New Luxembourg Rental Law 2024: Key Changes for Tenants and Landlords

On August 1, 2024, a revision of Luxembourg’s rental law came into effect, marking a significant shift in how tenancy agreements, particularly in colocation and coliving situations, are structured. These changes aim to provide more clarity, balance, and fairness between tenants and landlords while addressing the high demand for housing in Luxembourg. From formalizing roommate agreements to new rent caps and agency fee sharing, here’s an in-depth look at the key aspects of the new rental law and how it impacts both parties involved.

1. Colocation and Coliving: New Rules for Shared Housing

One of the most notable changes in the law is the introduction of mandatory provisions for colocation (shared living among tenants). For anyone living with roommates, it’s important to understand the distinction now made between colocation and coliving:

• Colocation refers to a shared housing arrangement where all roommates sign a single rental contract with the landlord. This means all tenants are jointly responsible for the rent and any damages.
• Coliving, on the other hand, is a different setup where each tenant signs an individual lease with the landlord. In this case, tenants are not held responsible for each other’s obligations (e.g., unpaid rent or damages).

Additionally, colocataires (roommates) must now establish a pacte de colocation (roommate agreement) in writing. This document formalizes the rules of communal living, helping to avoid misunderstandings regarding responsibilities, shared expenses, and the overall living arrangements.

What Does This Mean for Tenants?

For tenants, this means more structure and legal protection in shared living situations. Having a written roommate agreement ensures everyone is clear about their responsibilities, reducing the risk of disputes down the line. Additionally, joint responsibility means that if one roommate fails to pay their share of the rent, the others may have to cover the shortfall.

2. Written Lease Contracts Are Mandatory

Gone are the days of informal rental agreements. Under the new law, every rental agreement must now be in writing. This ensures that all the terms are clear and that both tenants and landlords understand their rights and obligations. The written contract must also include mandatory details, such as:

• The exact rent amount and payment terms.
• The duration of the lease.
• Specific clauses related to rent increases and any included utilities.

This requirement is designed to reduce disputes and ensure transparency, providing both parties with a legal framework to rely on in case of disagreements.

3. Rent Caps and Rent Increase Limits

The law further tightens control over rent prices by clarifying how rent caps are calculated, especially in shared housing situations. Specifically:

• The total rent paid by colocataires in a shared property cannot exceed the maximum allowable rent, which is set at 5% of the capital invested in the property.
• A landlord may charge an additional furniture fee if the property is furnished.
• In terms of rent adjustments, the law limits any rent increase to a maximum of 10% at a time, preventing landlords from making sudden and drastic rent hikes.

What Does This Mean for Landlords?

Landlords must now calculate rent based on clear guidelines tied to the property’s value. This regulation aims to prevent overpricing, particularly in shared rental situations where tenants might have been overcharged in the past. However, landlords can still increase rent, albeit within reasonable limits, ensuring they can maintain profitability while staying fair to tenants.

4. The End of “Luxury Housing” as a Special Category

The new law has also done away with the previously ambiguous category of luxury housing—properties labeled as “non-standard modern comfort.” Now, all properties will be judged equally under the same rent cap guidelines, ensuring consistency in how rent is calculated across different types of housing. This change simplifies the rental market and prevents properties from being overpriced based on subjective definitions of luxury.

5. Splitting Agency Fees Between Landlords and Tenants

Another critical update is how real estate agency fees are handled. Under the new law, the cost of using an agency to secure a rental will be split 50/50 between the tenant and the landlord. This is a major shift, as tenants were often solely responsible for these fees in the past.

Why Is This Important?

For tenants, this provides significant relief in upfront rental costs, making it more affordable to move into a new home. For landlords, it means sharing the burden of finding and securing tenants, which seems like a fairer arrangement, given that both parties benefit from the agency’s services.

6. Reduced Security Deposit Limits

To make renting more accessible, the law has reduced the maximum amount landlords can ask for a security deposit from three months’ rent to two months’ rent. Furthermore, there are now stricter rules on how and when the deposit must be returned:

• If a landlord unjustifiably delays the return of the security deposit at the end of a lease, they will be required to pay an indemnity of 10% of the monthly rent for each month of delay.

What Does This Mean for Tenants?

This change benefits tenants by lowering the upfront financial burden when securing a rental property. Plus, the new penalties for late returns of the deposit give tenants more security and assurance that they won’t face delays in getting their money back after the lease ends.

Conclusion: A Fairer, More Transparent Rental Market—But With Some Risks

Luxembourg’s updated rental law is designed to create a more balanced and transparent relationship between tenants and landlords. With stricter guidelines on rent caps, mandatory written contracts, and a fairer distribution of costs, this revision aims to address the housing challenges that many tenants face, while also providing landlords with a clear and manageable framework.

However, the new law’s emphasis on cost-sharing, particularly regarding the splitting of agency fees, is likely to result in fewer real estate agents being involved in rental transactions. While this may reduce costs for tenants and landlords, it also raises the risk of errors in drafting contracts or conducting property inventories. Without professional oversight, the potential for mistakes increases, which could lead to more disputes and legal issues.

As a result, we may see an uptick in cases brought before Luxembourg’s courts, as tenants and landlords grapple with these potential contract issues. It remains to be seen whether this new law will effectively streamline the rental market or create unforeseen disruptions that lead to further complexities.

The true impact of these reforms will become clearer as they are implemented over time, but for now, both tenants and landlords should approach the new regulations with a strong understanding of their rights and responsibilities to avoid potential pitfalls.