Real Estate Leasing

Verified 09 August 2022 - Directorate for Legal and Administrative Information (Prime Minister), Ministry of Economy

In order to meet the companies' need for premises, some specialist establishments offer the subscription of a contract for the property leasing. This type of contract allows companies to rent real estate and, in a second stage, become owner.

The building lease agreement corresponds to the leasing, by a specialized establishment (the lessor), of immovable property for professional or commercial use, for the benefit of a company (the lessee). This company has the opportunity to acquire the property at the latest when the lease expires.

The building lease agreement therefore includes 2 essential elements :

  • One lease : the company leases real estate (e.g. premises, offices, warehouse) to carry out its activity, it pays rent to the specialized establishment (e.g. a bank).
  • One unilateral promise of sale : the specialized establishment undertakes to sell the property to the company at the end of the lease. As for the company, call option. In other words, they have the opportunity to purchase or not purchase the property at a pre-determined price. The price takes into account the rents already paid, we are talking about residual value.


any professional can be lessee (business or sole trader) whatever its legal form and sector of activity. In contrast, only a bank or a specialized financial business can be lessor. One directory of authorized financial businesses is at your disposal.

In general, the procedure is as follows:

  1. A company chooses a property that meets its needs and negotiates the terms of the purchase with its owner (a seller).
  2. The company presents its project to the Financial business (lessor) who is free to accept or reject the case. In making its decision, the lessor generally relies on the financial situation of the company, its debt capacity and the characteristics of the property.
  3. In the event of acceptance, the financial business buys the property and leases it to the company for a specified period with the possibility of purchase at the end of the lease.

This mechanism allows the company to finance a real estate investment without initial intake, or bank lending. In addition, leasing debt is not in the accounting balance sheet but only in the annexes. Thus, leasing does not affect the debt capacity of the company, which retains its capacity to borrow.

Please note

leasing can be for real estate under construction. In this case, the lessee retains the contracting authority. It has the option of paying pre-rents during construction.

Contract Terms

The building leasing contract shall contain certain particulars, in particular:

  • Identity of the parties
  • Option Thrown Amount : for the purchase of the property
  • Rents and lease term : they are freely fixed. The lessor may require the payment of an initial rent plus a security deposit to be returned at the end of the lease.
  • Conditions for early termination : the lessee may waive the option before the lease expires, at the expense of paying compensation to the lessor. A minimum rental period is provided for in the contract.
Reciprocal obligations of the parties

The tenant (lessee) has a peaceful enjoyment obligation of the good and undertakes to ensure the good maintenance of the building. Thus, until the option is lifted, the lessee cannot sell or allocate the leased property of a mortgage.

Nor can it change the exclusive purpose of the good, that is, use the good for a purpose other than that originally intended. For example, the lessee may not use as commercial premises a building intended to house offices.

Similarly, the lessee shall to pay rent at maturity. Otherwise, the lessor may terminate the lease.


The lessor has an obligation to eviction guarantee in respect of the lessee (lessee).

Land Advertising

A property lease concluded for a over 12 years shall be subject to publicity with the land advertising service in a three-month period.

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in the absence of publication, the lease is not enforceable against third parties.

Such advertising shall give rise to the payment of the land advertisement tax. The amount of the fee shall be set at 0.70% the price expressed plus the charges imposed on the lessee, or rental value the real value of the rented goods if this value is greater than the price plus charges.

The payment of the tax is to be borne by the lessor who still owns the property at the time the lease is entered into.

At the end of the lease, the tenant (lessee) has the choice between one of the 3 alternatives :

  • Acquire the building : the tenant lifts the purchase option
  • Return the property to the lessor : the tenant does not waive the purchase option
  • Continue Rental : the tenant must obtain the agreement of the lessor.

A real estate leasing operation is governed by special tax rules.

Taxation of rents

Rents paid by the lessee (lessee) are deductible expenses income tax (taxable income).

However, where the expected price of the option waiver is lower than the land price, the fraction shall be equal to the difference is not deductible fiscally.

Example :

The annual lease fee is set at €100,000.

The land has been acquired €50,000. The price of the option waiver stipulated in the contract is €20,000.

The sum of non-deductible rents is: 50,000 - 20,000 = €30,000.

In the end, deductible rent amount will be 100,000 - 30,000 = €70,000.

Taxation of option waiver

The lifting of the purchase option entails the entry of the building into the property of the tenant (lessee). The property is then entered in its balance sheet among the elements of fixed assets.

The tenant, who now owns the property, is in the same tax situation as if he had purchased the property as of the date of the conclusion of the property lease agreement. Therefore, it must to reinstate a fraction of the rents paid to tax result company.

The amount of reintegration is obtained through the next calculation :

Value of the immovable property at the date of conclusion of the immovable lease contract - Amount of option waiver - Amount of depreciation that the tenant would have made if he had owned the property as of the date of conclusion of the contract - Amount of non-deductible rents during the lease period.

Example :

The 1er January of year N, a company enters into a real estate leasing contract. The value of the building is €200,000 (either €180,000 + €20,000 for the field).

The annual rent is €20,000.

The amount of the option is fixed at 10,000. €

December 31 of the year N+10, the company raises the purchase option and the account dampen the good of course 25 years.

Calculation : 200 000 - 10 000 - ((180 000 / 25) * 10) - 10 000 = 108 000

At the time of the option release, the company will have to make a fiscal reintegration of €108,000.

However, the company (lessee) is exempt from tax reintegration if it meets all of the following conditions:

  • The company is a SMB.
  • The lease was signed between the 1er January 2007 and December 31, 2015.
  • Leasing lasts for at least 15 years.
  • The property is for commercial or industrial use and is located in a regional aid area or a Rural Revitalization Area (RRZ).

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