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Welcome to the Luther Real Estate Brief, your quaterly update on legal developments in Luxembourg’s real estate sector.
Lease – Interference with use: when can rent be withheld?
Key takeaway:
Rent may only be withheld where there is a clear contractual imbalance. Mere inconvenience or partial disruption will not suffice.
Tenants experiencing difficulties in the use of commercial or professional premises may consider withholding rent on the basis that the landlord has failed to meet its obligations.
Under Article 1134-2 of the Civil Code, a party may withhold performance of its obligations where the counterparty has not performed its own.
However, in the context of a commercial lease, withholding rent is only justified where the landlord’s breach is sufficiently serious to deprive the tenant of effective use of the premises. It cannot be used as a tactical means to delay or avoid payment.
In a recent decision, the District Court1 reaffirmed this principle. The tenant relied on various issues, including lack of maintenance and restricted access due to construction works blocking the entrance.
The Court held that:
- the use of the premises must be substantially impaired; and
- limited disruption, even if established, is not sufficient to justify withholding rent.
In short, inconvenience or partial loss of use does not amount to a sufficient contractual imbalance. The tenant therefore remains under an obligation to pay rent and may otherwise face recovery action or termination of the lease.
That said, alternative remedies may be available, including seeking an order for remedial works, a rent reduction or damages.
Lease – Change of guarantor: landlord consent is essential
Key takeaway
A change of guarantor requires the landlord’s express consent. Failing this, the original guarantor remains fully liable.
A guarantee constitutes a separate contractual undertaking between the guarantor and the creditor (here, the landlord). Any amendment to this arrangement, including the substitution of a guarantor, requires the creditor’s prior consent.
In practice, a change in the shareholding of the tenant company, even where the purchaser undertakes to assume existing guarantees, does not release the original guarantor. Without the landlord’s agreement, the initial guarantor remains bound.
The Court of Appeal2 recently confirmed that provisions in a share purchase agreement providing for the transfer of a guarantee are not enforceable against the landlord, in line with the principle of privity of contract.
Such provisions remain effective between the parties to the transaction, meaning that the purchaser may be required to indemnify the original guarantor.
Sale agreement – Financing condition precedent: a strict approach with significant financial consequences
Key takeaway:
Strict compliance with contractual requirements (particularly deadlines and notification formalities) is essential. Failing this, the condition may be deemed satisfied, with binding consequences for the purchaser.
In a recent ruling, the District Court3 confirmed the strict interpretation applied to financing conditions precedent.
In this case, the sale agreement required the purchaser to provide, within a specified timeframe, a bank certificate confirming whether financing had been granted or refused.
The Court found that, as the purchaser failed to provide a refusal certificate within the agreed deadline, the condition precedent was deemed satisfied—even though financing had not in fact been obtained.
As a result, the purchaser could not rely on the failure of the condition to avoid its contractual obligations.
The purchaser’s failure to attend the notarial signing entitled the seller to enforce the contractual provisions, namely:
- retention of the 10% deposit; and
- payment of a contractual penalty equal to a further 10% of the purchase price.
The Court upheld the validity of this “double penalty”, reflecting the parties’ freedom of contract.
Off-plan sale (VEFA) – Delay in completion: developers may be compelled to complete under penalty
Key takeaway:
Timely completion is a core obligation. In the absence of proper justification, courts may order completion under penalty.
Delays in off-plan developments remain a frequent source of disputes and uncertainty for purchasers.
A recent Court of Appeal4 decision confirms that a significant delay, if not properly justified, may constitute a clearly unlawful situation.
In such circumstances, summary proceedings may be initiated under Article 933(1) of the New Code of Civil Procedure.
The court may order completion of the works within a specified timeframe, backed by a penalty payment, thereby compelling the developer to fulfil its obligations.
Co-ownership – Challenging approved charges: strict compliance with the two-month deadline
Key takeaway:
Any challenge must be brought within two months of notification of the general meeting minutes.
Decisions adopted at a general meeting may be challenged within two months of notification of the minutes. After this period, they become final and binding.
Accordingly, approved charges, advances and provisions are binding on all co-owners, even where their basis or allocation might otherwise be disputed.
The Court of Appeal5 confirmed that a co-owner cannot refuse payment on the grounds of alleged misallocation, lack of detail or inability to verify the accounts, provided the accounts were duly approved and not challenged within the statutory timeframe.
The Court also reiterated that agreements between seller and purchaser regarding the allocation of charges are not enforceable against the co-owners’ association. The registered owner at the time the charges are called remains liable, without prejudice to any recourse against the seller.
On the Legislative Radar
- Reform of the amended law of 19 July 2004 on municipal planning and urban development – Bills 7139A and 7139B – opinions issued by the Chamber of Commerce and SYVICOL
- Reform of property tax – Bill 8082A – legislative process ongoing; opinions from the Council of State, professional bodies and SYVICOL issued in February 2026
Footnotes
1 Jugement du Tribunal d’Arrondissement du 14 janvier 2026TAL-2025-03014
2 Arrêt Cour d’Appel du 28 janvier 2026 CAL-2023-00507
3 Tribunal d’Arrondissement de Luxembourg du 26 janvier 2026 TAL-2024-01425
4 Arrêt Cour d’Appel du 14 janvier 2026 – CAL2025-00585
5 Arrêt Cour d’Appel du 7 janvier 2026 CAL 2024-01056
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