The term “real estate” includes the following:

• Land
• Any buildings or structures of any kind on the land

The laws governing real estate transactions can be divided into two categories.

General legislation:

• Constitution of the Grand-Duchy of Luxembourg (the “Constitution”)
• The Luxembourg Civil Code (the “LCC”)
• The Criminal Code

Specific laws (including the following):

• Law dated 16 May 1975 on the status of divided co-ownership
• Regulation dated 3 September 1985 regarding the selling of floor-plan buildings (immeuble en l’état futur d’achèvement)
• Law dated 25 September 1905 on the transcription of real property rights

There are three public authorities involved in the Luxembourgish land registration system:

• Public notaries
• The Luxembourg land tax registry (Administration de l’Enregistrement et des domaines or AED)
• The cadastral authority (Administration du cadastre et de la topographie or ACT)

The land registration procedure entails three steps:

• The sale of land property must be enacted before a public notary, who will carry out inquiries into the seller, the existence of mortgages, or any other charges on the property
• The notarial deed will then be submitted to the AED for transcription
• The relevant information (size of the land, geographic situations) are transmitted to the ACT for the registration in public records

Title registration is jointly handled by the following authorities:

• A subdivision of the AED, namely the mortgages office (Bureaux de la Conservation et des Hypothèques)
• The ACT

• Transfer of property ownership (sale, donation)
• Ownership sharing agreements (usufructus)
• Mortgage over real estate properties
• Long-term leases (with a duration period exceeding nine years)

First, land owners can prove their ownership over real estate property via notarial deeds or their transcription by the AED. Secondly, a document evidencing the transcription can be obtained upon written request of the owner to the AED.

Only public administrations, administrations of municipalities, public entities operating in the real estate sector, geometers, bailiffs and notaries may perform an online search of title.

Foreigners are entitled to own real property in the same way as nationals; there are no nationality restrictions on land ownership.

Real estate property owners can be expropriated by the government only in case of public interest. Appropriate financial compensation must be paid to an expropriated owner according to Article 16 of the Constitution and Article 545 of the LCC, notably according to administrative procedure and regulations.

Generally, an interest in real estate is held by any of the following means:

• Ownership
• Undivided property co-ownership (indivision)
• Long-term lease
• Short-term lease

The usual structures used in Luxembourg for investing in real estate are either regulated or unregulated vehicles.

Unregulated real estate investment vehicles include the following:

• Corporate companies – this is most commonly used by professional, institutional and private investors for the acquisition of real estate
• Public limited company (Société Anonyme) or private limited company (Société à responsabilité limitée) – in practice, these are the most popular corporate forms in the Luxembourg real estate market
• Securitization vehicles – this is where a wide range of assets, tangible or intangible, movable or immovable, including real estate, are to be securitized

Regulated real estate investment vehicles include the following:

• Undertakings for collective investment – real estate UCIs must invest their funds in real estate, open their shares or units to the public by means of a public or private offer, and have the exclusive objective of investing in real estate assets in accordance with the principle of risk diversification
• Specialized investment funds – SIFs are considered one of the most successful tools in the real estate market, being operationally flexible and fiscally efficient
• SICARs (Sociétés d’investissement en capital à risque) ie, companies investing in risk capital – real estate investments need to have risk capital characteristics to be classified as eligible assets. However, such vehicles can invest 100% of their assets in one target investment as they do not need to comply with risk diversification requirements

Short-term or long-term bank loans, mortgages, multi-currency and revolving credit line facilities represent the main source of financing of real estate investments in Luxembourg. However, external financing and equity may be pushed down in the form of inter-company loans, profit participating loans and other kinds of hybrids.

If a notarial deed is required, the notary will prepare the documentation. Lawyers often prepare a letter of intent (compromis de vente).

If private seal documentation is sufficient for the purpose of the transaction, documentation is usually drafted by lawyers.

An owner is liable for matters relating to the real estate even if they occurred before he/she bought it, meaning that he/she, in principle, inherits the liabilities for such matters. However, in most real estate transactions and especially relating to pollution matters, sales contracts often set forth that the real estate is sold without pollution casualties. Such clause allows the current property owner to shift liability to the former property owner.

Under Luxembourg law, the liabilities of the seller can be divided into two categories:

• General provisions

The law provides for a guarantee in respect of latent defects (vices cachés) of the sold property which renders it unfit for the purpose for which it was intended, or which affects the use of this property. The seller would be liable if the buyer would not have acquired, or would have paid a lower price, if he/she had known of such condition. The seller is not liable for latent defects which the buyer was able to discover himself/herself.  

• Liabilities relating to the purchase of buildings under construction

The seller/constructor of a building to be constructed is liable for hidden defects for 10 years upon acceptance of the construction used by the purchaser, pursuant to the LCC. 

The action arising under this guarantee may be exercised by subsequent purchasers only against the original seller, ie, the constructor.