The average monthly cost of a flat in Luxembourg is currently 1,378 euros and 2,357 euros for a house. One- and two-bedroom flats have seen the biggest price increase since last year, costing 7% more than in spring 2016. But renting a studio flat costs 3% less than last year. On average, flat rentals have increased by 2% in one year.
In terms of houses, four- and five-bedroom homes have seen the largest increases – 8 per cent and 9 per cent respectively since 2016 – although rents have declined overall by 4 per cent over the past six months.
From a legal point of view, this is called rent adjustment.
“The rent of any dwelling fixed by virtue of the foregoing provisions, either by agreement between the parties, or by the Rental Commission, or by the courts, may only be adjusted every two years. “»
Law of 21 September 2006 on the lease for residential use.
It is therefore above all a question of duration. The law does not specify anything except “every 2 years”. The adjustment of your rent depends on the nature of your contract;
Summary diagram, see details below.
Do you have a fixed-term contract?
- A fixed term of between 1 month and 2 years: the rent increase on renewal of the contract
Let’s take an example, if your contract is for 1 year and is tacitly renewed from year to year, on the anniversary date (1 year after the day the rental period begins).
You have in your contract the possibility to denounce this tacit renewal, with a very precise deadline (for example, each party can denounce the renewal 2 months before the anniversary date).In this case, 2 months before the anniversary date, you will send your tenant your wish to increase the rent by registered letter, and specify that if he refuses, then this is considered as a termination of the contract renewal on your part/ - A fixed term of more than 2 years
You have two options;- Increase the rent on renewal of the contract, with termination of the tacit renewal of the contract if the tenant refuses the rent increase, as mentioned in the first point.
- After 2 years, the law allows the landlord to increase the rent in the lease contract. It is then useful to draw up an amendment to the contract, signed by you and the tenant, who has no choice but to accept it (except in the case of court proceedings).
Warning: even if the increase is legal, it has limits and conditions:- The rent must not exceed 5% of the capital invested in the property (see below for the revaluation coefficient of this capital if you bought your home/property several years ago).
- The new amount must be a minimum justified by the cost of living (for this it can be based on the State’s statistical indices), and it is possible to write on the lease contract that this rent revaluation will be done according to the percentage increase in the cost of living index in Luxembourg.
- If the tenant refuses the rent increase, a notice period of 3 months remains valid.
Do you have a permanent contract?
After 2 years, the law allows the landlord to increase the rent in the lease contract.
It is then useful to draw up an amendment to the contract, signed by you and the tenant, who has no choice but to accept it (except in court proceedings).
Warning: even if the increase is legal, it has limits and conditions:
- The rent must not exceed 5% of the capital invested in the property (see below for the revaluation coefficient of this capital if you bought your home/property several years ago).
- The new amount must be a minimum justified by the cost of living (for this it can be based on the State’s statistical indices), and it is possible to write on the lease contract that this rent revaluation will be done according to the percentage increase in the cost of living index in Luxembourg.
- If the tenant refuses the rent increase, a notice period of 3 months remains valid
The addition of a rent indexation clause
It is common in commercial leases.
Every 2 years, the rent is revalued in relation to an objective index (in relation to the cost of housing for example, it must be defined with the tenant and then validated by the parties).
Please note that the rent cannot be increased every year, the Residential Tenancies Act remains applicable (2 years before the rent increase).
Original rent x (new index / basic index) = new rent
If you have any questions or if you disagree with the rent increase, Van Maurits will be happy to advise you on the best solution for you.