You sign a deed of sale of property off-plan which provides that the total price is paid in instalments, based on the progress of works.
This type of contract is governed by the laws of Luxembourg.
The promoter is required to offer you a completion guarantee, which will be annexed to the notarial deed of sale and registered with him.
Through this guarantee, a bank undertakes to pay the sums necessary for the full completion of the construction in accordance with the terms of the contact, should the seller not fulfil his completion obligation.
The bank may replace this completion guarantee by a repayment guarantee. In that case, it undertakes to repay the buyer the instalments paid by the latter.
Besides the deed of sale, you also sign the co-ownership deed, which specifies the common areas.
The Co-ownership rules define the rules for joint living conditions among the co-owners.
When you receive your new accommodation, a delivery report mentioning any shortcomings and defects is drawn up. By countersigning this report, the builder undertakes to carry out the necessary works at the earliest.
The ten-year guarantee given by the builder covers the building against latent defects for a period of 10 years as from the delivery of the apartment.
The opinion of a building expert can also be useful to estimate the value of the building, detect latent defects (cracks, humidity) and estimate the costs of repairs to be carried out.
When you have found a suitable house or apartment, you can sign a pre-contract.
If the buyer finances the purchase of the property through a loan, it is usual practice to add to the pre-contract a suspensive clause providing for the outright cancellation of the pre-contract if the necessary funds are not obtained from the bank.
Some renovation or transformation works may be vital.
In that is the case, do not forget to apply for the necessary permits at the local Authority.
The Local Authority, the Land Registry, your notary and your architect can give you the answers to these questions.
If you wish to personally handle the various phases of the project, customised construction provides you with a wide range of possible interventions.
Your architect designs a pre-project taking into account your tastes as well as your financial capacity.
He also prepares a detailed description giving precise specifications on interior and exterior finishes, installations and materials to be used.
Once the final project is agreed, the architect gives you a detailed plan and plans the various construction phases.
It is your responsibility to launch calls for tender for the different categories of tradesmen, to assess their proposals and to choose the companies to undertake your project.
Your architect can help you find the most competitive and the most competent construction company, with references that can be verified.
In order to relieve you of the responsibility and the conduct of the works, you can choose the option “turnkey house”.
The construction company coordinates and supervises the works, and guarantees that deadlines and the quality of services are met.
Along with the builder, you sign a purchase contract or a construction contract along with a specifications document describing the works to be undertaken.
If the cost of your house is to be paid in instalments, you have the right to request a bank’s financial guarantee from your builder.
Through this guarantee, the bank undertakes to pay the sums necessary for the full completion of the construction, should the seller not fulfil his completion obligation.
On the day of handover of the keys, you sign with the builder a report of delivery of the house, which records the end of works and their compliance with the description.
A ten-year guarantee covering the entire works against latent defects over a period of 10 years is given to you by the builder. It starts on the date of delivery of the house and must be mentioned in writing in the report of delivery.
Possibility of taking up a loan with the interest rate partly variable and partly fixed in order to balance the risk.
In fact, the difference between, firstly, all expenses to be incurred for the purchase or the construction of the dwelling and, secondly, all the various sources of financing available to you, will be equivalent to the amount to borrow.
To help you draw up a financing plan for your property project, you can use the following table in which we have included the expenses to be borne and the financial resources that you may have.
|Cost of land
Prices of construction / acquisition
Costs of development and transformation
Mortgage deed fees
Premium on outstanding balance insurance*
Funds from a housing savings scheme
Income from life insurance
Premiums granted by the State
Premiums granted by the Local Authority
|TOTAL EXPENSES||TOTAL FUNDS|
The formula to calculate the loan required for the construction / purchase of your dwelling:
TOTAL EXPENSES - TOTAL FUNDS = HOME LOAN REQUIRED
The insurance outstanding balance allows you to insure a given capital in the event of death during a specified period. For a home loan, if the insured dies during this period, the insurance company undertakes to repay the outstanding loan balance to the beneficiary. The family is protected from the financial charges relating to the loan in the event of death of the insured.
In principle, repayment starts as from the grant of the home loan. However, most lending institutions allow the borrower to start repaying after a period of use to be agreed upon this is the deferred capital repayment.
Thus, if you have purchased a dwelling for which the construction or renovation is not yet completed and you are still paying rent for your current accommodation, you refund only the interests due over that period until you move house. The “normal” monthly payments are only paid as from the time you move house.
Take one third (33%) of your permanent income as a benchmark to make a good decision on the part of your budget to be allocated to monthly repayments of your home loan.
Do you wish to ensure that your budget is balanced? Maintain a suitable standard of living, taking into account your permanent income and your fixed expenses.
|The repayment capacity recommended in this example is:
Monthly disposable income (5 756.00 €) x 33 % (i.e. one third of your income)
|= 1,899.69 €|
|Net monthly income of husband (after taxes)
Net monthly income of the wife (after taxes)
+ Family allowances
+ Other fixed income (after taxes)
|TOTAL INCOME||6,185.60 €|
|- Current monthly expenses (current loans, insurance premium…)||429.00 €|
|NET MONTHLY DISPOSABLE INCOME||5,756.60 €|
This difference must not exceed +/- a third (1/3) of the monthly disposable income to ensure a decent standard of living.
The grant of a home loan is subject to certain basic conditions as well as guarantees required by the lending institution.
This is vital for the financial security of your family and for the long term success of your project.
Indeed, as soon as we decide to start a family, forward planning should be a natural reflex. We are responsible not only for ourselves, but also for our spouse and children.
When you contract a housing loan, you are normally required to take up one or even several insurance policies. The purpose of insurance policies is to guarantee the lending institution as well as the persons themselves.
This insurance covers your loan against the outstanding balance in the event of death.
Your spouse or heirs will become the owners of the building, without having to pay the remaining monthly instalments (capital and interests) in your place.
It also represents a security for the family (spouse, children) since, in the event of a death, the repayment of the home loan is covered by the insurance (fully or partly, depending on the terms and conditions chosen).
You can also divide the capital between the two persons, taking into account that:
Tax deductible amount of the outstanding balance insurance:
|Taxpayer||Increased ceiling (up to 30 years)||Over-increased ceiling (31 to 49 years, slice multiplied by the number of years)||Over-increased ceiling (50 years and more)|
|no children||3,000 €||240 €||7,800 €|
|with 1 child||3,672 €||294 €||9,547 €|
|with 2 children||4,344 €||347 €||11,294 €|
|with 3 children||5,016 €||401 €||13,041 €|
|with 4 children||5,688 €||455 €||14,788 €|
If you already have taken a life-insurance, this may be amended into an outstanding balance insurance (under certain conditions).
It is therefore recommended that you contact your insurer to jointly look into whether, and under what conditions, your life-insurance could be converted into an outstanding balance insurance.
This insurance guarantees the building, and the purpose is to repay the cost or to reconstruct the home after a loss.
In the case of a rental, the law considers that the tenant is responsible for the loss, unless he can prove otherwise.
Water damage – lightning – storm – hail – electrical hazards – theft – attempted theft – vandalism.
Since 1992, the law also provides for damage caused by a terrorist attack or an industrial dispute.
Due to this extension of risks covered, fire insurance is now called “home” insurance.
Civil liability can generally be included in the same policy.
It is therefore important to calculate this figure as accurately as possible when the insurance is taken and also to revise it on a regular basis.
It is recommended to keep photos and any other proofs of your household effects and valuables.
It offers the owner the guarantee that he will be compensated over 10 years following the completion of works, in the event of construction problems.
Since it is not compulsory but it can be very useful, it is important for the owner to ensure – before any commitment – that the builder has taken such an insurance.
If it is not included in your “home” insurance policy, take it as a separate insurance.
In effect, it covers all damages for which you could be liable and which are not included in the fire, storm, water damages and other clauses of your “home” insurance.
You are liable under the law.
You will be required to compensate the victim fully, without compensation limit or ceiling.
It covers damages caused during the building’s construction.
The Luxembourg government has adopted a series of new laws in relation to the housing policy with the objective of encouraging the supply of housing through precise and targeted measures. The new laws reduce the tax burden applicable on the sale of building lands, residential buildings as well as on the purchase and construction of residential buildings.
|Works||Creation of housing||Renovation following the acquisition||Housing renovation least 20 years old|
|Load-bearing units used for the stability and solidity of the building||Yes||Yes||Yes|
|Units used for purposes of enclosure, cover and water tightness, including screeds||Yes||Yes||Yes|
|Construction or demolition of interior walls separating||Yes||Yes||Yes|
|Breakthrough new doors or windows||Yes||Yes||Yes|
|Walling of existing doors or windows||Yes||Yes||Yes|
|Staircases and ramps||Yes||Yes||Yes|
|Ceilings and fixed partition-walls||Yes||Yes||Yes|
|Parts of ducts, pipe-work, lines and shafts of all types inside walls, ceilings or floors, as well as those underground and used for connection to public infrastructures||Yes||Yes||Yes|
|Lifts and elevators in houses or apartments as well as fixed structures||Yes||Yes||No|
|Stiles and frames of interior doors||Yes||Yes||No|
|All types of covering for walls, floors and ceilings||Yes||2||No|
|Interior and exterior paint including painted paper||Yes||2||No|
Each invoice must separately relate to an amount exclusive of VAT exceeding one thousand two hundred and fifty Euros (€1 250).
Any person having undertaken or has caused to be undertaken the works listed above, without benefiting from the direct application of the rate of 3% can request VAT refund, provided that:
A list of invoices accompanied by the originals of the invoices as well as proofs of payment must be annexed.
According to the regulations applicable before the coming into effect of this law, the tax relief granted was in question when the dwelling for which it was granted was sold or used for purposes other than as the main residence within ten years as from the 1st of January of the year of completion of works for which is the relief is granted.
Pursuant to the new law, the tax relief is to be fully returned with interests at the legal rate as from the day of its grant if the dwelling is used for purposes other than as the main residence within two years as from the 1st of January of the year following the one during which the eligible works were completed.
In order to stimulate housing construction, the government subjects the creation and renovation of a dwelling to the super-reduced rate of 3%, provided that it is used as the main residence, either directly by the owner or indirectly by the tenant.
Dwelling means any building or part of buildings representing a distinct unit (e.g. an apartment) likely to be used as the main residence, including the garage, cellar or interior common areas related to it.
The simultaneous use of a dwelling as the main residence and for other purposes gives right to the tax relief, provided that the area reserved for the main residence is more than three quarters of the total area. If this area is less than or equal to the said proportion, the tax relief is granted in proportion with the part reserved for the main residence.
May be authorised for creation and renovation works carried out by categories of tradesmen within the limits and conditions set out in the Grand-ducal regulations of 30 July 2002 concerning the application of Value Added Tax on the use of a dwelling as the main residence and on creation and renovation works carried out in the interest of dwellings used as the main residence and setting out the related terms and conditions.
The request, which should be in the format recommended by the department, is signed by the taxpayer and countersigned by his client. In practice, the company may send the said request with its quote to the client who approves, completes and signs it.
In the absence of prior authorisation, the company is required to invoice at the rate generally applicable in this respect and the owner must follow the refund procedure in order to benefit, if applicable, from VAT refund up to the super-reduced rate of 3%.
The tax relief arising from the direct application of the super-reduced rate of 3% respectively of the refund up to the rate of 3% cannot exceed €50 000 per dwelling created or/and renovated.
If the beneficiary or his right-holders sell the dwelling or change the intended use thereof within 10 years, they must reimburse all or part of the tax relief.
However, in the event of a sale, this reimbursement is not required if the buyer continues to use the dwelling as the main residence and provided he declares that he continues the personality of the transferor whose rights and obligations in respect of VAT he assumes.
Any transfer for consideration or any use other than as the main residence is to be declared in writing to the department within one month, failing which a penalty may be imposed.
The grant of the tax credit is subject to certain conditions, namely:
The relief is applied when they actually occupy the property. It is important to note that these buyers are also subject to the condition that the notarial deed should contain the undertakings provided under Article 7 of the law, in particular that of personally occupying the property.
To obtain refund of the duties, the buyer must apply in writing to the relevant office, supported by a certificate of residence.
After five years of occupation, the buyers are free to use their accommodation as they wish, since the relief is then final. To be entitled to another relief, two conditions must be met:
Le délai d’occupation ie le délai dans lequel les acquéreurs doivent occuper l’immeuble acquis.
L’article 10 stipule que l’occupation doit être effective dans un délai de deux ans à compter de la date de l’acte notarié d’acquisition. En cas d’acquisition d’une place à bâtir ou d’un immeuble en voie de construction, ce délai est fixé à quatre ans.
Toutefois, ceux-ci peuvent être prorogés par décision du directeur de l’administration de l’enregistrement.
En cas de non respect du délai d’occupation :
A défaut de demandes en prorogation, l’inobservation des délais de deux respectivement quatre ans, respectivement prorogés, donne lieu au remboursement total de l’abattement accordé pour l’opération concernée.
Dans tous les cas où il y a lieu au remboursement, celui-ci est restitué à l’administration avec les intérêts légaux à partir du jour de l’octroi de l’abattement.
La durée d’occupation, ie le temps d’occupation de l’habitation, requis pour bénéficier définitivement de l’abattement fiscal.
L’occupation doit rester un fait acquis pendant une durée ininterrompue de cinq ans au moins.
Toutefois le directeur de l’administration de l’enregistrement peut dispenser de cette condition dans les cas où celle-ci ne peut être respectée pour des cas de force majeure ou à la suite d’une situation telle que :
Cette liste n’est pas limitative. D’autres cas pourront être pris en considération, pour autant que les faits et circonstances de l’abandon sont indépendants de la volonté ses bénéficiaires.
En cas de non respect du délai d’occupation :
Les acquéreurs, qui au cours de la période d’occupation de cinq ans, vendront l’immeuble respectivement l’affecteront à un autre usage sont soumis à l’obligation de remboursement comme en cas de non respect du délai d’occupation.
Étant donné que ce remboursement a pour effet de reconstituer le crédit d’impôt jusqu’à concurrence de l’abattement consenti et remboursé, les acquéreurs jouiront de nouveau de la totalité de leur crédit, sous réserve de rembourser les intérêts dus sur l’abattement.
Finally. You have found your new home and you are getting ready to move house. Couldn’t be simpler, you might think! The reality may well be very different.
There is no short cut to moving house. Indeed, the earlier you start, the more prepared you are, the smoother and easier it will be. In general, you wish to relocate your home without any damage, loss or administrative hassles. You therefore have to take certain precautions.
To avoid any disappointments, we are pleased to offer some tips, based on commonsense: what you must not forget before, during and after your house move.
Renting a van and calling upon some friends is the cheapest way to move house.
That day you need to put in a lot of efforts and determination…
Professional removal companies allow you to save on time and efforts. To avoid breakage, it is better to have recourse to a team of professional removers. Advice and know-how are indeed most welcome at such hectic times. Professionals are experienced and better organised. They also have the necessary equipment to ensure that there is no damage to your furniture and delicate objects.
Moreover, in the event of breakage or damage caused by a remover, the damages are covered by the company’s insurance since the company is contractually liable for the goods under its responsibility.
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