How do you increase the rent on a commercial lease?

Any increase in rent under a commercial lease is subject to strict rules, as are the terms of the increase, which must be clearly set out in the contract binding the landlord to the tenant. As a landlord, you may be wondering whether you are entitled to increase the rent on your commercial premises, and how to do so in a way that complies with the law and avoids conflict. Here's an overview of the key rules you need to know about commercial leases.

How do you determine the amount of commercial rent?

An overview of commercial leases

In Luxembourg, the commercial lease is governed by the law of 3 February 2018. It can be used to rent any type of business premises, with the exception of offices, short-term rentals (12 months or less) and liberal professions. For these three categories, the lease of premises is governed by the Civil Code. Commercial leases are more commonly used for commercial and service activities, such as hairdressing salons.

Setting the rent for a commercial lease

Several criteria are taken into account when determining the rent, including the market, the condition of the property and the neighborhood. The sum of these characteristics is used to calculate the rental value of the property.

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Note: Please note: since 2018, it has been illegal to charge tenants of commercial premises a key money. This term was used to refer to the entrance fees charged to tenants on their arrival. Whether it's a " key money ", an " entry fee " or an " additional indemnity ", be aware that this practice is forbidden!

How can I increase the rent on a commercial lease?

The rent for your commercial premises must be clearly stated in the lease. You must also add the cost of utilities and specify what is included (water, electricity, maintenance of common areas, gas, etc.).

To avoid confusion and disputes, we recommend that you include payment terms and deadlines in the lease. Finally, the contract must include the rules for rent reviews. In general, this review is based on the consumer price index: you use the figure for the month preceding the signing of the lease to set the rent, and you use the latest index at the time of the review.

The risks of excessive commercial rents

Some professionals, including department stores, which are considered to be firmly rooted in their area, do not hesitate to leave their historic district if they consider the rent to be too high. It is therefore essential to bear in mind that any increase in the rent of a commercial lease can put the tenant in difficulty and force you to find a new tenant quickly.

What's more, a high rent is likely to be less attractive on the market. You may find it harder to find a tenant and they may not stay long, especially if they can find cheaper premises elsewhere.

Finally, too high a rent can also lead to problems with late or non-payment. To avoid these tricky situations that could cost you money, it is best to adapt to the market and remain reasonable when considering a rent increase. To guide you in your decisions, trust a professional property specialist in Luxembourg or entrust him/her with the management of your assets!