AMCHAM: Would you like to introduce yourself to our readers and explain the activity of DSM Avocats à la Cour?

Mario DI STEFANO: I founded DSM Avocats à la Cour in 2004. Since then, the firm has continued to grow both in terms of its reputation and size. Today, we have over 35 lawyers, jurists and staff. With an array of professionals with varied competencies and the range of services that we offer to our clients make DSM Avocats à la Cour an independent full-service business law firm. We are also proud to note that, apart from the trust our clients have placed in us for several years, the firm is recognized by the main legal directories such as Chambers, Legal500 and LeadersLeague as one of the most reputable law firms in Luxembourg. Our main areas of expertise are commercial and business law, particularly in M&A and all aspects of real estate law, banking and finance law, direct and indirect taxation, health and life sciences, labor and employment law, as well as new technologies and digital law and data protection, all of which is in an advisory capacity and, as we cannot always avoid it, representation in dispute resolution. Beyond our legal capabilities inherent to the legal profession, we put an emphasis on the relationship and communication with our clients. DSM Avocats à la Cour is also the member for Luxembourg of several independent, international legal networks which allows us to support our clients throughout the world.

In addition to my work with DSM Avocats à la Cour, I am also active in several organisations such as LuxReal, as well as AmCham Luxembourg’s Real Estate Committee of which I’ve had the honor of being President for the last several years.

AMCHAM: To you as a real estate expert in Luxembourg, we have an initial question: what will be the main changes in the proposed new law on residential leases?

There is indeed a draft bill, Bill number 7642 of 31 July 2020, aiming at amending the Law of 21 September 2006 on residential leases that in particular intends to abolish the category of “luxury housing”.

On 11 May 2021, the Council of State (Conseil d’Etat) gave its opinion on the bill and sent it to the Parliament’s commission in charge of amendment proposals to the bill.

  • the pure and simple abolition of the concept of luxury housing (so far, certain provisions on the determination of rent, rental charges and rental guarantees do not apply to “luxury dwellings” with modern, non-standard comfort, where the monthly rent or the capital invested exceeds certain thresholds set by law). However, the Council of State is of the view that abandoning that concept will have the effect of subjecting the housing in question to all of the protective provisions of the residential lease law, which is not necessarily in line with the spirit of the Law of 21 September 2006;
  • the option of requesting an additional amount of rent when renting a furnished apartment;
  • a limitation on the amount of annual rent that can not exceed 5% of the capital invested in the housing rented;
  • a limitation on rental guarantees to two (2) months’ rent; and
  • a sharing of up to 50% of real estate agency commissions between the tenant and the landlord.

Certain of the bill’s provisions, in particular on the manner of setting rents, real estate agency commissions and rental guarantees, shall be applicable solely to residential leases entered into after the entry into force of the future law, such that residential leases currently in force shall not immediately be impacted by these new provisions, with the exception of the abrogation of the concept of luxury housing which shall be immediately applicable.

AMCHAM: How is micro housing regulated? Since Luxembourg has a high demand for housing coming from young university graduates who are recruited by international companies to work in Luxembourg, why do the housing laws and regulations not allow micro housing as a solution for these target populations who do not need family housing solutions?

Currently, and despite a certain interest for the concept, there is not yet any specific regulation of tiny houses in Luxembourg. As a matter of fact, in the current state of legislation in many cases the size and dimensions of a “tiny house” will not comply with existing zoning and planning regulations and will not be approvable.

This situation is not likely to change anytime soon, as the political instances appear to think that there are better solutions for alleviating the lack of affordable housing in Luxembourg.

AMCHAM: And the regulation of flat sharing?

The high demand for affordable housing, not least for young expats coming to work in Luxembourg, has naturally led to the spread of flat sharing. While so far there is no specific legislation governing house or flat sharing, it can, as the case may be, lead to situations that are not compatible with local zoning and planning rules.

However, draft Bill number 7642 on the reform of the residential lease already cited will introduce, if adopted, a legal framework for the sharing of accommodations, and in particular a definition of co-tenancy and the establishment of a number of rights and obligations for co-tenants and landlords in a "co-tenancy pact" to be concluded between landlords and tenants.

However, in its current form, Bill 7642 does not resolve the problem that for dwellings destined, in the local zoning and planning regulations, for single-family occupation, it will not be legally possible to opt for the sharing of the accommodation by tenants who do not have a legally recognized family or partnership relationship with each other.

Also, it is not unlikely that landlords and tenants will prefer to maintain the currently prevailing practice to enter into separate agreements between the landlord and each tenant, so that it is unclear whether Bill 7642 will, if adopted, will have a major impact on the current handling of co-tenancy.

AMCHAM: What are the recent legal developments in real estate?

We recently published two articles on this subject that we invite you to consult by clicking on the links below:

The new cultural heritage law: towards a paradigm shift? https://www.dsm.legal/en/the-new-cultural-heritage-law-towards-a-paradigm-shift-by-mario-di-stefano-and-quentin-martin-luxembourg-real-estate-construction/

Luxembourg: Recent legal developments in Real Estate https://www.dsm.legal/en/luxembourg-recent-legal-developments-in-real-estate/

AMCHAM:And what news is there from the Real Estate Committee?

Since meetings in person are again possible, the Committee aims at organizing a webinar at the end of April / early May that should be held in a hybrid format (both on location and via videoconferencing), and a networking event in autumn. We will keep you informed soon, so stay tuned…

AMCHAM: You were recently at MIPIM, the world’s leading real estate event; how was the MIPIM after a two-year interruption?

As every year, DSM Avocats à la Cour has partnered as an exhibitor for the Luxembourg Pavilion organized by the Luxembourg Chamber of Commerce, and I have represented our colors together with my colleagues Renaud LE SQUEREN and Jean-Philippe FRANCOIS. We were happy to reconnect with both national and international clients and colleagues, among which are many good friends. MIPIM allows us to present the firm’s competencies, which cover the entire life cycle of a real estate project: acquisition, development, urban planning, financing, construction, taxation, leasing and the transfer in share or asset deals, entire or off-plan (VEFA) sales, litigation, etc. It is also a great opportunity to meet and exchange with actors from the Luxembourg real estate market, who today form a professional community has been able to meet the challenge of Luxembourg’s growth and development of the legislative and regulatory framework. Also, an advantage of MIPIM is to get a feel for the real estate market, it’s a barometer, and we feel that our ecosystem is doing great. DSM’s lawyers are proud to be a part of this community and contribute to Luxembourg’s success.