This brief report provides a summary of the most recent Luxembourg legal developments that currently affect and will be affecting real estate practitioners throughout 2017.

Bill of law n°6864 on commercial leases

Bill of law n°6864 on commercial leases, presented to Parliament on 3 September 2015, will not be enacted into law as quickly as foreseen. In fact, on 25 March 2016 the Council of State (Conseil d’Etat) formally opposed some of the proposed provisions. The bill aims at updating the provisions applicable to commercial leases and mainly focuses on enhancing the protection granted to tenants.

The Council of State has formally objected to:

  • The definition of tenant as set out in section 5 of article 1762-4 of the bill of law.
  • The early termination mechanism in favor of the tenant as stipulated in article 1762-5.
  • Some of the provisions pertaining to prohibited payments as described in article 1762-6.
  • The amendment of the agreement set forth in article 1762-7.
  • The amendments to the provisions of article 1762-8 on assignment of the lease and sublease.
  • The refusal to renew the lease described in article 1762-15.
  • The immediate application of the future law to all running agreements and all initiated procedures as retroactivity would harm certain rights of the litigating parties.

Consequently, the current version of the bill will certainly be amended to take into account the above objections. A rapporteur has been appointed on 20 October 2016.

Commercial leases: landlords to be affected by the decision of the European Court of Justice of 7 July 2016 on case C-494/15

The Czech company Delta center a.s. leases market halls in Prague (Pražská tržnice’) and sublets sales points to other market traders. Several producers and distributors of well-known brands noticed that counterfeits of their products were sold in those halls and requested the Czech courts to enforce on Delta Center the prohibition to continue the lease of sales areas to the market traders who committed such offense, based on the provisions of Directive 2004/48/EC of the European Parliament and the Council of 29 April 2004 on intellectual property rights, which allows brand owners to apply for an injunction against intermediaries whose services are used by third parties to infringe the right holder’s industrial property right.

The European Court of Justice, having received a referral for a preliminary question from the Supreme Court of the Czech Republic, confirmed in its decision of 7 July 2016 that a person who provides services related to letting or subletting sales points situated in market halls, thereby allowing such third parties to sell counterfeit products, shall be considered an intermediary according to the directive. Consequently, according to this decision, market place tenants may be ordered to stop and prevent market traders from committing any infringements on intellectual property rights.

Consequently, landlords who let commercial premises must ensure that tenants or subtenants do not sell counterfeit merchandise as they may be ordered by the competent court to take the necessary measures to stop the infringements. The European Court of Justice pointed out that the injunctions must be equitable and proportionate and must not be excessively expensive or constitute an obstacle to legitimate trade.

Landlords are not required to exercise general and permanent oversight over their tenants but may be ordered to take the necessary measures to prevent new infringements of the same nature from taking place.

Although, on the one hand, the European Court of Justice stated that injunctions must only be pronounced if they ensure a fair balance between the protection of intellectual property and the absence of obstacles to legitimate trade and, on the other hand, it is highly unlikely that a court will order the lease termination, landlords who receive an injunction might feel obliged to terminate a tenant’s lease in order to avoid new infringements from taking place. Therefore, standard commercial lease agreements should be amended to take into account the potential risks outlined above.

Urban planning: split of “Omnibus” bill of law n°6704

On 13 and 14 September 2016 the deputies of the parliamentary commissions on “interior affairs” and “civil service” decided to split the bill of law n°6704 called “Omnibus” into two different bills of law. Omnibus was presented to Parliament on 7 October 2014 and aimed at amending the law of 30 July 2013 on land development, the law of 19 July 2004 on municipal land management and urban development, as well as the law on housing, the law on water, the law on historic sites and monuments.

The Council of State stated that the Omnibus bill posed legal problems on the new surface right as provided for by the law of 22 October 2008 on the promotion of living space and the creation of a housing pact with the municipalities.

Consequently, the government split the original “Omnibus” bill by presenting to Parliament on 27 September 2016 bill of law n° 7065 exclusively focused on land distribution and amending:

  • the law of 16 August 1967 for the establishment of a comprehensive communications network and a road fund
  • the amended law of 15 March 1979 on expropriation in the public interest
  • the amended law of 19 July 2004 on municipal planning and urban development.

Bill of law n° 7065 might be enacted within a short timeframe and perhaps by the end of 2016 as stated by its rapporteur.

It should be borne in mind that the Omnibus bill is part of a series of measures to simplify administrative procedures.