Luxembourg

Updated on 19.03.2020

1. Is a lessee eligible for rent reduction due to a significant decline in footfall and consequently its turnover as a result of COVID-19?

No, in principle not.

2. Is a lessee eligible to temporarily close its leased space - on its own initiative – and opt for rent reduction as a result of COVID-19?

No, in principle not.

3. Is a lessee eligible for rent reduction in the event its leased space is closed following an order by the Government as a result of COVID-19?

The event where the leased space cannot be accessed following an order by the Government as a result of COVID-19, could be considered as (i) a failure of the lessor to provide peaceful enjoyment to the space; or (ii) a partial legal loss by fortuitous event of the premises rented. On such grounds, a lessee could request their lessor to reduce the rent. It is however worth noting that there is no existing case-law on the applicability of such legal grounds in the present case of an order to close commercial activities following a pandemic.

4. What kind of security is generally provided by a tenant in connection with a lease, a bank guarantee, a deposit or otherwise?

When concluding a commercial lease in the Grand Duchy of Luxembourg, the lessor may require the payment of a rental guarantee. This rental guarantee may not exceed 6 months' rent. The deposit may take the form of a payment to the lessor, a bank guarantee on first demand, an insurance policy, or any other guarantee covering at least 6 months’ rent.

Based on the above mentioned legal grounds, and depending on the gravity and duration of the event justifying the right of the lessee, a termination of the lease could be invoked as well as the non-payment of the rent as long as the event has not ceased. The measure to be taken should be analysed on a case by case basis and the lessee should always be careful that the defence they want to invoke remains a proportionate measure having regard to the situation of the lessor.

Authors

Picture of Sylvain Elias
Sylvain Elias
Partner | Avocat à la Cour