the possible structural changes made to the property since its initial build,

The building authorisations, which would have been sought for structural alterations (in the worst case you could even be asked to knock down an extension, which would not have received the proper building authorisation, even though you purchased the property with this extension!).

Disclosing so much information will reassure the prospective buyers; they will understand the property for what it is and not for what they are told. Although it is acceptable to describe a room currently used for a study as being a bedroom, it is incorrect to describe as “habitable” a space that legally is not (attic, basement, …)

The seller has a moral obligation to inform on all other matters that may relate to the property and which may not be visible at the time of the visits: the dilapidation of some structural items or equipment, a possible court case with a neighbor over the dividing wall. Buyers have the legal possibility of suing both sellers and estate agents for wrongful information.

The seller can also anticipate many questions on the running and maintenance charges of the property so it is best to provide visitors with copies of relevant invoices.

Finally, the Notary will check that no recent transactions overrule the documents listed earlier in relation to the ownership of the property, and will confirm the freedom of the owner to dispose of it freely. It is worth mentioning that although the property belongs to one person, if this property is the conjugal domicile of the owner and that of his/her spouse, the spouse must agree to the sale.

As always, these articles are a summary presentation of various topics on real estate. These topics ought to be reviewed with a professional when approached for an individual case.

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The Rental Contract Part 2

This is the 4th in a series of guest articles by Claire Aumont from Monde Avenir which will cover interesting topics for buyers, sellers, landlords and real-estate professionals in Luxembourg.

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Catch up on the rental contract clauses we covered in Part 1 here

The must-have clauses in a Rental Contract: part 2

The maintenance of the property:

Broadly speaking the tenant is responsible for the general day to day upkeep of the property during the occupancy period and the landlord is responsible at all times for maintaining the structure of the building.

It is advisable to list out who is responsible for maintaining specific items so there are no argument down the road (e.g. who maintains the boiler, who cuts the edges in the garden, should the tenant repaint the property before exiting it?).

Entering the property:

On the day of the key handover, make sure that you scan the property for any visible defects and that you take photographs. They should be documented together with the contents of the property in an inventory that is called “inventaire d’entrée”. If in the next few weeks the tenant comes across new defects when starting using appliances and other equipment, he/she must notify the estate agent in writing so it can be added to the document. Both parties must agree and sign the document for approval.

Leaving the property:

On leaving the property the tenant must hand over the keys to the landlord (or the estate agent) and should request a written acknowledgment. On the same day, both parties scan the property for any visible damages. The findings, illustrated with photographs, are gathered in the “inventaire de sortie” which is signed off and compared to the “inventaire d’entrée”. The law vaguely stipulates that the property should be handed back in a condition similar to the one it was let in. So any difference between the two documents must be identified: either it is due to ordinary wear and tear, or it is due to lack of care in which case the tenant is held responsible for (unless he can prove no personal wrong doing).  

General considerations:

The current legislation is published under the “Loi du 21 septembre 2006 - Le bail à loyer” and it relates to most residential rentals. When it does not answer a specific point, one must refer to the Code Civil. This rental legislation is complex and the above article can only be perceived as a general guideline.

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The Rental Contract Part 1

This is the 3rd in a series of guest articles by Claire Aumont from Monde Avenir which will cover interesting topics for buyers, sellers, landlords and real-estate professionals in Luxembourg.

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The must-have clauses in a Rental Contract: part 1

So you’ve made it through the minefield of rental listings and property viewings and actually found a place that you like and want to rent. Your landlord or estate agent hands you a thick document in French and asks you to sign there and then! Don’t panic - below we’ve listed the main must-have clauses in a rental contract. Don’t be afraid to discuss points with your landlord and don’t be afraid to ask for new clauses to be added.

When negotiating your Rental Contract “contrat de bail”, you should obviously discuss some clauses such as the rental price. Some other clauses don’t seem as critical yet it is essential that you check them all so as to understand thoroughly the contract you are entering into.

Personal details of both parties:

Communication is key so make sure to mention full current addresses, telephone numbers and email addresses.

 If a married couple is renting, both names (and details) should be listed so if one partner dies, the other can stay legitimately as long as the terms of the contract are respected

Co-tenants are co-responsible for complying with all the terms of the contract.

The property:

It is important to specify its boundaries and all that is included in it whether it is a parking space, a cellar in a residence, …

The estate agent will have checked the proprietary rights of the landlord prior to signature.

The price:

The current legislation stipulates that the rent can only be adjusted once every 2 years so there is no need to add anything.

The warranty:

A refundable warranty worth a maximum of 3-month rent is requested on the day of entering the property. This warranty is either paid into the landlord’s bank account or it is held as a bank warranty (it stays in the tenant’s bank account but only the landlord can have access to it and so until he/she releases it back). The landlord can only use the warranty to cover the costs of damages incurred by the tenant; under no circumstances does it replace the payment of rent.

The duration of the contract:

It can be unlimited but usually it is limited to a specific duration. Traditionally the banking contracts ran for 3 years so some landlords still impose such a long rental period. However nowadays a period of 1 or 2 years is more commonly requested.

Termination of contract:

It is essential to clearly lay out the terms of the termination and those of its renewal. By law the termination of a contract calls for a minimum notice of 3 months. Some contracts stipulate an automatic renewal but make sure you agree with the implied extended rental period.

All expatriate tenants insist on the insertion of a “Clause Diplomatique” as it allows them to break a contract before its determined end. However this only applies when the tenant is sent back to his/her country of origin by his/her employer. The 3-month termination notice must still be given and paid for.

and more... we’ll finish the must-have clauses in the next post

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Essential Real-Estate documents Part 2: The V.E.F.A. Contract; the legal and financial implications

This is the 2nd in a series of guest articles by Claire Aumont from Monde Avenir which will cover interesting topics for buyers, sellers, landlords and real-estate professionals in Luxembourg. You can find Part 1 here which focuses on the Compromis de Vente.

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Buying a new property: The V.E.F.A. Contract

Buying a new property in Luxembourg can be an attractive option for potential homeowners - just being able to design your property yourself and have things the way you want them is enough to persuade many people. However, like many things in Luxembourg it’s not as straightforward as you might think. Read on to find out all you need to know...

V.E.F.A. stands for “Vente en l’Etat Futur d’Achèvement”; this is the term used to describe the sale of a property yet to be built and this specific condition dictates some variations from the standard “Compromis de Vente” and “Acte de Vente” mentioned in Part 1 (Compromis de Vente).

When the buyer purchases a piece of land with the intention to build a property on it, he/she is facing two situations:

Either the buyer buys the land alone (and then, at a later stage, organises the build, requests planning authorization, puts a team of tradesmen together, etc)

Or the buyer buys a piece of land to which a building project and a developer are already attached.

In the first instance, the procedure is that described in the Part 1. Both contracts relate then to the purchase of the piece of land only.

In the latter instance, the particulars are as follows:

The buyer may sign a “Compromis de Vente” which acknowledges the specific VEFA conditions. Alternatively he/she may be asked to sign a “Contrat de Réservation”. For a fee not exceeding 2% of the estimated project price, he/she reserves an apartment or a house to be built by a designated developer, who will organise all aspects of the build.

The “Contrat de Réservation” describes the intended project in more or less details depending on its advancement to date and whether the planning authorisation has been granted or not. The reservation fees are refundable, upon cancellation by the buyer, if, following planning authorisation, the actual project differs from the proposed one by more than 5% of its estimated value.

At a later stage, an “Acte de Vente” is signed but the monies exchanged only relate to the purchase of the land.

During the build of the dwelling, the developer remains the “Maître de l’Ouvrage”, i.e. the person who is in charge of the project.

As the build progresses, the buyer pays the developer in proportion of the accomplished work (between 4 and 8% for each milestone such as the pouring of a concrete slab or the completion of the electrical works) and the transfer of ownership happens here progressively in proportion with the payments made. The final payment is made ahead of the transfer of the keys, date at which the client becomes the sole and full owner of the property.

The price mentioned on the “Acte de Vente” often differs from the final one. On the “Acte”, the price is based on a “Cahier des Charges”, a standardised list of technical specifications. As the project progresses, the client is asked to choose materials, fixtures as well as fittings, and the final price must obviously reflect all the choices made. So as the buyer pays the various installments, he/she must be vigilant that the invoices reflect the variations from the original list of specifications and from the original selling price.

[heyhouser]

Essential Real-Estate documents Part 1: Compromis de Vente

This is the first in a series of guest articles by Claire Aumont from Monde Avenir which will cover interesting topics for buyers, sellers, landlords and real-estate professionals in Luxembourg.

Brought to you by www.houser.lu

The Compromis de Vente

Congratulations! You’ve managed to find a place to buy and agreed a price with the seller. The hard part is over so now you can relax, right? Not really! It’s at this time that you actually need to take extra care to make sure the sale goes through on time and that you don’t get any nasty surprises in the Notary’s office. Below you’ll find all you need to know about the documents that you’ll need to sign and what they mean…

The purchase agreement, known in Luxembourg as the “Compromis de Vente” is the first of the two contracts that buyers and vendors must sign when a property changes ownership. The second one is the “Acte de Vente”.

The purchase agreement does not always receive the attention it deserves as its signing is an informal procedure (“sous seign privé” i.e. signed privately). When the sale of a property is arranged through an estate agent, the latter usually drafts the document otherwise no other party needs to intervene.

Two important points must be acknowledged:

This purchase agreement is a binding contract; one cannot freely cancel the purchase unless the reason given for doing so is anticipated in the document (see below the suspensive clauses),

This contract must contain the relevant information as it will be mentioned in the second contract, the “Acte de Vente”.

The purchase agreement includes the details of both parties, the description of the property (inc. its land registry reference), its transfer price, the date of the transfer and any other particulars such as a rental agreement (if the vendors remain in the property for a pre-determined period after the date of sale). Penalty fees for unforeseen cancellations are also included.

Equally important are the suspensive clauses, which lead to the cancellation of the property transfer in the instance that these clauses cannot be realized and this without incurring any charges. The most common one would be the refusal by the buyer’s bank to lend the mortgage requested and required for the purchase. Other frequent clauses relate to the pending of a building authorization or the realisation of another property sale.

Some purchase agreement templates are available online. Although they provide a solid base for wording the contract, they need to be adapted to the specific circumstances surrounding each transaction.

The purchase agreement must then be registered with the “Administration des Domaines et des Enregistrements”.

The period between the signing of each contract is dedicated to the gathering of the documents, which are checked for validity and included in the “Acte de Vente”. Both estate agent and notary are involved in this process.

The “Acte de Vente” is signed upon receipt of the transfer price and in front of a Notary. He/she then registers it at the “Bureau des Hypothèques” so as to ensure that no one can oppose the transfer of property at a later stage.  He/she also deposits the registration tax, which relates to the sale and which is also due at the time of the signature of the “Acte de Vente”.

Next time: Essential Real-Estate documents Part 2: The V.E.F.A. Contract - buying a property that’s not build yet

[heyhouser]

Making sense of EU VAT

For anyone else unfortunate enough to be grappling with how to implement EU VAT regulations on an e-commerce site, I found these sites really useful:

Everything web designers need to know about #VATMOSS](http://www.webdesignerdepot.com/2014/12/everything-web-designers-need-to-know-about-vatmoss/)

A JSON webservice with the different country rates

A human readable list of EU VAT rates

We're using Stripe as our payment provider which luckily provides the country that the credit card is from but we still have to cope with making sure customers from different countries all pay a standard price, as we don't want to penalise customers for living in a country with high VAT!

Luxembourg have at least provided an online VATMOSS system for filing VAT returns so let's hope it all works!

Brought to you by www.houser.lu

[heyhouser]

The newest member of the Houser team: one of the prizes we received from 123Go. Not sure I get the metaphor though - as a startup we’re supposed to get big, right?

[heyhouser]

We attended the annual 123Go awards ceremony last week and won a cheque for €4500 and received our own Bonsai tree. Obviously we're very excited to have a new member of the Houser crew :-)

Beforehand, we were slightly apprehensive about how our sound-bite video would turn out, as we didn't get a chance to review (or reject!) the material. In the end it was OK, although my big take away is how strong my Irish accent sounded! The feedback we received from the other attendees was very positive though - we had lots of people asking when houser would cover different regions in France and Germany. There were some very interesting projects presented in some surprisingly niche fields like custom algae production in a laboratory and live modelling of human intestinal bacteria! My favourite, though, was the family electric bike from bike43 (although I think they should change there need to bike4three as it looked to me just like bike-forty-three). We also had an interesting chat on the different working cultures within Luxembourg with Marc Jacobs from imajine, who uses his experience of working with different cultures to advise companies. Probably a bit early for Houser to need his services, but maybe someday...

I'd say we're pretty positive overall about our experiences with 123Go. Writing a business plan is a worthwhile exercise for any startup to do anyway, so to get some reward from the competition was nice. The coaching provided by our mentor, Robert Schauss, definitely proved helpful and we'd like to thank him and the 123Go staff for their time and expertise.

[heyhouser]

We’re taking part in the 123Go Business Plan Competition closing evening on Thursday so wish us luck! We got to make a video for the ceremony, so hopefully we’ll be able to post it afterwards. Watch this space :-)