Luxembourg law distinguishes two categories of patrimonial rights: real rights (rights in rem) and personal rights (rights in personam).
In property law, rights in personam essentially have their origin in the relationship between landlord and tenant pursuant to a lease agreement.
There are four types of property lease agreements under Luxembourg law: the standard (civil) lease, the commercial lease, the residential lease and the agricultural lease.
In contrast to rights in personam, there are a limited number of rights in rem. Under Luxembourg. The following are considered as real rights:
- Rights of usage and residence
- Emphyteotic lease
- Right of superficies (also referred to as building right)
The most absolute right in rem is the right of ownership.
Real estate ownership entails all the rights and privileges afforded to the owner. This includes the right to use the property, the right to receive all revenues flowing from the property and the right to abuse the property (including its destruction), subject to restrictions imposed by any applicable laws and regulations and subject to sanctions arising from the rules of civil liability when the owner is either causing damage to others through his/her fault or, without fault, is causing abnormal damage to neighbouring properties.
In addition, ownership of land includes in principle ownership of the ground and of the subsoil, together with all the proceeds and income deriving from them.
Pursuant to the principle of accession, ownership of land automatically brings with it ownership of all that is built on it. Accession is therefore a method of acquiring ownership where the owner of a principal asset becomes the owner of all that is incorporated in it.
According to this principle, the owner of a plot of land automatically becomes the owner of any construction on the land, regardless of the identity of the person who built it and/or the ownership of the building materials, unless otherwise agreed with that person. It is possible for the owner to waive its right of accession. Such waiver results in the builder becoming owner of the building and generally creates a right of superficies or an emphyteotic right (long lease) both limited by law to 99 years.
Rights in rem (other than the right of ownership) over property are from time to time created to grant a right of use over property, being usufruct, emphyteotic lease and the right of superficies. For the “lessee” they usually offer more stability than a mere lease. For the “lessor” they usually guarantee an income over a longer period of time.
Moreover, in certain circumstances, the acquisition of rights in rem can be considered as an alternative to a purchase. Rights in rem are usually granted for a long period (up to 99 years), and carry extensive rights for their holder.
Transactions having the effect of transferring title to a real estate property or of creating a right in rem encumbering such a property have to be recorded at the Mortgage Registrar Office. Such registration is required in order to have a valid title against all third parties, who may take precedence in the absence of registration (see section 12).