A complete guide to real estate transactions !

If you are involved in a property transaction, it is important to understand the registration and transfer of property rights. These steps play an essential role in the transfer of property and the fulfillment of legal obligations. In this article, we will look in detail at the key aspects of registering and transferring property rights.

1. Introduction to the transfer of title

The transfer of real property rights concerns the transfer of ownership of real property. This transfer may be free of charge, e.g. in the case of a donation, or for a fee, e.g. in the case of a sale of real estate. According to the Civil Code, such transfers must be registered in order to be legally valid.

2. The importance of the deed of sale

It is important to understand that the preliminary contract of sale has the same legal value as the sale itself. If the agreement contains suspensive conditions, such as the obtaining of a loan or a municipal permit, the sale is concluded when these conditions are fulfilled.

In the case of suspensive conditions, the registration fee is 12 euros, as there is no real transfer of ownership. If, on the other hand, the suspensive conditions are lifted and the sale is completed with the signing of the notarial deed, the proportional registration fee applies. This is 5% plus 2/10 (i.e. 6%) of the sale price. There is also a transfer duty of 1% of the sale price.

In total, the registration and transfer taxes amount to 7% of the sale price. If no real estate agent is involved in the transaction, the documents must be submitted to the tax authorities within 3 months. However, if a real estate agent is involved, this period is reduced to 10 days.

3. Registration procedure

The registration must be made at the tax office of the place of residence or at the head office of the real estate agency concerned (e.g. Bureau II for Luxembourg). The buyer is usually responsible for paying the registration fee.

Let's take the example of a sale between Pierre and Emile of a property with a market value of 500,000 euros. In this case, the registration fee is 5% plus 2/10 (i.e. 6%). The registration fee is therefore 30,000 euros. In addition, the mortgage registration duty is 1%, which amounts to 5,000 euros. The total amount to be collected is 35,000 euros.

4. Tax credit

A tax credit is available for the purchase of a building intended for residential use. In the case of the acquisition of a building for residential use, a tax credit (abatement) may be granted on the registration and transfer fees, up to a maximum of 20,000 euros. This application must be made to the notary at the time of the deed. The purchaser must undertake to notify the administration in writing within 3 months of any transfer or change of use of the property. The tax credit must be used for personal purposes.

It should be noted that if Emile claims the tax credit, he will have to pay the difference between the theoretical tax (15,000 euros in this example) and the allowance granted (20,000 euros). If Emile buys jointly with his wife Cecile, the tax will be divided by two, which means that each of them will have to pay 17,500 euros. Emile will therefore have a surplus of 2,500 euros, which he and Cecile can use later.

5. Purchase with a view to resale

In the case of a purchase with a view to resale, there is a special rule whereby this intention must be stated in the notarial deed in order to avoid paying the 1% transfer tax. If Emile states that he is buying the property with a view to reselling it, the basic rate of 5% plus 6% will apply. In this example, this would be 36,000 euros.

6. Special case: Sale in the future state of completion (VEFA)

In the case of a sale in the future state of completion, registration duty is paid according to the progress of the work. For example, if the building is 40% complete, payment is made for 40% of the total amount. It should also be noted that in the case of a VEFA, there is no contract of sale, but rather a reservation contract.

7. Leasing with rent

In the case of a lease, rents are capitalized at 0.5% plus 2/10. For example, if the lease has a term of 3, 6 or 9 years, with tacit renewal of three years in three years, and the monthly rent is 100 euros, the tax base would be 14,400 euros (12 years * 12 months * 100 euros). The exact calculation of the transfer tax will depend on the applicable rate.

8. Right of emphyteusis and legal obligations

The right of emphyteusis corresponds to the annual fees of a real right similar to a property right. It is important to comply with the legal obligations regarding the registration and declaration of this right.

9. Legal provisions and obligations of real estate agents

According to the law of 28 January 1948, real estate dealers have specific obligations towards the tax authorities. These include the concealment of sale prices or exchange or sharing balances, as well as the provision of certificates from real estate agents confirming the accuracy of the prices stated in the deeds. Failure to comply with these obligations may result in fines and penalties.

10. Municipal Surcharge

In some municipalities, such as the City of Luxembourg, a local tax may be levied on the transfer of real estate. These surcharges are generally calculated as a percentage of the registration fees due.

11. Exemptions and special cases

There are specific exemptions, e.g. for single-family houses or rental houses classified as such by the tax authorities. In addition, purchases for resale do not qualify for these exemptions. It is important to find out the specific conditions for benefiting from these exemptions.

In conclusion, it is important to understand the registration and transfer procedures of property rights when undertaking a property transaction. These steps can have a significant impact on the costs and legal obligations associated with the transaction. By becoming familiar with these procedures, the parties involved can ensure a legal and transparent property transaction.

Here are 20 quiz questions with 4 choices and answers:

What is the transfer of a property right?

a) The transfer of a mortgage
b) The transfer of a property
c) Changing the zoning of a property
d) The alteration of a lease

Answer: b) The transfer of a property

What is a suspensive condition in the sale of a property?

a) A clause allowing the sale price to be revised
b) An obligation to carry out work before the sale
c) A condition that must be met for the sale to be valid
d) A guarantee given by the vendor as to the condition of the property

Answer: c) A condition that must be met for the sale to be valid.

Who is generally responsible for paying the registration fee in a property transaction?

a) The seller
b) The buyer
c) The estate agent
d) The notary

Answer: b) The buyer

What is the usual time limit for submitting the registration documents without a real estate agent in Luxembourg?

a) 3 months
b) 6 months
c) 10 days
d) 1 year

Answer: a) 3 months

What is a tax credit on the purchase of a property?

a) A reduction in property tax
b) An amount refunded by the government after the purchase
c) A reduction in registration and transfer fees
d) An exemption from local taxes

Answer: c) A reduction in registration and transfer fees

What are the conditions to benefit from the tax credit for the purchase of residential property?

a) Actual occupation within 2 years
b) Actual occupation within 5 years
c) Actual occupation within 6 months
d) Actual occupation within 10 years

Answer: a) Actual occupation within 2 years

What is the rate of the municipal tax on property transfers in Luxembourg?

a) 10%
b) 25%
c) 50%
d) 75%

Answer: c) 50%

What are the consequences of the real estate agent's failure to certify the sale price in the deed?

a) A reduction in the registration fees
b) A fine of between 25 and 1,250 euros
c) Cancellation of the sale
d) A ban on the estate agent

Answer: b) A fine of between €25 and €1,250

What are the duties of an estate agent in property transactions?

a) To declare the transactions to the tax authorities
b) To keep registers and send them to the
registrars
c) Pay a special tax on real estate transactions
d) Provide security for the property sold

Answer: b) Keep records and provide records to registrars

What is an acquisition for resale in the context of conveyancing?

a) The purchase of a property for long term rental

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b) Buying a property for quick resale
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c) Buying a property to be used as a primary residence

d) Buying property for commercial purposes

Answer: b) Buying property for quick resale

What is the local tax on property transfers in Luxembourg?

a) 25%
b) 50%
c) 75%
d) 100%

Answer: b) 50%

How long does it take to submit the registration documents for a property transaction with an estate agent in Luxembourg?

a) 3 days
b) 10 days
c) 1 month
d) 6 months

Answer: b) 10 days

What is a transcription fee in a property transaction?

a) A fee charged for audio and video recordings of transactions
b) A fee charged for notarized documents relating to the transaction
c) A fee charged on property exchanges
d) A fee on leases of property

Answer: b) A fee charged on notarized documents relating to the transaction

What are the consequences of concealing the price of a property sale?

a) A reduction in the registration fees
b) A fine equal to the amount concealed
c) Cancellation of the sale
d) A ban on selling property in the future

Answer: b) A fine equal to the amount concealed

What is the tax credit for the purchase of a property for residential use?

a) 10 000€
b) 20 000€
c) 30 000€
d) 40 000€

Answer: b) 20 000€

What are the duties of a notary in a property transaction?

a) Give legal advice to the parties
b) Draft the deed of sale
c) Explain the relevant articles of the law
d) Collect the registration fees

Answer: c) Explain the relevant sections of the law

What is a VEFA in the context of property transactions?

a) A sale of property between private individuals
b) Sale of a building with bank financing
c) A sale of a building in its future state of completion
d) A sale of a building with a view to resale

Answer: c) A sale of a property in its future state of completion

What is the minimum period of occupancy required to benefit from the tax credit for the purchase of a property for residential use?

a) 6 months
b) 1 year
c) 2 years
d) 5 years

Answer: c) 2 years

What is the effect of a break in occupation of a building within 2 years of purchase?

a) An increase in registration fees
b) A reduction in registration fees
c) A full refund of the reduction granted
d) An additional payment of council tax

Answer: c) A full refund of the discount granted

Who is responsible for paying the registration fee for a property transaction in Luxembourg?

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a) The vendor
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b) The buyer
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c) The estate agent
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d) The notary
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Answer: b) The buyer