Real estate finance law in Belgium

Yes.

Yes.

None.

No.

Yes. A second ranking mortgage is established before a Belgian Notary and must be registered at the Mortgage Registrar (“Bureau de Sécurité Juridique/ Kantoor Rechtszekerheid”).

A second ranking mortgage ranks below the first ranking mortgage as a matter of law. If the second ranking mortgagee wishes to take enforcement action, it can do so but the first ranking mortgagee has a primary right to sell the secured real estate. The first ranking mortgagee is entitled as a matter of law to receive the net proceeds of enforcement to apply to the sums owed to it, whether enforcement is carried out by that mortgagee or not. Priority deeds are not required, but several mortgagees may agree that they will share pari passu in the enforcement proceeds or a mortgagee may transfer its higher rank to another mortgagee with a lower rank.

Yes. A mortgagee can enforce the mortgage even though the property is no longer owned by the original mortgagor. In practice, a mortgage deed includes an agreement not to sell (or grant rights in or to) the property except with the prior written approval of the lender.

Numerous legal liens and privileges can attach to all (or part) of a debtor’s assets. However, with respect to mortgages, judicial costs relating enforcement proceedings are likely to be the only claims to benefit from a lien or privilege.

Yes. However the maximum amount of the mortgage will need to be specified.

Yes. A receivables pledge of rents can be taken which would be enforceable against the relevant tenant once that tenant receives notification of the pledge. However, towards third-parties, the pledge is effective as soon as the pledge agreement is entered into between the pledgor and the pledgee. Keeping the pledge silent toward the tenants of the pledgor is neutral from this point of view.

Yes. Security is taken over bank accounts by a receivables/bank account pledge.

It is usual for lenders to contractually restrict the borrower’s rights to withdraw funds from the borrower’s bank accounts. Typically, the receivables pledge agreement allows the borrower to freely operate its accounts until default occurs. After default, amounts credited to those accounts are to be paid to the lender and cannot be withdrawn without lender consent.

Security is not enforceable against third parties.

Mortgages must be (i) established before a Belgian Notary (by way of a notarial deed) and (ii) registered at the relevant local Mortgage Registrar (becoming effective on registration). A mortgage is valid for 30 years from the date of registration but it can be renewed.

Registration duties 
1% of the secured obligations.

Mortgage duties 
0.3% of the secured obligations.

Mortgage Registrar’s fees 
The mortgage registrar's fees constitute a fixed amount paid to the State for carrying out mortgage formalities and for issuing duplicates and certificates. The fee amount varies based on the mortgage value, being 230 EUR for values under 300,000 EUR and 985 EUR for values above 300,000 EUR.

Notary fees 
250 EUR plus a proportional fee ranging from 0.0460% to 0.7500% of the secured obligations.

Administrative costs 
Between 800 EUR and 1,100 EUR depending on the Notary.

All security constituted by attending a Notary requires the lender to be represented. Usually the lender grants local Belgian lawyers a power of attorney (which is not submitted to any specific formality) to enable the lender to be represented before the Notary.

No. “Parallel debt” arrangements are used instead. Since April 2015, mortgages may be transferred between financial institutions without any formality or costs. This has simplified transfers of loan participation on the secondary market.

Traditionally, in case of change of lender, the transfer of the mortgage must be notarized and registered in the Mortgage Registry.

This formality (and the related costs) may be avoided if one of the parties to the transfer is a financial institution. However, in this case, in the Mortgage Registry, the lender of record will remain the old lender, resulting in the same keeping a duty to inform third-parties of the identity of the transferee.

The tenant has the right to assign its lease without the landlord's consent unless otherwise provided  in the lease. In practice, however, most leases contain as clause requiring the landlord's consent.

The outgoing tenant remains bound by the terms of the lease unless the landlord agrees to release the outgoing tenant.

A lease of retail premises together with the business assets (“cession du fonds de commerce/overdracht van het handelsfonds”) can be transferred without landlord’s consent.

Lender’s consent on changes of tenants depends on the concrete situation of the asset (e.g. single tenant vs multi-tenant).

A foreign jurisdiction can be chosen to settle disputes between lenders and borrowers. Security arrangements are almost always governed by Belgian law and disputes relating the Belgian securities are dealt with by Belgian courts.

No. Belgium is, however, party to the Brussels and Lugano Conventions and subject to the Brussels Regulation (EC44/2001) on recognition and enforcement of judgments in civil and commercial matters, which generally provide for recognition of judgments of most EC partners, except in limited circumstances.The enforcement of arbitral awards will always be subject to a prior review by the Belgian judge.

Belgium is, however, party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) the purpose of which  is to facilitate the recognition and enforcement of foreign arbitral awards .

The enforcement of foreign judgments depends on whether they originate from EU Member States or not :

• Judgments from EU Member States are enforceable without prior review by a Belgian judge  (Brussels I^bis Regulation - 2015).
• Judgments from non-EU Member States are enforceable subject to an  an exequatur procedure in Belgium. However, Belgium has concluded a number of conventions to facilitate the enforcement of foreign judgments (e.g., the Lugano II Convention (2007) or the Hague Convention (2019)).

The enforcement of a mortgage results in the sale of the property to a third party. As a rule, the property is sold by a notary by way of a public auction under court supervision. Private sales may be permitted by the court under certain conditions.

As a rule, the declaration of bankruptcy does not prevent the first ranking mortgagee from enforcing the mortgage (save for a brief period when creditors’ claims are ascertained) . The receiver appointed by the commercial court may nonetheless ask the court to suspend the sale of the mortgaged property provided it is in the interest of the bankrupt estate and it is not detrimental to the mortgagee. This suspension may however not last for more than one year as from the opening of the bankruptcy. When the sale of the property has occurred, the receiver is obliged to pay the net proceeds to the first ranking mortgagee after paying the holders of liens/privileges (see A2.5) and his own costs.

No. However, a lender may choose to maintain/insure to protect the value of the asset.

Foreclosure is prohibited. Mortgagees may not gain title to the property. The asset must be sold.

No.

Yes.

Yes, if first ranking pledgee approves, a third party pledge-holder can hold the pledged shares for the account of multiple pledgees. First ranking pledgee tend to be reluctant to approve second ranking pledges.

B3.2 for perfection requirements.

If the pledge is not registered, the security is not enforceable against third parties.

A pledge over registered shares requires appropriate book entries (registration) in the company share register.

The pledge over dematerialised shares is perfected by the booking (registration) of the shares on a special pledge account.

No noteworthy taxes/costs (except legal fees and banking fees in connection with granting a pledge over dematerialised shares).

Generally, no. A special pledge account can be opened in the name of the lender or its nominee for dematerialised shares.

Loans from shareholders can be contractually subordinated.

Shareholder loans are often pledged to the lenders, which facilitates the enforcement of the share pledge.

Our answers apply to standard leases. Specific rules may apply to retail tenants.

The lease length is freely determined by the parties in accordance with their economic needs, subject to the comments below. In practice, standard leases are often concluded for a term of nine years, but shorter or longer terms are common.

Not applicable, except for retail leases, which have a statutory minimum duration of 9 years.

Subject to the following, a lease is generally entered into for a fixed term:

Lease agreements may provide the tenant with a break option, allowing the tenant to terminate the lease before the end of the agreed lease term if it gives the requisite notice.

If, after the expiry of the fixed term, the tenant stays in the premises without objection from the landlord, the lease is renewed on the same terms and conditions (i.e. for the same duration and rent as the original lease) (“reconduction tacite/ stilzwijgende verlenging”).

A lease with no express duration is deemed to be concluded on a rolling month-to-month basis and can be terminated by either party giving 1 month’s notice.

It can be agreed that a lease will automatically renew at expiry of the fixed term on the same terms and conditions (i.e. for the same duration and rent as the original lease), unless notice is duly served to terminate.

In principle, a fixed-term lease may only be terminated early in the cases provided by law or contract.

If the leased premises are destroyed or become unfit for their intended use, the lease terminates by operation of law.

If the landlord is in breach of his obligations under the lease, the tenant can seek termination of the lease before the courts.

No.

There are no statutory provisions. Generally, rent is payable in advance, typically either monthly or quarterly.

No rent reviews are allowed during the lease term, except indexation reviews (see C2.3 and C2.4).

However, for retail leases, either the tenant or the landlord can request, upon expiration of each three-year period, a rent review when that party considers that the rental value is either 15% below or above market value. Such requests often result in litigation before the courts.

Rent is usually reviewed annually by reference to a specified index (see C2.4).

For retail leases specifically, the review basis is market rent.

Yes. The rent can be indexed only once a year in accordance with the health price index (which can increase, maintain or theoretically decrease the amount of rent payable). Generally, leases provide that the rent will not decrease below the originally agreed rent (even if the index is negative). The earliest such review can take place is on the first anniversary of the lease.

For retail leases specifically, the judge (usually with the assistance of an expert) will determine whether an upwards or downwards adjustment of the rent is justified based on market prices.

Small repair and maintenance works connected with the ordinary use of the leased premises are borne by the tenant.

The landlord must maintain the leased premises in a good state of maintenance during the lease term and carry out all repairs required in that regard (“landlord’s works”). However, leases often provide that the landlord is only responsible for structural repairs and that all other maintenance and repair works are borne by the tenant.

External and internal maintenance, decoration and repair beyond the landlord’s works and the maintenance/repair obligations assumed by the landlord under the lease are the tenant’s responsibility (“tenant’s works”).

All repair costs which are not “tenant’s works” are borne by the landlord. Structural repairs are typically not considered as “tenant’s works” and are therefore to be borne by the landlord.

There is no statutory obligation to have insurance cover in place. Buildings insurance is frequently taken out by the landlord and the premium is then charged to the tenant under the terms of the lease. Most leases require the tenant to insure its own assets placed in the premises.

Generally, it is a condition of the lease that each party obtains from its insurer a waiver of any rights it might have in relation to insurance proceeds paid out by the other party’s insurer.

In Belgium, leases are typically not subject to VAT.

However, exceptions exist and, under certain conditions, permit the option of applying VAT.

These exceptions include: (i) leases of new buildings or buildings that have been significantly renovated; (ii) leases for durations of less than six months, excluding residential leases and specific non-profit uses; and (iii) leases of warehouse or storage spaces.

Choosing to apply VAT enables the recovery of VAT incurred on construction or renovation costs.

Where VAT applies, the standard rate is 21%.

See C3.8.

Common practice is for the tenant to be obliged to pay (i) rent, (ii) maintenance, insurance and repair costs, and (iii) real estate taxes. Items (ii) and (iii) are usually charged as service charges.

Landlords tend to include as many items as possible in the service charges.

Lease agreements will be applied and interpreted by the courts in accordance with the applicable statutes (e.g. the Civil Code) and the supporting case law on the matter.

Under Belgian law, court recognition of appraisals does not strictly require the appraisal to be prepared by a domestically regulated or qualified valuer. However, it is advisable for a property valuation report to be prepared by such a valuer.

Yes. Lenders often request such reports prior to lending. Furthermore, it is a formal requirement to obtain an Energy Performance Certificate (PEB/EPC) for a building prior to its sale or rental. This certificate must be issued by experts who are officially accredited by the state.

By 2030 at the latest, all buildings in Belgium will be required to have an EPC identifying the requisite energy renovations.

These obligations stem from European law, notably Directive 2010/31/EU of 19 May 2010 on the energy performance of buildings.

In principle, a lender holding a mortgage on a property is not liable for breaches of environmental laws.

However, if the lender enforces the mortgage and the property is sold, certain environmental obligations apply. Notably, if there is a suspicion of soil contamination on the mortgaged property, the seller/lender is required to conduct a preliminary soil investigation before the sale to ascertain the presence of contamination. Should contamination be confirmed, the authorities may request further remediation measures. Consequently, the lender may face various costs associated with these environmental requirements.