1. 04/09/2007 p1 Renting properties in Belgium Seminar British Embassy - 20/09/2007 Benoît KOHL LL.M. Cambridge Lecturer University of Liège Solicitor (Stibbe Brussels)

2. 04/09/2007 p2 Menu 1.Real Estate in Belgium : Bird’s eyes view 2.Residential leases agreements -Overview of the Act of 1991, as modified by the Act of 2007 -Rules relating to the conclusion of the contract -Duration – Rules for termination -Rent – Rent review – Costs (“charges”) related to the property -Assignment -Break clauses -Maintenance Issues 3.Question time / Exercises / Cases

3. 04/09/2007 p3 PART I : REAL ESTATE IN BELGIUM : BIRD’S EYES VIEW

4. 04/09/2007 p4 Where do I find the Law in Belgium ? -Real estate mainly governed by the Civil Code (« Code Napoléon » - 1804) -Other relevant statute law includes:  Planning law,  Standards for residential habitability,  Consumer Act,  Construction of dwellings Act (« Loi Breyne »)  Mortgage credit Act  …

5. 04/09/2007 p5 How to find his way in the Civil Code ? -2280 articles -Lease contracts (movable & immovable): articles 1708 ff. -Contracts for lease of immovable property : articles 1714 ff.

6. 04/09/2007 p6 PART II : LEASING RESIDENTIAL PROPERTY

7. 04/09/2007 p7 1. Introduction – Basis concepts

8. 04/09/2007 p8 Note: -Articles 1714 to 1762bis : General provisions for any lease agreement related to an immovable property -Three specific Acts governing 3 specific lease contracts (inserted in the Civil Code):

9. 04/09/2007 p9 1. The Act of 20 February 1991: Residential Leasing 2. The Act of 30 April 1951: Retail trade leasing (direct contact with customers) 3. The Act of 4 November 1969: Farms and rural estate leasing

10. 04/09/2007 p10 The Act of 20 February 1991 on residential leasing : general comments -Act aimed at guaranteeing housing security of tenants in private lettings and minimum quality of these lettings -Consequence : All articles of the 1991 Act are « imperatifs », i.e. no derogation possible by agreement (by clause in the contract) contrary to the tenant’s interests. -Possible however to increase by contract the tenant’s protection

11. 04/09/2007 p11 -Where the 1991 Act is not applicable OR where the 1991 Act gives no answer to a specific issue (for instance: what are the landlord/tenant’s duties in connection with the maintenance of the property), THEN back to the general provisions applicable to any lease contract -Where these general provisions give no answer (for instance : do I have the right to suspend the payment of the rent?), THEN back to the general contract law.

12. 04/09/2007 p12 When does the 1991 Act apply? -Need to be a lease -Need to be the tenant’s main place of living -Need to be an individual (not a company)

13. 04/09/2007 p13 Is the 1991 Act applicable to lease contracts where the tenant is an Embassy ? No !! However it is possible to make the 1991 Act applicable to these contracts by specific clause to be inserted in the contract. Advantage : the tenant (i.e. the Embassy) is far more protected. Drawback : more formalities (ex: registration of the agreement, strict notice periods to be complied with,…)

14. 04/09/2007 p14 !!! The clause must be explicit. Example of such a clause: « Les parties déclarent expressément soumettre le présent contrat aux dispositions de la loi du 20 février 1991 sur la bail de résidence principale (telle que modifiée par les lois ultérieures), même si le présent contrat, pour quelque motif que ce soit, ne rentre normalement pas dans le champ d’application de cette loi ».

15. 04/09/2007 p15 2. Signing the contract : NEW RULES (Act of December 27, 2006 and Act of April 13, 2007)

16. 04/09/2007 p16 a. Public Lease Announcement Each public lease announcement shall mention both the rent and the shared costs of the property. Local authorities of the town where the property is located may impose fines up to EUR 200 for infringements on this obligation.

17. 04/09/2007 p17 In addition, the local authorities may oblige the landlord to provide them with detailed information concerning the property at least 14 days prior to the signing of a lease agreement. If the landlord does not provide this information on time, a tenant will subsenquentely have the right to annul the lease agreement by means of a registered letter to the landlord up to 10 days after signing of the contract.

18. 04/09/2007 p18 b. Duty to register the lease agreement -Previously, any real estate lease, sub-lease or transfer of lease in Belgium was already (supposed to be) submitted to registration entailing the payment of a registration fee. But no sanction for the Landlord - New rules, however, are now applicable for residential leases as to deadlines, the persons subject to the obligation, the amount of fees and penalties.

19. 04/09/2007 p19 - Deadlines : From now on, residential lease agreements must be submitted for registration within 2 months (4 months for other lease agreements) - Person subject to the obligation: Residential lease agreement must now be registered exclusively by the Landlord (other lease agreements: Both parties were jointly held to proceed with the registration – even if the agreement usually compelled the tenant to do so)

20. 04/09/2007 p20 - Amount of fees: Registration of residential lease agreement will now be for free - New civil sanction introduced : any non registered residential lease agreement may be terminated by the tenant at any time (i.e. the normal notice period is 3 months) and without penalty (i.e. normally a penalty equal to 3, 2 or 1 month’s lease is payable, whether termination occurs during the 1., 2. or 3. year) !!

21. 04/09/2007 p21 c. Inventory of fixtures (« état des lieux ») - Previously, it was not compulsory to provide for an inventory of the property. In such a case, if no inventory had been drawn up, the law (civil code – art. 1731) presumed that the tenant had received the property in the state where this property was left at the end of the lease agreement (provision in the advantage of the tenant) – NB: It is open to the landlord to try to proof against this presumption.

22. 04/09/2007 p22 - From now on, a detailed inventory of the property should be drawn up, either before or during the first month of residence, in the presence of both the landlord and the tenant. - This inventory has to be attached to the lease agreement, and has to be registered together with the agreement. - N.B. : 1) this new provision applies for any lease contract (not only residential lease). 2) No specific sanction if the inventory is not drawn up (old sanction (presumption) still valid)

23. 04/09/2007 p23 -What if the Landlord refuses to draw up the inventory ? → Can be compelled to do so by the Judge, who will nominate an expert (in principle, shared costs).

24. 04/09/2007 p24 d. Instructive document An instructive document has been developed by means of a Royal Decree, which has to be attached to the lease agreement. This document will contain information relating to the following topics : (i) legal requirement for a written lease agreement, its registration and the costs thereof; (ii) regional rules regarding health, safety and fitness for habitation of places of residence; (iii) rules regarding the duration of a lease agreement; (iv) the possibilities with respect to the revision of the lease agreement, the indexation of the rent and the additional costs, the repair of damages, the termination of the contract and the change of ownership of the property and (v) information regarding the possibilities of legal aid in case of a dispute.

25. 04/09/2007 p25 e. Security deposit : new rules The 2007 Act foresees 3 different ways in which a tenant may provide a security deposit: -The tenant may open a personal account in his name: in this case, the maximum amount of security deposit is 2 months’ rent -The tenant may provide a bank guarantee: in this case, the maximum amount of security deposit is 3 months’ rent -(Other option : in case of financial difficulties, a tenant may ask as Social Service Department (CPAS) to provide a bank guarantee on his behalf) In any case, the security deposit may only be used after the termination of the lease agreement or by court order.

26. 04/09/2007 p26 2. Performance of the Lease Agreement – Duties of the parties

27. 04/09/2007 p27 a. Duties of the Landlord a.1. General Law of Lease contracts - NB: general lease contract law: it is allowed to deviate by a specific clause in the agreement - Duty to deliver properly the property, i.e. remove the « obstacles de fait ou de droit » that could hinder the entry in possession ex: works have to be finished, … - Duties relating to the maintenance (see later)

28. 04/09/2007 p28 - « Guarantee duty » (« obligation de garantie »): - against any (hidden) defects of the good (see maintenance) - against any « trouble de jouissance »: 1. caused by the landlord : ex - landlord hires a caretaker/manager of the building; caretaker’s negligence that leads to a burglary → builder may be liable for his caretaker’s fault. - landlord ask a building contractor to do some extensive repair, … ; excessive noise, dust → landlord must indemnify (even if the purpose is to increase the comfort of the property : ex. : installation of a lift, modification of central warming system (if this results in works, or increase of costs for the tenant). However, must be admitted by the tenant any minor works (ex: new door, installation of individual electricity meters,…)

29. 04/09/2007 p29 - one tenant does not pay the water/electricity costs and the landlord stops to provide water/electricity for the entire building : not allowed - landlord can not transform the real property until the end of the lease agreement (but for with the tenant’s agreement). - landlord can not decrease the level of comfort existing at the beginning of the lease agreement (ex: suppression of parking places, suppression of the garden, suppression of the caretaker (if agreed),…) - It is allowed for the landlord to do any urgent repairs, even without the tenant’s agreement: for these works, the tenant will not have indemnity if the duration of the works is less than 40 days (art. 1724 Civil Code)

30. 04/09/2007 p30 - IN NO CASE, the Landlord can enter in the property without the tenant’s agreement (even for repairs, visits before the end to the lease agreement (with potential new tenants); If the tenant refuses the access without legitimate motif → ask authorization to the Judge. - contracts with to 2 tenants at the same time - landlord contracts with a tenant which is a competitor of the tenant of his neighboring flat 2. Caused by 1/3 parties: ex: - A third party pretends to have a right on the property – - !! Not for third parties’ “troubles de jouissance”. (Ex: noisy neighbor, neighbor’s dog,…) : the tenant must react himself.

31. 04/09/2007 p31 a.2. Landord’s specific duties with respect to residential lease Specific duty: the landlord is responsible for the upkeep of the property, in order for the property to meet the standards for residential habitability (defined by law – Royal Decree 8 July 1997 - !! the policy of setting the standards for habitability is partially in hands of the « Régions » - ie Flanders, Walloon Region and Brussels) Indeed, other leases often imposes to the tenant to bear some of the obligations to upkeep the property (with the exclusion of works which relate to the soundness of the property) See also later (maintenance)

32. 04/09/2007 p32 What are these standards of habitability ? -Size of the place of living : at least one privative “living place” (bathrooms, toilets, corridors, … may be common to several privates places of living) -No defects that can have an negative impact on health or safety (ex: high level of humidity (but not if the humidity is caused by the tenant’s behavior)) -“Natural light”: all places of living and bedrooms must have a source of natural light (size: at least 1/12 of the roof size) + aeration in bathrooms,… (size : at least 0,1 % of roof size)

33. 04/09/2007 p33 -Minimal equipment : point of potable water (warm water not required); private wc (or 1 common wc for 5 persons), minimal electrical system, … -Possibility to lock the property -… → Minimal requirements (“minimal human dignity”)

34. 04/09/2007 p34 + REGIONAL RULES -RENT PERMIT to be obtained by the Landlors -Conditions for obtaining the permit may differ from one Region to another (ex: Need to obtain the attest from the Fire Inspection Dept.); -For different kind of properties : -all properties in Flanders (but is not required: only helps the Landlord to proof that his property meets the health and safety conditions), -only small size properties (living space < 28m² and student rooms) in the Walloon Region and Brussels (not possible to rent such properties without permit) -Sanction if no permit : contract might be void. -Other Regional rules (ex.: Fire detector (new rule in Walloon Region since Decree 21/10/2004))

35. 04/09/2007 p35 b. Duties of the Tenant 1. To pay the rent (!) - Indexation clause (mandatory formula): basis rent x new index basis index N.B: - index = published in the official Gazette (Moniteur belge), by minister of Economy - what if landlord forgets to adapt (limitation of action: 1 year)?

36. 04/09/2007 p36 -Specific rules for residential lease (1991 Act): NO INCREASE of the RENT possible UNLESS a. indexation possible even if nothing is provided in the agreement (exception: if the agreement expressly prohibits the indexation); BUT the landlord must ask it expressly (by letter), maximum once a year. If the landlord forgets the anniversary date of the agreement, he can ask the indexation later, but there will be no indexation accepted for the previous month’s rent (with exception for the last 3 month’s rent before the date of the landlord’s letter, on which indexation will be due)

37. 04/09/2007 p37 b. when the judge accepts a prorogation of the agreement in case of exceptional circumstances, he may accept an increase of the rent if it is fair. c. possible to increase the rent every 3 years - c.1) by agreement between the parties (but only between the 9th and the 6th month before the end of each 3 years-period – if not between these dates, parties are free to considered no to be bound by the agreement on the increase (or decrease) of the rent) - c.2) in execution of a court’s decision (ex: in case of new circumstances, if increase of the « normal rent value » of the property of more than 20 % / or in case of works performed on the property which increase the value of the property of more than 10 %)

38. 04/09/2007 p38 2. To pay the « charges ». - lump sum or effective charges (choice of parties) - separate calculation (therefore, no indexation possible for the charges); - the landlord is under a duty to produce documents proving the effective costs (rule not applicable in the case of a lump sum).

39. 04/09/2007 p39 - in the case of a flat in a building with multiple flats where a « syndic » has been nominated, the landlord’s duty is simplified (not necessary to send documents proving the effective costs – summary is enough + possibility for the tenant to consult the documents at the syndic’s office) - specific rule for residential leases: 1. The annual real estate tax (precompte immobilier) can not be paid by the tenant (ie cannot be included within the « charges ») 2. Reminding : 2007 Act : Each public lease announcement (only for residential lease) shall mention both the rent and the shared costs of the property. Local authorities of the town where the property is located may impose fines up to EUR 200 for infringements on this obligation.

40. 04/09/2007 p40 3. Duty to use the property as a « bonus pater familias » (idea of good faith). examples: -prohibition to have activities that deteriorate the property (of course !) ex: - no occupation of the property, without care for aeration, warming, surveillance,… - dangerous (or dirty) animals,… - no care of the garden -duty to warn the landlord if his intervention (urgent repairs,..) is needed -prohibition to modify the property (save little « aménagements » that do not properly modify the property : ex: painting, wallpaper, bathroom/kitchen’s accessories…) 4. Duty to maintain the property (see later)

41. 04/09/2007 p41 4. Duty to furnish the property - this provides a guarantee for the landlord - exception for property leased with furniture 5. At the end of the agreement, duty to restore the property in its previous state - utility of the inventory (« état des lieux »), from now on, in principle compulsory (2007 Act) - see above : proof of the state of the property / presumption when no inventory has been drafted

42. 04/09/2007 p42 -Costs of the inventory : shared between parties - Disagreement : the judge can nominate a judicial expert whose inventory will be binding for both parties. -Special issue in case of fire: the tenant is presumed to be liable, save as he can prove that the fire was not his fault

43. 04/09/2007 p43 3. Consequences of non performance of duties / garanties

44. 04/09/2007 p44 -Maintenance, repairs, defect guarantees : see later -!! Specific protection: « exception d’inexéctuion » : right to suspend your duties if the other party is in fault - ex : right to suspend the payment of the price if landlord does not maintain conditions: good faith (not suspend the total rent if minor maintenance’s problem)

45. 04/09/2007 p45 -If one party fails « seriously » to perform his duties (landlord : provide the property, maintain,../ tenant : pay the price, maintain,...), the other one may ask the judge for the « resolution » of the agreement + indemnities. -! Necessary to go to court the ask for the resolution (never automatic in lease contract law). -NB: Frequent penalty clause (« clause pénale ») : if tenant does not pay the rent, he is liable to pay interest -NB: Possible for the parties to increase/decrease their legal duties (save for the matters regulated by the 1991 Act) ex: possible to make the tenant responsible for all the repairs – see later.

46. 04/09/2007 p46 4. Term of the residential lease agreements

47. 04/09/2007 p47 - If the lease does not fall within the scope of the 1991 Act : parties are free to agree on the term (ex: 1 month, 1 year, 3-6-9 years,…): the contract may provide for a notice, or may exclude it. - If the residential lease falls in the scope of the 1991 Act : Extremely complex regime :

48. 04/09/2007 p48 1.Principle : 9 years 2.Main exception : short term lease (3 years max.) ! : short term lease may be renewed only 1 time with the total duration being no longer than 3 years (2nd renewal = automatically becomes a 9 years lease) ! : Notice of leave at least 3 months before the expiration date of the lease (if not : automatically becomes a 9 years lease)

49. 04/09/2007 p49 3. Possibilities to put an end at the lease agreement (without other party’s fault) -End by the landlord : only: -a: for personal occupation of the property (at any time, with 6 months notice; NB: the landlord must really occupy the property: if not, he must pay an indemnity = to 18 months rent) -b: for heavy works to be carried on in the property (only at the end of year 3, 6 and 9 – with 6 months notice ; NB landlord must really perform the works announced: if not, indemnity = to 18 months rent) -c: without any reason (only at the end of year 3, 6 and 9 – with 6 months notice + indemnity of 6 or 3 months rent )

50. 04/09/2007 p50 -End by the tenant: -At any time, with 3 months notice -+ indemnity if he leaves the 1, 2 or 3 year ( indemnity of 3, 2 or 1 months rent) -+ « contre-preavis » (if the landlord puts an end to the agreement – with 6 months notice -, the tenant may abbreviate this notice by giving a 1 month notice to the Landlord) (ex: if he has found another property in the meantime).

51. 04/09/2007 p51 - consequence : lease agreement does not automatically expires on year 3, 6 or 9 - NB : If the tenant stays in the property after year 9, automatic renewal for a new 3-6-9 lease agreement - NB: In any circumstance of resiliation by the Landlord, the Tenant may ask the Court for a extension of time of the lease agreement (« prorogation »), in the case of exceptional circumstances

52. 04/09/2007 p52 -examples of exceptional circumstances -Pregnancy of recent chirurgical operation -Age of the Tenant (90-95 years old,..) -Delay in the construction of the Tenant’s new house -But not : -Delay in the construction of the Tenant’s new house, caused by Tenant’s fault -Medical situation of Tenant, but not “exceptional” -Difficulty to find a new property to rent (not “exceptional”) -…

53. 04/09/2007 p53 5. Assignment of the contract – Sub-lease agreements 1.Assignment to another tenant : only with the Landlord’s agreement (the tenant is « released » - no duty to pay the rent, to maintain…)

54. 04/09/2007 p54 2. Sub-Lease Agreements: -Only for a part of the real property -Only with Landlord’s agreement -Terms of lease and sub-lease must be the same -The Tenant stays liable towards the Landlord for the entire real property (no direct relationships between landlord and sub-tenant)

55. 04/09/2007 p55 6. Sale of the real property which is occupied by the tenant. If the lease agreement has been registered (see above 2007 Act): the new Landlord is bound by the lease agreement If not : new landlord can put an end to the lease agreement (with 3 months notice if the Tenant has been living in the property for at least 6 months)

56. 04/09/2007 p56 7. End of the Lease Agreement: summary -Mutual agreement between the parties (always possible) -Resolution because of the other party’s fault (landlord does not maintain, tenant does not pay,…)… -Each party can put an end, but following the rules regarding notice periods, indemnities,…

57. 04/09/2007 p57 8. In case of disagreement… -Local judge (« juge de paix ») has exclusive jurisdiction to deal with all aspects of lease contracts’ claims. -Not compulsory, but strongly advisable to be advised by a lawyer.

58. 04/09/2007 p58 PART III: MAINTAINING RESIDENTIAL PROPERTY

59. 04/09/2007 p59 1. Basic principles -Difference to made between : -Situation of the property at the beginning of the lease contract: only Landlord’s liability -Duty to maintain the property during the lease contract: both parties may be liable with respect to maintaining the property

60. 04/09/2007 p60 2. At the beginning of the lease contract

61. 04/09/2007 p61 REMEMBER The Landlord must “only” provide for a property that meets the minimal standards for residential habitability. Initially, these minimum standards were mentioned in the Royal Decree of 8 July 1997 Since then, the three Regions have received jurisdiction on habitability matters (mainly to precise or to add some standards to the minimum federal standards – see also the requirement to obtain a rent permit)

62. 04/09/2007 p62 !!! All These « standards » of habitability are minimal ones (minimum of habitability. See examples above. By Contract, parties may increase these standards (Remember: “état des lieux”)

63. 04/09/2007 p63 Remember (2007 Act) : - From now on, a detailed inventory of the property should be drawn up, either before or during the first month of residence, in the presence of both the landlord and the tenant. - This inventory has to be attached to the lease agreement, and has to be registered together with the agreement - Instructive document to be annexed to the contract : regional rules regarding health, safety and fitness for habitation of places of residence

64. 04/09/2007 p64 3. Maintenance during the lease of the property

65. 04/09/2007 p65 -State of the Law before the 2007 Act: 1. The Landlord is responsible for the « réparations nécessaires » (necessary repairs, i.e. necessary to let the Tenant use the property in conformity with the contract terms) 2. The Tenant is responsible for the « réparation locatives » (lease repairs, i.e. repairs which result from the normal use of the property) 3. BUT SUPPLETIVE LAW: possible (and very frequent) to increase by contract the Tenant’s duties (but for the Landlord’s responsibility for the upkeep of the property, in order for the property to meet the standards for residential habitability)

66. 04/09/2007 p66 -Modifications since 2007 Act The distinction between « réparations nécessaires » and « réparations locatives » is from now on imperative: impossible to increase the tenant’s duties and to make him responsible for some or all of the réparation nécessaires.

67. 04/09/2007 p67 -A Royal Decree will soon be published with a list of the « réparations nécessaires » (ie Landlord’s repairs) not yet published…

68. 04/09/2007 p68 Examples of « réparations » a.« Réparations nécessaires » (Landlord’s duty) -Ex: Humidity -Ex: Central warming system deficient (or very old) -Ex: Windows broken due to “unknown” reason (ex: weather, malevolent act,…) -Ex: Roofs, walls, gutters, water pipes, electric cables, lifts, … (repair or maintenance)

69. 04/09/2007 p69 BUT NOT: -if the repair is caused by the Tenant’s fault -Sumptuous works (ex: Landlord can not be asked to replace an “Ikea kitchen” by a “3 stars kitchen”) -Entire reconstruction (ex: following fire) Remember: -Tenant’s duty to warn the Landlord if urgent repairs are required -If repairs for more than 40 days, indemnity for Tenant

70. 04/09/2007 p70 b.« Réparations locatives » (Tenant’s duty) -Ex. Annual chimney sweeping -Ex. Maintenance of the Alarm system -Ex. Maintenance of the boiler -Ex. Repairs to doors, locks,… -Ex. Repairs to windows -Ex. Painting of the walls -Ex. Garden -Ex. Replacement of washers (of taps), joints,… -…

71. 04/09/2007 p71 QUESTION TIME

72. 04/09/2007 p72 THANK YOU Benoît KOHL LL.M. Cambridge University of Liège Solicitor (Stibbe Brussels)