In general, the primary sources of law in Belgium are legislation, case law, doctrine, and customs. However, it should be highlighted that for real estate specifically, the below considerations are to be taken into account.

Belgian real estate law operates under a dual framework: it is governed at the federal level by the Civil Code, which is currently undergoing recodification, and at the regional level, where legislative powers can enact laws.

In the area of civil law, the Civil Code governs, notably, property rights (Book 3), contractual obligations (Book 5), and general tenancy agreements. Retail leases are mainly regulated by the Retail Lease Act of 30 April 1951 and regional decrees. Finally, residential leases are also regulated at the regional level.

Public real estate law, encompassing zoning, planning, and environmental legislation, is essentially governed by regional and local authorities.

Taxation powers in real estate law are shared between the federal state (matters with respect to the Income Tax Code and VAT Code) and the regions (notably transfer tax matters).

Other legal sources impact real estate legal practice and transactions such as:

• the Code of Companies and Associations;
• the law of 12 May 2014, on Belgian Real Estate Investment Trusts (B-REITs);
• the Code of Companies and Association;
• the law of 19 April 2014 on alternative investment funds and their managers, and the related decree of 9 November 2016 on the Belgian SREIF (Specialised Real Estate Investment Fund); and
• the Code of Economic Law.

In 2023, the Belgian real estate market faced challenges from ongoing macro-economic issues and geopolitical tensions, including the Ukraine conflict, high inflation, and volatile construction materials costs. These factors, combined with higher interest rates, contributed to reduce investment activity and a notable decline in real estate (M&A) transactions and stimulate a conservative climate as borrowing costs rose and financing entities exercised increased caution in lending and the structuring of securities associated with the financing of real estate operations.

The following economic factors are also to note.

• Signs of recovery – despite the slowdown, there are early signs of recovery as evidenced by stabilised, higher-level rents and a reduced vacancy rate in the Belgian office and retail real estate sectors in Q4 2023.
• Fundraising trends – real estate-related fundraising has declined, reaching a ten-year low in 2023, but a modest recovery is expected, likely driven by large investment funds.

The real estate market is currently facing a challenging economic environment. The sector’s inherent resilience, coupled with strategic adaptation by investors (with an increased focus on ESG and sustainability needs), may lead to significant recovery and growth in the forthcoming periods.

With respect to major deals, some remarkable transactions occurred in 2023, such as:

• the acquisition by IRET of the Grand Bazar shopping center;
• the acquisition by BNP Paribas REIM of five companies holding five healthcare properties from Baltisse Real Estate;
• the sale of the Blue Towers in Ghent to Reactr;
• several transactions in the hotel real estate investment market, involving among others Extendam, Limestone, FICO and Van der Valk;
• the transfer of the office part of the AXS mixed-use development project by Baltisse to AGRE and Baloise; and
• the sale by Cofinimmo of Park Hill to License to Construct.

In the context of the Civil Code reform (see 1.1 Main Sources of Law), several of the Civil Code Books affecting the real estate practice are already in force: Book 3 (Property Law) since 1 September 2021, and Books 1 (General Provisions) and 5 (Obligations) since 1 January 2023. On 1 February 2024, the Belgian Chamber of Representatives approved Book 6, which will include a reform of the Extracontractual Liability regime in Belgian law. Its provisions are set to enter into force six months after their publication in the Belgian gazette. Proposals for Book 9 and Book 7, which encompass securities and special contracts (including sales and leases), were filed in February and April 2024 respectively.

The different types of Belgian property rights are exhaustive in nature, as only the legislator can establish new property rights. The current legal property rights are:

• Ownership – provides the owner with use, enjoyment, and disposal rights regarding their property (subject to legal limits). It is a perpetual right.
• Co-ownership – shared property rights among multiple (natural or legal) persons over the same asset or set of assets, without exclusive right over such asset(s) or parts of them.
• Easements – property right of use involving the imposition of a charge on a property benefitting another.
• Usufruct – temporary entitlement to prudent and reasonable use and enjoyment of someone else’s property, in accordance with the property’s purpose, with the obligation to return the property upon expiration or the right (upon death of the holder or, for legal persons, their bankruptcy or dissolution).
• Long-term lease right – extensive use and enjoyment of another’s property for a minimum of 15 years up to 99 years (or perpetual, subject to conditions).
• Right to build – ownership of volumes (constructed or not) on another person’s property, for the purpose of erecting buildings or plantings, lasting up to 99 years (or perpetual, subject to conditions).

Real securities, including special privileges, mortgages, pledges, and retention rights, also fall within this closed system.

In asset deal transactions, the general principle is that the transfer of ownership occurs when parties agree on essential elements (mainly the object and price). Exceptions may apply, such as court-ordered transfers in the context of ownership disputes.

Regarding share deal transactions, the transfer of special purpose vehicle’s shares also generally occurs through the consent of the parties on the essential terms of the transaction. Court decisions may also be a source of transfer of shares (eg, in the context of a dispute between shareholders).

Prior to the transfer of share ownership, formalities such as pre-emption rights or approval by existing shareholders may be required, often stipulated in articles of association/shareholders’ agreements whereas various operations causing the issuance of shares require formalities such as publishing a (de)merger draft in the annexes to the Belgian Gazette at least six weeks prior to the relevant general meeting resolution and/or preparing reports by the management body of the company and a chartered/statutory accountant (for example, in case of a contribution in kind).

Additionally, the recording of the transaction in the company’s share register post-transfer or issuance is mandatory.

In addition to the principle of consensual agreement described in 2.2 Laws Applicable to Transfer of Title, the completion of the transfer or granting of real rights in Belgium requires specific formal actions, such as transcription and registration, which will cause the transfer or granting of real rights to be enforceable against third parties.

Usually, the transfer of title/granting of real rights must be recorded in a notarial deed and then transcribed in the Belgian mortgage register. Are also transcribed in this register (amongst others) deeds granting a right of pre-emption to a property and leases longer than nine years.

Sellers of real estate assets have an obligation to provide information on the condition of the asset (including known hidden defects) and therefore typically constitute a data room populated with relevant information needed for a buyer to make an informed decision.

Buyers usually conduct a legal due diligence on real estate assets based on the data room and public registers information, covering areas such as:

• ownership title and encumbrances;
• occupancy agreements;
• construction agreements;
• business, repair and maintenance agreements;
• insurance coverage;
• existing or potential legal disputes; and
• property’s tax obligations and financial information.

These legal analyses also often cover environmental and planning aspects such as:

• planning status;
• permits;
• soil condition;
• asbestos presence; and
• energy efficiency compliance.

When purchasing shares of a company that holds real estate assets, due diligence also includes examining the company’s financing agreements, corporate structure, employment agreements (if any) and accounting and tax obligations.

Beyond the legal framework, purchasers generally perform a technical evaluation of the properties involved in the scope of the transaction to assess their physical condition and maintenance.

Seller’s representations and warranties (R&W) in real estate transactions generally relate to:

• the seller (eg, its rights to enter into the transaction);
• property ownership;
• agreements with respect to the property;
• absence of litigation; and
• permits/environment.

In a share deal structure, the seller’s R&W are usually broader and may also include corporate law, employment, accountancy, and tax matters.

In the event of warranty breaches, the purchaser can seek compensation for damages suffered or the annulment/termination of the transaction in court (in case of material breach or defect in consent). Alternative remedies or limitation to the purchaser’s remedies may be agreed upon by the buyer and seller.

Time limitations on liability for breaches of warranties by the sellers vary depending on the type of warranties. Fundamental warranties (typically concerning the ownership of the asset /shares of the target entity) usually remain in force for a period up to 30 years. Tax warranties typically endure until the expiration of the prescription period for claims by tax authorities. For other warranties, parties commonly agree to time limitations ranging from 12 to 36 months.

A materiality threshold is often agreed upon for claims for damages by the purchaser due to breaches of warranties as well as a maximum limitation of liability for breaches is often stipulated, which is usually a percentage of the purchase price (eg, 10%).

The implementation of a warranty & indemnity (W&I) insurance covering damage resulting from breaches of warranties given by the seller is not unusual.

When preparing for a real estate transaction, investors should review:

• conditions impacting titles on properties such as pre-emption rights, specific stipulations (such as easements), applicable environmental aspects, and obligations, including potential remediation requirements (see 2.7 Soil Pollution or Environmental Contamination);
• lease agreements legislation; and
• for development investments – local zoning regulations affecting project acceptability.

Investors also need to consider tax, urban planning, and permitting aspects. Most development/construction projects require prior approvals from public authorities, such as building and environmental permits, in addition to specific authorisations based on the business type/size (eg, hotels, restaurants and cafes).

To determine if a real estate purchaser (or real right grantee/transferee) is responsible for soil pollution or environmental contamination on a property, it is necessary to differentiate between the regulatory framework (eg, conducting soil surveys and remediation) and civil liability (which addresses the financially responsible party for pollution-related costs and damages).

Regulatory Framework

Each region has enacted soil legislation defining the party responsible for soil surveys and remediation.

• Flemish region – first on the operator of a listed activity, then the user (through personal or real rights), and finally the landowner.
• Brussels region – the responsibility varies with the contamination nature and may fall on the current operator, the polluter, or the holder of real rights (including the owner).
• Walloon region – the responsibility falls upon the volunteer to perform the obligation, then to the polluter the operator, real rights holders, and, lastly, the landowner.

Legal obligations under the soil legislation (eg, providing a soil certificate and performing soil surveys or remediation), are triggered by events such as real rights transfers, corporate restructuring, permit requests, etc.

Civil Liability

In all regions, the person carrying out soil surveys and remediation – whether voluntarily or following a legal obligation – can seek damages from the polluter under general civil liability law. Additionally, specific strict liability rules for polluters under the soil legislations may apply in certain scenarios.

Whether a buyer, upon acquiring a real estate asset, will be legally obliged to perform soil surveys and soil remediation works depends on the structure of the deal.

Asset Deal Structure

Asset deals are a triggering event in all regions. The seller must perform at least a soil survey prior to closing if specific listed activities likely to cause soil contamination are or have been carried out on the asset. If further surveys or soil remediation works are necessary, the closing will, in principle, need to be postponed and may also require an undertaking to remediate the soil, backed by a financial guarantee, typically provided by the seller but potentially assumable by the buyer.

Share Deal Structure

Share deals do not constitute a triggering event and soil surveys or soil remediation works are, in principle, not required by law prior to closing. This may create information asymmetry as the buyer may not have (full) knowledge of contamination at the time of closing but the company it will acquire will keep its existing environmental liabilities.

Information on the authorised use/destination of land plots is available on the websites of public authorities and through urban planning information from municipalities. Generally, urban planning information must be provided to the buyer before closing an asset deal. Regional legislation incorporates public-private co-operation aspects for development projects, with the Flemish region using an integrated permitting and planning process for complex projects, and the Brussels Capital and Walloon regions providing urban planning certificates outlining conditions for building permit approval.

Public entities have the right to expropriate for the public interest and against indemnification, subject to limitations which are notably enshrined in the constitution.

Certain properties are encumbered with a legal pre-emption right enabling public authorities to fulfil their duties of public interest (regarding nature conservation, spatial planning, housing policy, water management, etc). Pre-emption and repurchase rights can also be contractually stipulated, which often occurs in the sale of industrial real estate by public authorities.

In share deals as well as in other restructuring operations (such as (de)mergers) neither transfer tax nor VAT typically applies. Other taxes, such as capital gains tax on the share transfer (see 8.2 Mitigation of Tax Liability), may potentially be levied.

Additionally, Belgian law includes anti-abuse regulations that may make certain legal acts unenforceable against tax authorities.

If the tax administration considers that a transaction was specifically designed to transfer a real estate asset via a share deal (or a restructuring operation) instead of an asset deal and is abusive (for instance, on the basis that the transaction structure would be set up with the sole or essential objective to avoid a disadvantageous tax regime), it could claim the payment of the taxes that would have been due in an asset deal structure as well as applicable penalties.

Regarding asset deals, the transfer tax could either be the applicable VAT rate or registration duties, depending on whether the transaction falls under the VAT regime (see 8.1 VAT and Sales Tax). When VAT is applied to a real estate sale, registration duties are correspondingly exempted.

If a real estate transfer of ownership is not subject to VAT, registration duties apply. Registration duties rates vary by region:

• 12.5% in Brussels and Wallonia; and
• 12% in Flanders.

For long-term leases and rights-to-build, duties’ rate are usually 5%.

Investors must be mindful of the existing legal frameworks aimed at the prevention of money laundering and the financing of terrorism, as well as the consequences of international sanctions on their activities in Belgium. It is now common to encounter clauses in real estate agreements (including leases) which allow for contract termination if international sanctions are imposed on a party, or clauses that prevent the transfer of contractual rights to a person subject to international sanctions.

Furthermore, as of 1 July 2023, a foreign direct investment screening mechanism entered into force in Belgium pursuant to which non-EU investor (including natural persons or entities with their principal residence or registered office outside the EU and EU-based entities with one of their ultimate beneficial owner having its principal residence outside the EU) must submit a notification to a screening commission for any direct or indirect acquisition by non-EU investors of:

• 25% or more of voting rights in a Belgian company with activities relating to, among others, (physical or virtual) critical infrastructure (including energy and other sectors), critical technologies and energy storage, critical inputs, access to sensitive information, private security, freedom of media or biotech; or
• 10% or more of voting rights in a Belgian company (i) active in certain sensitive strategic sectors in Belgium (including energy, defence, cybersecurity), and (ii) which realised a global turnover exceeding EUR100 million in the financial year preceding the investment.

The commission’s prior authorisation is required for the completion of the investment. Non-compliance with the notification requirement can lead to administrative penalties amounting to up to 30% of the total investment value.

The financing of commercial real estate acquisitions usually involves a combination of equity, potentially including intra-group debt, and debt in the form of a loan or occasionally bonds. In case of share deals, the existing debts of the entity holding real estate may be refinanced.

Financial leasing, in which the lessor/financier acquires full ownership or real rights of a real estate asset and leases the property to the lessee/debtor, with an option to acquire the (residual) ownership rights upon expiry of the agreement is also common for financing commercial real estate.

Usual securities for real estate financing are:

• a mortgage on the real estate asset;
• in case of share deals, a pledge over the shares of the special purpose vehicle;
• security on the income generated by the real estate asset (eg, pledge on rent receivables, bank accounts, and insurance receivables); and
• potentially also parent guarantees.

In principle, security over real estate can be granted to foreign lenders without restrictions, and payments can be made to them under security arrangements or loan agreements, as long as they do not provide regulated banking or investment services in Belgium without a licence or authorisation.

The granting of a mortgage on a real estate asset is subject to registration duties at a rate of 1% and a mortgage duty at a rate of 0.3%, calculated on the secured amount. In addition, mortgage register and notary fees will be due.

Mortgages are usually granted on a limited percentage of the secured amount in combination with a mortgage mandate (where costs are lower than those associated with mortgages) convertible into a mortgage in case of default on the remaining part of the secured amount.

Belgian companies are prohibited from advancing funds, granting loans, or providing security with a view to the acquisition or subscription of their own shares by a third party (unless certain conditions are met) and transactions entered into by a Belgian grantor must fall within its corporate purpose and serve its corporate benefit.

In the event of a debtor’s default, a lender can enforce its (validly established) mortgage. Enforcement of mortgages may only take place by sale of mortgaged assets at public auction or direct sale of pledged assets pursuant to procedures decided by the court. Lenders with valid security interests over the real estate asset will have priority, depending on their ranking, over unsecured lenders regarding the proceeds of the sale.

The timing for the enforcement of a mortgage varies, depending on the duration of court proceedings required for the verification of the claim and the formalities related to selling the asset but may easily take up to one year from the claim before the courts. Generally, the execution of the notarial deed of sale takes several months.

Enforcement of a security interest is not dependent on the debtor’s insolvency.

Bankruptcy proceedings can delay the enforcement of security. Although the lenders in principle retain the right, in the case of bankruptcy of the debtor, to initiate or continue proceedings, any enforcement procedure is automatically suspended for a maximum period of 60 days while creditors’ claims are checked. Enforcement procedures by the lenders may be suspended by the court, at the request of the receiver, for a period of up to one year from the declaration of insolvency to allow the receiver to proceed with the sale by court order.

In judicial reorganisation proceedings (a corporate rescue procedure), all enforcement measures will be suspended during the moratorium declared by the court (for a period of up to four months, which may be extended, under certain circumstances, up to a maximum of 12 months).

A creditor can agree to contractually subordinate existing secured debt to newly created debt through a subordination or intercreditor agreement.

Furthermore, should the debtor enter into insolvency proceedings, the pre-existing secured debt may become subordinate to claims of certain privileged creditors (in particular bankruptcy proceeding debts (debt of the estate) – eg, the costs of managing the estate).

As a principle, lenders do not bear liability for environmental damages or infringements of environmental legislation incurred by the borrower (see 2.7 Soil Pollution or Environmental Contamination).

In principle, a validly granted and perfected security interest cannot be declared void in the event of the insolvency of the borrower.

However, new security granted in respect of pre-existing debt may be declared ineffective against third parties if concluded or performed during a so-called “hardening period” before a bankruptcy judgment.

The cessation of payments (a condition for filing for bankruptcy) is deemed to have occurred as of the date of the bankruptcy order. However, the court issuing the bankruptcy order may determine that the cessation of payments occurred at an earlier date (but not earlier than six months before the date of the bankruptcy order). The period from the date of cessation of payments up to the declaration of bankruptcy is referred to as the “hardening period”.

The rules regarding the hardening period do not apply in case of judicial reorganisation.

In case of the opening of a judicial reorganisation procedure, during the moratorium, no enforcement measures with respect to pre-existing claims in the moratorium may be continued or initiated against any of the debtor’s assets. The debtor cannot be declared bankrupt, nor can its business be wound up by court order.

See 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security for the (registration) fees relating to the granting of mortgages. No taxes or fees (other than a stamp duty of EUR0.15 per original of certain finance documents drafted and/or signed in Belgium) are payable by the lender or borrower in connection with the entry into of loans.

No withholding tax is payable on interest on loans paid to a financial institution by a borrower.

Zoning plans (at the regional, provincial and local levels) have been adopted by the authorities. These plans specify the authorised use or destination of a plot of land and include specific zoning prescriptions.

Each region has adopted its own instruments, under different names and with varying degrees of binding authority.

The construction of new buildings, as well as modifications to the exterior appearance or structural elements of existing buildings and, in some cases, change in destination require a building permit. The proposed construction and modifications are assessed by the permitting authority during the application procedure based on compliance with the applicable legislation (including zoning plans) (ie, legality check) and the integration/impact on the neighbourhood and the environment (ie, proper special planning check).

Local municipalities where plots of land are located have the authority to issue development/renovation permits. For certain projects (eg, projects located on multiple municipalities, projects of public authorities/public importance), this responsibility is transferred to either the provincial or regional level (in the Flemish region) or the delegated officer (in the Brussels Capital region and the Walloon region). They examine compliance with the applicable zoning plans, consult various advisory bodies, assess the impact of the proposed project on its surroundings and may impose the permit holder conditions and/or charges (amount to be paid to the local authority, works to the benefit of the community) to compensate the negative impact a project may have on its surroundings.

The developer must submit a permit application to the relevant authority which, depending on the type and/or size of the project, will include an environmental impact assessment.

Once the application is declared admissible and complete, the authority must examine the request within a binding timeframe, seek advice from various authorities and, if required due to the type and/or size of the project, conduct a public inquiry to allow interested third parties to submit their objections. The duration of the procedure varies, spanning from two to three months up to half a year, depending on the complexity and nature of the permit request.

The permit applicant, the relevant authorities and interested third parties have the right to appeal a decision related to the granting of a permit. Depending on the region and the appealing party, such appeals must be initiated through administrative procedures with governmental bodies or through jurisdiction procedures with the Council of State (Brussels Capital and Walloon region) or the Council for Permit Disputes (Flemish region).

The permit applicant may negotiate agreements with local or governmental authorities provided that public procurement rules and general rules on transparency and equality are followed. Transfers of real rights and/or the obtaining of an occupation right on neighbouring plots of land are often negotiated with the local authority and/or utility suppliers to allow the execution of projects.

If permit conditions are breached or construction works lack authorisation, sanctions may include administrative actions like stop or modification orders, site restoration, and administrative fines. Severe breaches can lead to criminal proceedings. Interested third parties can also seek damages through civil claims for unauthorised works, potentially resulting in premises restoration or financial compensation.

The preferred corporate vehicles for holding real estate are:

• the public limited liability company (SA/NV); and
• the private limited liability company (SRL/BV).

Additionally, the use of limited partnerships (Scomm/CommV) is also common for holding real estate. Limited partnerships are structured with two categories of partners:

• the general partner(s), which bear(s) unlimited liability for the entity’s obligations; and
• the limited partner(s), whose involvement is restricted to their contributions and which may not participate to the management of the company.

Belgian law also encompasses a variety of investment fund regimes. Since the establishment of its dedicated regime in 2016, the “Fonds d’Investissement Immobilier Spécialisé (FIIS)”/“Gespecialiseerd Vastgoedbeleggingsfonds (GVBS)”, a specialised real estate investment fund (SREIF), has become a prominent structure for real estate investments. It should, however, be noted that SREIFs’ investments are limited by a list of allowed investments defined by law (including, amongst others real rights on properties located in Belgium and abroad and shares of companies and investment vehicles active in real estate investments, subject to conditions).

The shares of a SREIF can only be offered to investors eligible by law (such as institutional or professional investors, including investors registered with the Belgian financial services and markets authority).

SREIFs must be incorporated subject to a set duration of ten years, although their articles of association may allow the shareholders to vote on extensions in increments of up to five years each.

SREIFs are distinguished by certain features specific to their legal framework, including (but not limited to):

• mandatory registration with the Ministry of Finances’ list of SREIFs;
• IFRS-compliant preparation of annual financial statements;
• a requisite distribution of 80% of net results, which generally triggers withholding tax for the shareholders, although relevant double taxation treaty provisions may apply;
• SREIFs may, in principle not act as real estate developers (except if such activity is carried-out on an occasional basis);
• specific mandatory reporting obligations (such as a specific annual financial report and information document for the shareholders);
• mandatory annual valuation of the net asset value of the SREIF’s shares; and
• SREIF’s real estate portfolio must reach a minimum valuation of EUR10 million by the close of the second financial year subsequent to their registration.

A specific tax regime, detailed in 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity, applies to SREIFs.

The incorporation of Belgian corporate entities essentially requires a notarial deed. This requirement applies to both public limited liability companies and private limited liability companies whereas limited partnerships can be incorporated by a private agreement among founding partners (without notarial deed). For the incorporation of both limited and public limited liability companies, founders must also communicate a financial plan over a two-year horizon to the notary (amongst other information and KYC documents).

In terms of real estate ownership, there are no specific tax incentives. Excluding specific tax regimes, such as the one applicable to SREIFs (which is detailed in the paragraphs below), Belgian companies are in principle subject to a corporate tax rate of 25%. A reduced rate of 20% on the first EUR100,000 of taxable income may be available to small and medium-sized enterprises, subject to conditions.

SREIFs benefit from a derogatory tax regime. SREIFs taxable base is essentially limited to “abnormal and benevolent” advantages and various disallowed expenses. Rental income and capital gains are in principle not subject to taxation.

A specific “exit tax” (at a rate of 15%) is applicable and triggered upon the subscription of an existing company to SREIFs’ official list (such as via conversion of an existing company, merger, demerger or contribution) on unrealised capital gains (and, potentially, untaxed reserves). This tax is also due if a SREIF acquires properties through corporate restructuring (eg, a merger with a public limited liability company).

SREIFs are also subject to an annual “subscription” tax levied on collective investment entities at a rate of 0.01% on the total net assets placed in Belgium.

An alternative investment structure to SREIFs is the “société immobilière réglementée”/“gereglementeerde vastgoedvennootschappen” (commonly referred to as the “Belgian REIT”, or B-REIT).

These entities, designed for long-term investment and risk diversification fall into three distinct categories.

• The “public” B-REIT, financed by the public (notwithstanding other financing methods), with their shares mandatorily listed on a regulated market.
• The “institutional” B-REIT, which can only be financed by eligible investors or individuals (on the condition that their subscription or purchase price is at least EUR100,000) – more than 25% of the share capital of an institutional B-REIT must be held, directly or indirectly by a public B-REIT.
• The “social” B-REIT, whose operations must be dedicated to real estate necessary for the social sector and housing for individuals, amongst other conditions.

B-REITs are incorporated for an unlimited duration, must adhere to a minimum capital requirement of EUR1.2 million and are subject to an approval from the Belgian financial services and markets authority. Their main activity must be the purchase of real estate assets (directly or indirectly) or construction and renovations of real estate assets in view of the occupation by users or the direct or indirect holding of shares in entities with a similar activity. B-REITs are also allowed to participate in various categories public-private partnerships and to participate in energy, fuel, water and waste sectors projects. B-REITs are also notably forbidden to act as real estate developers and B-REITs’ investments are limited by a list of allowed investments defined by law.

The tax and accounting framework for B-REITs has similarities with the one applicable to SREIFs: B-REITs must prepare their annual accounts in accordance with IFRS standards, and their taxable income essentially comprises “abnormal and benevolent” advantages received and various disallowed expenses. B-REITs are also subject to a distribution obligation, requiring them to annually distribute 80% of a portion of their income, as defined by a particular formula.

Due to their specific regime, B-REITs are also subject to specific governance and information obligations (including periodical valuation of public B-REITs’ assets and publication of specific annual and biannual financial reports), as well as various consequences if the debt ratio, as defined by law, of a public B-REITs reaches thresholds provided in the law.

From a tax perspective, B-REITs are also subject to an “exit tax” as well as an annual subscription tax on their Belgian net assets (at a rate of 0.0925% for public B-REITs) (see 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity).

The remainder of this publication will focus on SREIFs’ regime, with the understanding that numerous legal principles governing SREIFs are also applicable to B-REITs.

Public limited liability companies must maintain a minimum share capital of at least EUR61,500. This obligation does not extend to private limited liability companies and limited partnerships.

The governing body of public limited liability companies may be structured in one of the following ways:

• a single director, who can be made jointly liable for the company’s commitments;
• a board of directors, composed of at least three members (or two if the company has fewer than three shareholders); and
• a dual-board system featuring a management board overseen by a supervisory board.

Private limited liability companies are characterised by greater flexibility in their management structure, which can include:

• a lone director;
• multiple directors with either individual or collective full decision-making authority; or
• a board of directors.

The Belgian Code of Companies and Associations does not prescribe detailed rules for managing limited partnerships, but limited partners may not be involved in the management of the limited partnership.

The directors are generally entrusted with most of the decision-making responsibilities, except for certain powers reserved by law for the shareholders’ meeting (eg, ratifying the annual accounts and making decisions regarding share capital and corporate restructuring activities). Directors can usually be either individuals or legal entities (with a natural person permanent representative).

The day-to-day management can be delegated by the directors to either a director (a “delegated director”) or a third party. Listed companies are subject to additional governance obligations.

Finally, investment entities such as SREIFs that meet the criteria specified by law might be required to appoint a licensed manager (with the necessary approvals from the financial services and market regulator) tasked with fulfilling the obligations laid out in the legislation governing alternative investment funds.

The expenses associated with accounting compliance can vary significantly, depending on several factors, including the specific legal structure chosen for holding property, the volume of assets held by such entity and the nature and quantity of agreements in force with respect to these assets (for example, leases, maintenance contracts, etc). Accounting obligations entail, among others, the filing of yearly financial statements (which must be approved by the general meeting of the shareholders).

Additionally, if the entity meets the criteria for having to appoint a statutory auditor (or decides to opt-in for the appointment of such auditor), a specific annual report on the annual accounts will be prepared by them annually. The fees for these accounting services, including those for external accountants and company auditors, are generally in the range of EUR20,000 to EUR40,000.

With respect to SREIFs, an annual financial report must be drafted by the SREIF and communicated to its shareholders, which must include the statutory accounts, a table detailing the cash-flow flux, the statutory auditor’s reports as well as various mandatory analysis with respect to the accounts and operations. Such requirements, including the appointment of a licensed manager if the SREIF meets the relevant legal requirements, can increase the accounting and compliance costs of the SREIF, which can be above EUR75,000.

There are two types of limited-duration real estate use rights:

• property rights (eg, long-term leases/rights to build); and
• personal rights (eg, lease agreements).

Business premises can be leased via a retail lease (in case of direct contact with clients), regulated by the 30 April 1951 law and regional decrees (essentially composed of imperative provisions), or a common law lease for other uses such as offices, covered by the Civil Code (with generally suppletive provisions).

Lease terms, including rental arrangements, are usually negotiable (but will depend on the business activities carried-out in the premises). Common law leases (eg, office leases) often include clauses to prohibit retail activities in the premises in order to avoid the application of the mandatory retail lease law.

Fixed rent, typically indexed annually, is common in Belgium, but variable rent (with a guaranteed minimum) based on turnover is often used for hotels, shopping centres, and some food and retail businesses. Temporary contractual rent reductions or exemptions can also be arranged between the parties.

Length of Lease Term

Retail leases have a minimum nine-year term with triennial termination rights granted to tenants (and, sometimes, to the landlord) as well as up to three renewal options. Special “pop-up” retail leases (regulated at the regional level) offer shorter terms. Common law leases require no specific duration but cannot be perpetual. For third-party enforceability, all leases must be registered and leases over nine years also require execution in the form of a notarial deed.

Maintenance and Repairs

With respect to both retail and common law leases, the Civil Code essentially limits tenants responsibility to minor rental maintenance and repairs but leases often transfer more maintenance and repairs responsibilities to tenants, making landlords responsible only for major repairs (eg, structure, roof, etc). Belgian leases commonly adopt usufruct rules, making tenants liable for most maintenance and repairs, subject to normal wear and tear and dilapidation, while landlords are mainly responsible for major repairs on the structure of the property and its inherent components.

Inventory of Fixtures

An inventory of fixtures is usually drawn up before the commencement date of the lease to establish the original condition of the premises, which is used to assess any damages to the premises and the tenant’s liability and repairs/payment obligations in that respect at the end of the lease. In the absence of such inventory, proving damages caused by the tenant is challenging for the landlord, as the tenant will then be presumed to have received the premises in the end-of-lease condition.

Guarantee

Parties commonly agree on a guarantee provided by the tenant as security for its payment and other obligations, such as a first demand bank guarantee, parent company guarantee, or cash deposit, often set at six months’ rent.

Force Majeure and Hardship

During the COVID-19 crisis, tenants used force majeure as an argument to seek rent reductions or exemptions with mixed success, arguing that government restrictions suspend landlords’ obligations to provide premises, causing the tenant to be relieved of its obligation to pay the rent.

The hardship principle, now enshrined in the civil code (under suppletive provisions), allows for contract renegotiation or court intervention (leading to adaptation or termination of the agreement) when unforeseen circumstances cause the performance of an agreement to become excessively onerous for a party.

Post-COVID-19, real estate contracts frequently include specific force majeure and hardship clauses, deviating from standard civil code provisions.

Rising Use of Green Clauses

Landlords are increasingly incorporating “green clauses” into their standard leases, requiring tenants to use energy-efficient materials in their fit-out works, disclose energy usage, and adhere to other environmentally sustainable practices.

Leases often include an indexation clause allowing annual rent adjustments based on an index and formula determined by (imperative) law. However, as a commercial gesture, the landlord may waive indexation, for a specific period of time or for the entire duration of the lease. See 6.6 Determination of New Rent for retail rent specifics.

Indexation

See 6.5 Rent Variation.

Renewal of Commercial Lease

Under the retail lease law, tenants can request rent reductions or other lease modifications in the context of the renewal process. In the absence of agreements, a judicial proceeding is provided by law, pursuant to which the Judge of the Peace will decide on the adapted lease conditions (including rent), usually guided by the parties’ arguments and independent valuations.

Additionally, at the end of every three-year period, either party can seek before the courts a rent review if the property’s rental value has shifted by at least 15% from the current rent due to new circumstances.

Payment of VAT

The leasing of immovable property is usually a VAT-exempt activity, unless the VAT option provided in the VAT Code is applied, which is subject to the following conditions (amongst others):

• the building must be used for the economic activity of the tenant;
• the leased premises are (parts of) a new/substantially renovated building (ie, buildings for which VAT on construction or refurbishment cost became due for the first time on 1 October 2018 at the earliest); and
• the option will apply for the entire duration of the lease.

However, leases for specific properties such as parking spaces and storage units generally incur VAT, but exemptions may apply. Additionally, VAT also applies to short-term leases under six months (with exceptions, eg, residential leases) and to other arrangements such as hotel accommodation or “service/business centre” which include services (cleaning, maintenance, furniture, printers, meeting rooms, etc) in addition to premises made available (such as offices).

Inventory of fixture – if both parties decide to appoint a professional, such as a land surveyor, to draft an inventory of fixtures, the costs thereof are usually split equally. Alternatively, each party may hire their own expert to collaborate on the inventory of fixture.

Insurance – tenants are usually required to have insurance to cover risks such as fire and water damage as well as their fit-out works. Landlords sometimes also require additional risk coverage from the tenant (such as operational losses).

Registration duties – at the start of the lease, the tenant is usually required to pay the registration duties of the lease.

Entry fee – in the context of retail leases, an entry fee is sometimes contractually agreed between the tenant and the landlord (or between the transferee and transferor of a lease).

Guarantee – see 6.4 Typical Terms of a Lease.

Retail and common law leases usually assign maintenance and repair costs to the tenant, except for major repairs. In multi-tenants properties, the landlord usually enters into maintenance and repair agreements for the common areas, which are re-invoiced to the tenants in proportion to their occupied space.

Tenants are usually responsible for arranging their own connections to utilities and communication services.

Even if there is, in general, no statutory obligation to take out insurance, two types of insurance are usually required in lease agreements.

• Building insurance – landlord insurance typically covers property damage from events such as water damage, vandalism, or fire. The insurance premiums are often re-invoiced to the tenants as part of the service charges.
• Tenant’s insurance – such insurance covers the tenant’s business operations and civil liability, as well as any personal fixtures and furnishings. It has been observed that insurance policies covering business interruption have standard exclusions for events such as the COVID-19 pandemic, which could prevent the tenant to claim compensation for interruptions caused by such exclusions.

Should the tenant plan to carry-out fit-out works on the premises, the landlord may require the tenant to take out all-risk construction insurance.

It is also common that the parties agree that the insurance agreements include waiver of recourses provisions.

The premises’ use by the tenant is agreed upon by the parties. The importance of the specified use of the premises extends beyond the lease, as it may affect a range of matters regarding the property and the landlord, such as taxation considerations and compliance with environmental law and zoning regulations.

Common Law Lease

Parties usually agree that tenants can carry-out reversible alterations works to the leased premises, with stipulations often allowing landlords to keep or require removal of changes post-lease, sometimes compensating the tenant or not, depending on the agreement’s terms and ensuring that, if irreversible alterations are made without the landlord’s consent, the landlord is entitled to request their removal at the tenant’s costs or to retain them without compensation to the tenant.

Retail Lease

Under the retail lease law, tenants have the right to alter and improve the premises to suit their operational needs, provided that:

• they notify the landlord of the project (who can only object on valid grounds);
• the total costs do not exceed three years’ rent;
• the structure of the property is not permanently altered; and
• the works do not affect the safety, the aesthetic value or the health aspects of the property.

In conjunction with the retail lease law and regional ordinances, parties to a lease agreement must comply with the broader legal framework governing leases (such as Civil Code provisions). With respect to residential leases, regional regulations govern the use of properties for natural persons’ occupation, including their primary residence.

Lease agreements often include clauses mandating prompt notification from one party to the other upon the initiation of insolvency proceedings and granting the other party the right to terminate the lease under these circumstances. The enforceability of such termination clause depends on various factors, including the type of insolvency procedure ‒ for instance, clauses that allow termination solely because the tenant has sought judicial restructuring are expressly prohibited, whereas such restriction does not apply in the case of bankruptcy proceedings (subject to limitations, as express resolutive clauses are forbidden in lease agreements).

Usually, tenant’s bankruptcy does not cause the lease to end automatically and landlords have to file a statement of their claims. In the absence of specific contractual provisions, the receiver usually decides on lease termination, but may also decide to continue its performance (eg, if he seeks a buyer for the tenant’s business). In case of judicial reorganisation proceedings initiated by the tenant, the latter may request a moratorium, during which it is no longer possible for creditors to use means of execution. In such context, matured debts (including outstanding rents prior to the reorganisation proceedings) are frozen during the moratorium. New debts, including rents accrued following the opening of the judicial reorganisation proceedings are in principle not affected by the moratorium.

It is a common practice for landlords to obtain a rental guarantee from tenants, as mentioned in 6.4 Typical Terms of a Lease.

Furthermore, landlords are given a statutory privilege against other creditors over the tenant’s movable assets located within the leased premises, providing the landlord with additional security in the event of a default by the tenant.

When a common law lease expires, it is automatically terminated, and the tenant is not entitled to remain in the premises, unless otherwise agreed.

For retail leases, if a tenant without renewal rights remain in occupancy of the leased premises at the lease expiry, a new lease tacitly enters into force for an indefinite duration, which may be terminated by the landlord with at least 18-months’ notice, without affecting the tenant’s right to request renewal.

In common law and retail leases, tenants can sublease or assign their rights under their lease to third parties, unless restricted by agreement. To prevent adverse effects for the landlord, leases often state that the landlord’s prior consent to the sublease or assignment is required.

In retail leases, clauses restricting the transfer of the lease are unenforceable if the assignment or sublease occurs in conjunction with a business transfer, unless the landlord or their immediate family members reside in (a part of) the building. Formal procedures must be followed for such transfers.

Leases may be terminated prior to their natural expiry either by the landlord or the tenant under conditions agreed between parties (subject to exceptions provided in the law) or by mutual consent.

Common law leases often allow early termination in case of a change of control of a party, transfer of the property/leased premises and force majeure events. Partial destruction of the premises usually lead to rent reduction or lease termination.

Retail leases can be early-terminated at the end of each triennial period:

• by landlords (provided that such right is stipulated in the lease), with at least one-year notice, and under condition that the landlord or close family members will operate (potentially through a company) a business in the property; and
• by tenants upon expiry of each three-year period, subject to a six-months’ notice.

In case of early termination of a retail lease by the landlord, the landlord will not have to indemnify the tenant, unless they conduct the same business in the premises. If so, the landlord must pay two years’ rent as compensation (and three years’ rent in the absence of disclosure of this information).

In retail or common law leases, lease registration may be the landlord’s or tenant’s responsibility, but the registration duties (ie, 0.2% of total rent and charges to be paid for the duration of the lease) are usually borne by the tenant. Leases over nine years or with a discharge of three years of rent require a notarial deed and mortgage registration.

Failure to comply with these formalities may cause the lease to be unenforceable against third parties who, in good faith, claim an ownership interest in the leased premises.

landlords seeking to evict their tenant on the basis of a contractual breach must initiate a claim before the justice of the peace. The process may last several months, especially if tenants claims the landlord’s request is unjustified, for instance, if they remedied the breach before the hearing, potentially leading to debates.

There is no such thing as a termination of a lease by a third party in Belgium, except in case of expropriation (by a public entity), which may lead to a claim for indemnity by the tenant.

Remedies for lease breaches often involve financial compensation, enforcing lease obligations, retention of rental guarantee, or lease termination. In case of termination, leases (and court decisions confirming the termination) usually define principles on property reinstatement, occupation indemnity, and other potential financial compensations.

Architects and main contractors usually enter into agreements with a fixed price model, based on specific assumptions such as the projected surface area of the project. To account for unexpected changes and ensure costs reflect actual expenses, adjustments to the fixed price are usually contractually defined to protect involved parties (such as the contractor or the architect), covering hypothesis such as additional research or project alterations due to permit requirements, including termination rights. Alternatively, parties sometimes agree on a price model with set minimum and maximum limits.

Payment schedules are usually milestone-based, aligning with significant project stages such as design approval or delivery phases, or can be structured around regular monthly or quarterly invoicing that reflects actual costs incurred.

Payments schedules are typically structured in instalments based on project phases (milestones) such as the final design, provisional delivery and final delivery. Alternatively, invoicing may occur on a monthly or quarterly basis, reflecting the actual expenses incurred during said period.

Architects are usually responsible for the project’s design, assisting in obtaining building permits, required for construction and (in some instances) demolition of significant structures, and also tasked to oversee the project’s implementation. An engineering consultant might contribute to studies and design. The main contractor handles project execution, often hiring subcontractors with no direct contractual relationship with the employer. A safety co-ordinator is sometimes appointed, and in certain cases, legally required, to mitigate the risks of workplace accidents.

The parties may agree on a two-stage work delivery: provisional and final acceptance. Provisional acceptance occurs when works are free of (visible) defects, aside from minor issues (“punch items”) not hindering the property’s use. The employer arranges acceptance visits with the main contractor, possibly with the architect and technical advisors present, to inspect and ensure the works meet the agreed contractual standards.

If no or only minor defects are identified, parties will approve the provisional acceptance, listing any issues for the contractor to remedy, and draft provisional acceptance minutes. This milestone causes the handover and acceptance of the property in its visible condition, with unreported visible defects considered accepted and not claimable later, unless specific warranty provisions state otherwise. After provisional delivery, the contractor remains liable for defects remediation during the (contractually agreed) defects liability or warranty period(s), as well as for structural defects under the statutory ten-year liability (see below). Defects in relation to technical equipment (HVAC, lifts and other) are often subject to a two-years warranty period (and one year for other defects).

Following remediation of minor defects from provisional acceptance and defects identified within the contractually agreed warranty period, the parties will proceed to the final acceptance of the works. Typically, one year, or two years for special techniques, will expire after provisional acceptance to enable the employer to uncover any (hidden) defects and verify the remediation of minor defects/issues before granting final acceptance.

The contractor is also liable for hidden defects discovered after final acceptance, subject to a ten-year statute of limitation post-final acceptance. Claims in that respect must be reported within a “reasonable period” upon discovery, which will be assessed by the courts on a case-by-case basis. This liability can be adjusted (usually limited) by contract.

Furthermore, following final acceptance, the employer also remains protected by a specific mandatory ten-year liability provided for in the Civil Code and pursuant to which the architect and stability engineer (and potentially other technical study contractors) are liable for hidden or apparent defects affecting the structural soundness of the building. This liability starts from the construction’s acceptance, typically final acceptance, but agreements often stipulate that it will start from provisional acceptance.

This safeguard also applies to future owners since the ten-year liability is linked to the property itself, rather than to the individual buyer or employer.        

The aforementioned division between provisional and final acceptance is mandatory if the Breyne Act applies, ie, for agreements concerning residential buildings to be built or under construction. In that case, the warranty period should entail at least one year.

Constructions involving technical installations, such as solar panels or a cogeneration installation, will usually also benefit from contractually stipulated performance guarantees ensuring, for example, a minimum output or functionality during an agreed period of time.

Contractual agreements generally address the consequences of delays attributable to the architect/contractor, including late delivery penalties, time extensions, contractor/architect substitution or termination. Contracts often exempt the architect/contractor from liability for third-party caused delays and address force majeure events by excluding or granting employer indemnification only if the delay extends past a certain timeframe.

For residential properties, the Breyne Act provides that the compensation must be at least equivalent with the property’s standard rental value upon completion.

Construction agreements often stipulate that contractors must provide a bank-guaranteed performance bond to ensure work completion. The conditions for releasing or reducing the bond are negotiable, but typically involve reaching milestones (eg, a half release at provisional acceptance, and the rest at final acceptance). Alternative guarantees like parent company guarantees, letters of credit, performance guarantees, and insurance policies may also be negotiated. In cases where the Breyne Act apply (for residential properties), securities must be provided by contractor, the scope of which varying between accredited or non-accredited contractors.

Construction and architect agreements usually include a default interest clause for late payments. Architects and contractors can also withhold performance their services in case of default of payment. They have also privileged creditor status on the increase in value of the employer’s property resulting from their services.

Furthermore, contractors may also retain ownership of certain installations or materials, despite incorporation into the works, through retention of title registered in the national pledge register.

Depending on the specific use of the real estate asset and the region in which the real estate asset is located, several authorisations or certificates might be required, including with respect to the operation of certain classified activities or installations (eg, operation of parking, heating and cooling installations), the operation of socio-economic activities (eg, retail activities), the energy performance certificates and asbestos inventories.

VAT (at a standard rate of 21%) may be applicable to sales of real estate assets classified as “new” for VAT purposes (ie, until 31 December of the second year after its initial use or occupation). This classification applies to newly constructed buildings as well as those that have been substantially renovated. With respect to renovations, the VAT regime is largely determined by administrative practices.

Tax authorities have clarified in their commentary of the VAT Code that significant renovations that fundamentally alter the key components of a building, namely its nature, structure or intended use will qualify it as “new” for VAT purposes. A property can also be qualified as “new” if renovation costs, excluding VAT, amount to at least 60% of the building’s market value, excluding land, upon completion of the works.

The imposition of VAT on the sale or acquisition of property is influenced by the nature of the seller. For new properties sold by:

• Professional developers – they are legally bound to sell such properties with VAT included. However, in cases of renovations meeting the “60%” threshold, developers might choose not to consider the real estate asset as new (with application of registration duties instead of VAT).
• Non-professional developers – they have the option to apply VAT, requiring amongst others a prior declaration to VAT authorities. The exercise of this option must be reflected in the sales agreement and in the notarial deed that records the sale.

Under certain conditions, a reduced rate of 6% may apply to residential properties.

When transferring shares of a company that owns real estate, such transactions do not, in principle, incur transfer taxes or any other real estate-related taxes (except in case of dispute by the tax administration over tax abuse, see 2.10 Taxes Applicable to a Transaction). However, a legal entity shareholder may be subject to capital gains tax if its participation in the company (that owns real estate) does not meet the criteria to be eligible for the “dividend received deduction” (DRD). To be eligible for the DRD, the participation must notably:

• relate to a company subject to corporate income tax;
• relate to shares representing at least 10% of the shares outstanding or having an acquisition value of at least EUR2.5 million; and
• be held during a continuous period of at least one year.

The purchaser of a SPV’s shares indirectly bears future capital gains tax on the SPV’s real asset(s) in case of sale of such assets post-closing. To mitigate this, the seller and the buyer of the SPV’s shares usually share the “tax latency” (the corporate income tax that would be due in an asset sale) by adjusting the SPV’s share price with a negotiated discount.

In asset deals, some investors opt for long-term leases or right to build over full ownership transfers, due to lower registration duties (see 2.10 Taxes Applicable to a Transaction).

Local and regional taxes, often apply to different property types, business activities and infrastructures, including vacant properties, offices, retail spaces, parking and telecom structures (eg, pylons/antennas), the latter being often disputed initiated by telecom operators and subject of political discussions.

Additionally, a yearly real estate tax (“précompte immobilier”/“onroerende voorheffing”) is levied on all property categories.

Office and retail leases often provide that the tenant will bear these taxes.

Acquisition by Foreign Investors of a Special Purpose Vehicle Holding Real Estate or a SREIF/B-REIT

When foreign investors purchase shares in a company that serves as a special purpose vehicle (SPV) holding real estate, or in a SREIF/B-REIT, the income generated by the SPV, including rental income and capital gains, is subject to Belgian taxation (at the standard corporate income tax in Belgium), at the level of the SPV (subject to specific tax regimes, such as the SREIF/B-REIT’s specific tax provisions and potential double tax treaty provisions which may apply). Dividends and potentially interest earned by foreign investors from the SPV will be taxed according to the relevant double taxation agreements.

Dividends can in principle qualify for a withholding tax exemption if the DRD criteria are met (see 8.2 Mitigation of Tax Liability). If such an exemption is not applicable, a 30% withholding tax shall apply (a reduced rate may be available under certain conditions). Double taxation treaties may offer various mechanisms that can lessen the impact of double taxation of the payment of dividends or interests to investors by SPVs.

It is important to note that SREIFs are legally bound to distribute dividends on a yearly basis and the shareholders of SREIFs have no right (or only a limited right, subject to specific conditions) to benefit from the DRD exemption. These dividends are typically also subject to a 30% withholding tax, although this rate may be decreased through exemptions or reductions available under pertinent double taxation treaties. Furthermore, and in principle, Belgium does not levy a withholding tax on dividends distributed by a SREIF (or a B-REIT) to foreign shareholders, provided that the dividends do not come from Belgian dividends or Belgian real estate income.

Acquisition by Foreign Investors, Through a Non-Belgian Entity

Regarding acquisitions made through a non-Belgian entity, foreign companies are allowed to acquire ownership or real rights over Belgian properties. Here, the relevant double-tax treaties come into play, with the general principle being that rental income and capital gains are taxable in Belgium at the ordinary corporate income tax rate.

Belgian law does not provide specific tax benefits granted with the ownership of real estate in Belgium. Usually, the ownership of real estate properties can be subject to amortisation, which will be tax deductible. There is, however, no amortisation on land.