1. What legislation and/or regulatory bodies are
responsible for regulating the relationship between landlord
and tenant in Belgium?
The relationship between landlord and tenant is
regulated by the provisions of Title VIII, Chapter II, Section
I, Articles 1714 through 1762bis of the Belgian Civil
Code. Most of these general provisions are not mandatory and
will apply only if the parties did not provide for them
otherwise by contract.
Under Belgian law, the term "lease" (huur or
louage) refers to a contract pursuant to which one
party commits to deliver to another party the possession of
property for a specific term and in consideration of a certain
price, which the latter commits to pay (Article 1709 of the
Civil Code). The term "leasing", in both Dutch and French when
used by Belgian legal commentators, refers to transactions
where, typically, the lessor purchased the asset according to
the requirements of the lessee when the lessee has an option to
purchase the leased asset (financial leasing). We will use
"lease" to mean huur or louage, as opposed to
Certain specific contracts between landlord and tenant have
been imperatively regulated. The law of February 20 1991
applies if the tenant uses the premises leased as his main
residence; the law of November 4 1696 applies to farm leases;
the law of April 30 1951 is applicable to "commercial leases",
ie leases of real property to be used mainly by the tenant or a
sub-tenant for retail trade or for the activity of a craftsman
directly in contact with the public (such leases will be
referred to as "retail leases").
The lease of offices or warehouses is only regulated by the
general lease provisions of the Civil Code.
The law of April 30 1951 regulates, inter alia, the term of
the lease agreement and the right for renewal, the revision of
the rent, the tenant's right to modify the leased premises, the
transfer of the lease and sub-lease, the consequences of the
sale of the property, the indemnification of the tenant in case
of government taking and certain specific procedural issues.
The provisions of the law are mandatory.
2. What is the effect of a tenant's insolvency, and
what remedies are available to landlords?
In the event of bankruptcy of the tenant the contract
will most likely be terminated. The landlord may apply a
contractual termination clause applicable in such an event. The
receiver has the option to terminate the lease or to perform it
further; the receiver is bound to make his choice upon formal
request given by the landlord to do so.
In the event of request of the tenant for a settlement with
its creditors (gerechtelijk akkoord or concordat
judiciaire) the landlord will not be able to terminate the
lease exclusively because of such initiative. However the
landlord maintains the right to require the court to terminate
the lease for non-performance.
By law, the landlord is granted the benefit of a security
interest in all furnishings (including stock, machinery,
furniture) present in the leased premises for the payment of a
maximum of two years of rent overdue.
Conflicts might arise between the security interest of the
landlord and a creditor of the tenant holding a pledge on the
business, an unpaid seller claiming the benefit of a retention
of title clause on assets sold and delivered and present within
the leased premises. Under certain conditions, the claim of
such creditors will prevail.
As a general rule the first date will be decisive (date of
first performance of the lease, date of entry of the pledge on
the business of the tenant). Under certain conditions,
typically information given to the landlord prior to the entry
of the assets in the premises, the claim of the unpaid seller
In the ranking of priorities granted by law, the privilege
of the landlord comes third, after the privilege for the
recovery of the enforcement expenses and of expenses made for
the preservation of the debtor's assets. In order to prevent
removal of the furnishings, the landlord has the option of
making an attachment.
3. How might changes in accounting standards affect
the landlord/tenant relationship?
We are not aware of any proposed changes to the
Belgian accounting standards. Changes to the International
Financial Reporting Standards (IFRS) are less relevant, as the
latter are not yet applicable in Belgium. As of 2005, listed
companies will be obliged to draft their consolidated accounts
in accordance with the IFRS. The Belgian government has still
not decided in which other cases the application of the IFRS
will also be allowed. The immediate impact of the application
of the IFRS will of course depend on the final version of the
exposure draft regarding the first time application.
4. How has recent statutory reform affected (or, how
will proposed future statutory reform affect) the lease renewal
The lease renewal process is only regulated in a
mandatory manner with regard to retail lease, main residence
lease, and farmer's lease, pursuant to the specific statutes
referred to above in section 1. The renewal process of none of
the types of leases mentioned in section 1 has been affected by
any recent statutory reform; we are not aware of any proposed
future statutory reform.
5. How does human rights legislation in Belgium
affect the landlord/tenant relationship?
A recent law dated February 25 2003 reinforced
legislation against discrimination.
When a building is offered for lease on the market, a
landlord may not discriminate when selecting a tenant. In
addition to criminal sanctions, a victim of discrimination may
request an injunction order to stop the discrimination.
6. What is the effect of conditions restricting
tenants wishing to divest themselves of surplus properties
('alienation'), and how can those restrictions be satisfied or
Under the general lease provisions of the Civil Code,
a tenant may sub-lease or (partially) transfer the lease. Most
leases restrict this by requiring the prior approval of the
landlord. With regard to retail leases, the law of April 30
1951 provides that a contractual clause restricting the
transfer of the lease will remain without effect in case the
tenant transfers the lease jointly with the business operated
in the leased premises.
In case of sub-leases, the initial tenant remains liable
vis-à-vis the landlord for the performance of the
contractual obligations under the lease agreement. In the event
of a transfer of the lease the same rule applies for a limited
period of time.
Securitization of real estate assets
1. How significant is the real estate securitization
market in Belgium?
A securitization model was developed many years ago
using real estate certificates, ie typically securities issued
by the owner of the real estate where the certificate holders
are entitled to a portion of the rental income and of the
proceeds of the sale of the property. This rental income is
treated as interest and only subject to a withholding tax of
15%. The repayment of the principal will, moreover, be tax
neutral. From a tax point of view, a real estate certificate
therefore constitutes an effective hybrid.
There have been private deals for the securitization of
lease receivables, some related to leases granted to the
2. What have the key real estate securitization
deals been over the last 12 months?
To our knowledge, there have not been any significant
real estate securitization deals in Belgium over the last 12
3. To what degree of detail (if at all) are the
parties obliged to disclose the lease terms on a formal
registry (eg the land registry)?
An original or a certified copy of all lease
agreements for real property must be submitted for
registration; the registration duty to be paid is of 0.2% (20
basis points) on the aggregate rental amount increased with
certain costs to be paid by the tenant (for residential leases
the duty is limited to euro 25). The document filed with the
registration office is not accessible to the public. None of
its contents are published.
As creditors of the landlord might challenge any lease
granted for the term exceeding nine years, the tenant, in order
to be protected by a longer term, will need the contract to be
notarized and to be copied in the register of the local
mortgage keeper. Any interested person may have access to the
register of the mortgage keeper.
4. To what extent can uninsured risks or potential
legislation leading to rent reviews affect the sanctity of the
The allocation of risks between landlord and tenant is
regulated by the general lease provisions of the Civil Code as
further implemented by case law. Pursuant to Article 1722 of
the Civil Code, if, during the term of the lease, the leased
premises are totally destroyed by force majeure, the lease is
automatically terminated. If it is only partially damaged, the
tenant may request a reduction of the rent or the termination
of the lease, according to the circumstances. During the lease,
the tenant will be held liable for any damages to the leased
premises and, in case of fire, will be deemed liable save
evidence to the contrary (Article 1733 of the Civil Code). In
such a case, the tenant's obligation to pay full rent will
continue for the entire term of the lease.
The landlord and tenant may agree to allocate risks (as well
as the consequences of an incident) in a different way. Often,
the lease agreement will provide that the tenant must provide
evidence of sufficient insurance coverage. The fact of whether
or not a risk is insured, absent any contractual clause on the
subject, will not have an influence on the question of which
party bears that risk.
Contractual clauses as to the unconditional liability of the
tenant to pay the rent are an essential element in any attempt
to achieve "sanctity" of the receivable securitized.
5. How important a role do the rating agencies play
We are not aware of any significant securitization
transactions whereby securities were offered to the public, and
not of any significant role played by rating agencies.
1. How prevalent is property outsourcing in
At present property outsourcing is a limited practice.
There are more traditional sale and lease back transactions,
but with no significant increase in the services rendered by
the landlord / property manager to the tenant.
2. What are the relative benefits of each of private
finance initiatives (PFIs) and public-private partnerships
3. what lessons have been learnt from both private
sector and public sector property outsourcing schemes in terms
of performance, service provision, financial benefits,
PFIs and PPIs are not (yet) common practice in
Belgium. The rules related to the sale of government-owned real
estate procedures are still relatively undeveloped, and recent
published transactions have indicated that the government
indeed obtained expert assistance.
4. To what extent should the service provider extend
services to cover back office systems such as IT and human
It is to be expected that, when property outsourcing
develops IT, and to a more limited degree, HR, they would have
to be included in the services offered.
5. What has been the effect of Enron and the
accounting scandals on corporates considering off-balance sheet
We have seen no noticeable effects.
6. What is the future of property outsourcing for
the private sector?
There will likely be slow growth, with outsourcing
most successful in the major cities.
Financing of real estate transactions
1. What are the most common methods by which
purchasers finance high-value real estate transactions in
The most common method is the middle or long term
loan, secured by a mortgage on the real estate purchased
combined with a pledge on the rental income from the
Since the cost of entering a mortgage is quite high, (1% of
the secured amount) a practice has developed to reduce the
amount secured by the mortgage (eg to 10% of the entire debt)
and to require the owner to sign a power for mortgage for the
balance. The lender may, at any time, register the mortgage for
such amount but this second mortgage will only rank at the date
of its entry.
Another common method of financing buildings (as
distinguished from land) is a real estate leasing structure. As
a general rule, the lease of real estate in Belgium is exempt
from value added tax (VAT). As a consequence, the VAT paid for
the construction of the building (presently 21 %), cannot be
offset with any incoming VAT on rent. Subject to certain
conditions a real estate leasing can qualify as a service
subject to VAT (as set forth in a Royal Decree No 30 dated
December 29 1992). Since, with this VAT leasing structure, the
costs of construction can be reduced with 21%, real estate
leasing has been used extensively.
Finally the purchasing company might consider issuing bonds
secured by a mortgage on the property.
2. To what extent does stamp duty (or the
equivalent) affect the cost and method of financing real estate
The transfer of real estate is subject to a
registration duty of 10% (for property located in the Flemish
Region) or 12.5% (for property located in the Brussels Region
or the Walloon Region) of the purchase price. If the tax
administration proves that the price paid for the property is
at least 1/8th (12.5%) below its market value, it will require
payment of an additional registration duty and of a fine.
Under certain conditions the transfer of title to
professional resellers is subject to a reduced registration
duty rate of 5%.
Until December 31 of the second year following the year
during which a building has first been occupied or used (after
its constructions or important transformation), the transfer of
the building may be subject, at the discretion of the parties,
to VAT (at the normal applicable VAT rate). The plot of land on
which the building is erected will remain subject to
In order to reduce the tax burdens, an investor may choose
not to purchase the land but to enter into a long-term lease
agreement (erfpacht or emphytéose) or
to acquire a right to build (opstalrecht or droit
de superficie). This right allows the investor to become
owner of the building. Both a long-term lease and the right to
build, as well as the buildings erected pursuant to such
rights, can be mortgaged. The mortgage will not, however,
survive the termination of the long-term lease, or the right to
The granting of both a long-term lease and a right to build
are subject to a registration duty of 0.2% on the indemnities
paid under the agreement for the entire term. The owner of the
land burdened with such rights may still sell (the land).
As a general rule, no registration duties will be due on the
transfer of shares of a real estate portfolio company.
3. To what degree of detail are the parties obliged
to disclose the terms of financing on a formal registry (eg the
A mortgage deed must be inscribed (and not copied) in
the register of the local mortgage keeper. Such inscription
will contain the identity of the creditor and debtor, the
secured amount, and the identification of the encumbered
property. Any interested party may obtain a mortgage
certificate containing this information.
4. Is there any debate as to who holds the legal
title to a mortgaged property?
This issue is not the object of any controversy or
debate in Belgium. The lender never holds title of any kind to
the mortgaged property; title remains with the initial owner.
Even in case of an event of default, title to the property is
not transferred to the mortgagee, who may only foreclose on the
mortgage by requiring a court order for the public sale of the
1. What are the various forms of property ownership
Under Belgian law, there is only one form of ownership
(propriété or eigendom) which
is the most complete right in rem. Other rights in rem can be
granted with regard to real estate, such as a long term lease
(emphytéose or erfpacht) and a right
to build (opstalrecht or droit de
superficie), usufruct, and easements.
A lease agreement does not grant a right in rem, but the
tenant will have a contractual right to possession
(genot or jouissance) of the property.
2. Other than the general principles of contract law
governing agreements between vendor and purchaser, what other
statutory governance, regulations or guidelines exist to
protect the parties to a property transaction?
Most provisions on the sale of goods as contained in
the Civil Code are not mandatory, so that the parties may
contractually provide otherwise.
The transfer of real estate must be enacted per notarial
deed. The role of the notary public is, as a public officer, to
verify the compliance with all applicable legislation and to
receive the tax. In addition, he will also advise the parties
as to their rights and obligations. Any party may request to be
assisted by a separate notary public without the incurrence of
The notary public must verify the seller's title to the
property and the absence of any mortgage or other
For real estate located in the Flemish Region, any sale is
subject to the prior obtaining of a certificate of no-objection
from the Flemish administration in charge of environmental
issues. If no such certificate can be delivered further
procedural steps are to be taken.
3. Is the practice of the vendor wanting to take
advantage of development uplift prevalent? How do lawyers
usually achieve this?
Without saying that the practice is prevalent in
Belgium, we have seen development projects - mainly in retail -
where in a share purchase transaction, the purchase price was
partially dependent and could possibly be negatively adjusted
in relation to take-up and rental income. In another
transaction the price of the land was to be increased if the
building permit to be granted allowed for a higher number of
lettable properties than the parties initially expected.
4. How significant is e-conveyancing? What rules and
regulations govern the e-conveyancing process?
E-conveyancing is insignificant in Belgium. Any
transfer of real estate necessitates the intervention of a
notary public. The notarial deed establishing the transfer will
be registered at the registration office and transcribed at the
register of the mortgage keeper. The only computer programme
intervening in the process is the notary's word processor.
Modern communication methods are only used for marketing
5. How have legislation and recent case law
addressed the issue of adverse possession?
The ownership of goods can be inquired by inheritance,
donation, the effect of agreement (eg a sale and purchase
agreement), accession or incorporation, or adverse
Ownership title on real estate can be acquired after an
uninterrupted, public and notorious, exclusive and undisputed
possession of 30 years. Shorter terms are provided for the
possessor in good faith and holder of a "lawful title" of
acquisition. The "lawful title" in theory contains everything
that is required to transfer ownership, but was not granted by
the true owner of the property.
Neerveld Straat 101-103
Tel: +322 743 4343
Fax: +322 743 4310