BELGIUM

 

 

Country: BELGIUM

Name of the organization: SNP-AES 

 

Introduction

 

Belgium consists of 3 areas, the Flanders, the Area of Brussels Capitale and Wallonia from which the structure of the real market are appreciably different.

 

Indeed, the area of Brussels is characterized by a dense establishment of offices and many investment properties, on the contrary of the two other areas more directed towards housing and owner-occupation.

It is not consequently astonishing to see that the ratio "numbers residences occupied by the owner/a number of residences given in hiring" is located around 40/60 for the Area of Brussels-Capital and 70/30 for the other areas.

 

The Area of Brussels-Capital is naturally influenced at the same time by a strong economic activity, the presence of the European institutions and the airport area near which constitutes an increasingly important development pole.

This area generally constitutes an engine and a precursor with the expansion (or recession) real and influences the other areas thereafter.

The trend of the rent prices is influenced in general in the same chronological order.

 

With the end of the Eighties and beginning of the Nineties, the Area of Brussels knew a strong expansion of the real investments and a relatively important rise of the rents at the same time for the offices and the construction/renovation of residences. This real development was made essential at the same time by the needs for the new establishments of the European seats and also by a phenomenon of correction of price compared to the previous decade.

 

The rents as well as the selling prices underwent this phenomenon.

 

During the few following years, the offer on the level of the rental market became more abundant with a request which had been stabilized. Currently one attends however a rarefaction of the offer of modest residences which, combined with the increase in poverty (economic situation and migratory pressure), creates a situation of shortage of residences for certain categories of the population.

On the level of the sale of residences, the prices had increased on average about 9% into 96, 11% into 97 and of 11% into 98.

This evolution is explained mainly by a fast reduction, during this same time, of the interest rates which pushed young households to acquire their property rather than to rent it. In addition, the tendency of the many governments was in the direction to rather privilege the access to the property of its housing than to support the rental sector.

 

Indeed, the current tendency is rather morose with regard to the investments of residences given in hiring.  There is a political tendency to estimate that the rents must rather be a function of the purchasing power of the households that function of the actual value of the real investment with a return in acceptable investment! This way of seeing was not translated in the law but it planes like a malefic shade on certain sectors of the rental market, without counting that many vexatious rules for the landlords discourages them. In particular, one attends an increasingly important protection of the tenants, including those which are in rupture of payment of their rent. (obligatory conciliation procedure before judgement of expulsion - from where a time of several months before the release of the house -, acknowledged intention of certain parties to the capacity to prohibit expulsion in winter - without any netting for the landlord, etc). In same time, increasingly constraining regulations, in particular on the administrative level, are adopted to standardize the condition of the rented houses.

Lastly, other constraints, often unrealistic and unacceptable still weigh on the sector, in particular on the basis of regional legislation, such as the setting in hiring (more or less) forced non-occupied buildings or the surtaxation of those etc... with the purpose in particular of leading to a reduction in the rents without holding account of the actual value of the goods and the real estate property market.

 

This policy followed during times of low inflation and low interest rates, made the investment in real estate rental property very inattractive, in spite of the stagnation of the stock exchange market.

Consequently, it is not surprising to note that many landlords disinvested in the rental sector since one estimates at approximately 80.000 (out of approximately 400.000) which led to reduction in the number of landlords in 10 years.

 

With regard to the market of the offices, primarily concentrated in the urban areas in Brussels, Antwerp and other large cities, it underwent a strong expansion initially, as we mentioned higher, followed of a deceleration and a slow recovery currently.

 

The landlords and investors had hoped at the time of the elections of 1999 that the future could be better insofar as the liberals had won majorities in all the Federal and Regional governments. Unfortunately, the policy being the art of the compromise, those were done very often on the back of landlords.... The recent elections, in May 2003, confirmed the progression of the liberals but also a strong socialist push with the detriment of the parties "ecologist". The owners wonder with a certain concern if they still will make the expenses of the forced "blue-red" agreement...

 

 Purchase and construction of real estate property in Belgium

 

Any act of property transfer or establishment of bearing usufruct on a real estate located in Belgium must be subjected to the formalities of property registration. The registration fees amount to 12,5% on the value of the good to which it is necessary to add the expenses of notary of about 4%. In Flanders, the basic tariff was reduced to 10%.

 

The registration fee is limited to 6% (5% for the goods located in Flanders) for the purchase of a modest dwelling i.e. whose cadastral income does not exceed 745 EUR. However, the purchaser and/or his spouse cannot have other buildings assigned to the dwelling except for buildings collected in the succession of a relative or a grandparent.

 

B.         Registration fee in the event of division.   The exit of joint possession or the transfer on the one hand with an indivisaire is subjected to a registration fee of 1% 

C.        Registration fee in the event of conversion into property of the legal usufruct of the surviving spouse  The acts noting conversion are subjected to a fee registration of 1% 

 

T.V.A.

a)      T.V.A. in the event of sale of a new building  The sale of a new building is subjected to a rate of T.V.A. of 21%. A building is regarded as new until December 31 of the second year which follows the first occupation.

This mode of T.V.A. is also applicable to the sales of a new building by a private individual (occasional taxable person).

 

b) T.V.A. in the sector of construction  The rate of T.V.A.  for the building work and the purchase of materials by the supplier is fixed at 21%.

 

c) T.V.A.  in the sector of the social housing  The sector of the social housing (primarily the sector of the housing of public utility) profits from a rate of 12%.

 

d) T.V.A.  for work of restoration of occupied private dwelling since more than 15 years.

  Certain work profits from the reduced rate of 6% if they relate to goods which are mainly affected with housing which has more than 15 years and provided that this work is carried out by a recorded contractor.

 

Following the European directive on the reduction of T.V.A. , this rate is extended to buildings older than 5 years. This measure taken by Royal Decree, is valid until the 31/12/2003, but will be probably prolonged.

 

e) T.V.A.  on the provision of parking spaces  The landlord must apply T.V.A. 21% on the amount of his sales turnover realized by the taxpayer (by holding account of its other possible activities that are submitted to T.V.A.) is higher than 5.580 EUR per annum.

 

Dimension of real Estate Property

 

1. Number of built dwellings: 3,8 million (given 1991).

2. Number of houses of habitations/logements by 1000 inhabitants: 380 dwellings by 1000 inhabitants

3) the private property (dwellings) accounts for approximately 80% of the total of the rental market

4) Percentage of dwellings occupied by a tenant:

Area of Brussels-Capital: 61% Flemish Area: 31% Walloon Area: 30% 

5) Percentage of the population living in social dwellings: The estimate is 10%             

6) Percentage of the population living in joint ownerships:    

Distribution of the apartments (joint ownership) occupied by owners or tenants  

                 Area   Owners Tenants

Total        Belgium 12% 58% 27%

                 Brussels 57% 91% 77%

                 Flanders 9% 49% 21%

                 Wallonia 9% 42% 20%

7) Population of Belgium: 10 million inhabitants 

 

 

Constitutional Status and Protection of Property

 

1. Property is guaranteed by the Belgian Constitution.

 

2) It is provided that noone can be deprived of his property, in the event of expropriation due to public utility, without a fair compensation paid in advance.

Generally, the amount of compensation following expropriations is fixed according to the market value of property.  

2. The loss of value and other restrictions on real estate property imposed by the legislation, do not give to the owner the right for a reasonable compensation.

 

3) The current tendency, in the case of unoccupied dwellings, is to elude the constraints of expropriation by other measures such as taxes of inoccupation or the forced renting (direct or indirect) of these goods, which can depreciate substantially these goods. In addition, as in other countries, it has been added in the Constitution first of all and then in the regional legislations, the introduction of the Right of pre-emption which can be exerted by various public authorities on goods registered in given perimeters. An attempt was even made in Area of Brussels to allow pre-emption at a price lower than that which had been agreed with an amateur. This intention was however thwarted by the National Syndicate of Property Owners (SNP).

 

House rentals.

 

  1.       There is no protected rental market in Belgium, apart from the social housing belonging to public companies and which are allotted in theory to households whose resources are limited.

 

2.         In theory, the duration of the house rentals (main home) is 9 years. However, at the time of a first lease with a determined tenant, it is possible to be appropriate of a lease of short duration, 3 years to the maximum, and of which the duration is constraining both parties. This lease can be renewed once. At the end of the lease of short duration or its renewal, and to the maximum after 3 years, the lease is transformed into a 9 years rental. If there is objection at the end of the 9 years lease, it is prolonged for 3 years each time. The tenant who has a 9 years lease can always  leave with a 3 months notice, but if he wants to leave during the first 3 years of the rental, he must moreover pay a compensation.

At the end of a lease, the owner is free to ask for his house, without having to justify the reason. The notice period is 3 months in the event of lease of short duration and 6 months for the 9 year old leases. During the 9 years lease, the landlord can give leave to occupy the house personally or by a member of his close family. At the end of the lease the tenant can however always ask by the court for a prolongation of the lease for exceptional circumstances.

The Belgian law has provisions on the lease-transfer and the sub-renting which however are regulated. It does not permit however the exchange of rented houses among tenants.

 

3.         The fixing of the rent on the private rental market is free at the time of the formation of the lease.

Within the framework of the 9 year old rentals, it is possible to re-examine the rent every three years in so far as the similar rents in the district evolved more than 20%. In this case, it is up to the Justice of the Peace to estimate if the request has grounds or not.

In the event of succession of rentals of short duration (3 years maximum), which takes place necessarily with different tenants, the rent cannot be increased from one lease to the next one, if it was the landlord who evicted the preceding tenant.

In the event of voluntary departure of the tenant or if the landlord gave leave but concludes with a new tenant a 9 years lease, the fixing of the rent becomes again free.

On average, the rent represents annually from 2 to 4% of the commercial value of the good. It is known however that in certain very specific segments of the market, primarily the hiring of modest goods, the prices can be considerably higher, which encourages certain associative movements having the ear of the political parties marked on the left to ask for the fixing of "objective rents". Currently, there is no yet majority in Belgium to adopt this type of limitation.

 

4.         At the end of the lease, the landlord can request the departure of the tenant without having to justify the reason. In the course of lease the owner can break the 9 years lease in the following circumstances.

A. For personal occupation, constantly (see higher)

B. At the end of a triennium, owing a compensation of 9 or 6 months of rent

C. At the end of a  triennium, for renovation works costing at least 3 years of the rent D.At any moment, for renovation works in the whole building (the compensation will be the rents of 2 years.

If the tenant does not respect the lease terms, the landlord can request the cancellation of this last from the Justice of the Peace.

The procedure of expulsion lasts in theory at least two to three months. The introduction of the obligatory conciliation procedure (see higher) tends to lengthen in a worrying way this duration. There is also a discussion on imposing delays in the eviction procedure and particularly prohibition of evictions during the winter months.

 

5.There is not fast procedure for expulsion. On the contrary, the tendency is to  lengthened the existing one, in particular by the introduction of an obligatory conciliation procedure preliminary to the procedure of judgement. However, the procedure as regards lease is relatively simple insofar as it can be introduced by way of request simply deposited at the clerk's office of the qualified district court. In theory, the audience of judgement takes place later approximately fifteen days and if the business does not require pleadings, the judgement is given a few days afterwards. After the significance of the judgement by the court’s clerk (usher), the minimum time of expulsion is one month. According to jurisdictions', the obligation to resort to a conciliation will lengthen the procedure for several months.

 

 

Commercial rentals

 

 1.        The market is free (see law in appendix)

 2.        Current duration of a commercial lease: 9 years, renewable 3 times, are on the whole 36 years. With the end of each 9 years period, the tenant must observe a procedure to specify if he wants the confirmation of the renewal. The owner can refuse only for reasons envisaged by the law (if he needs the premises to personally exercise commerce,  change of the use of the good, hiring to a new tenant paying a higher rent, demolition and rebuilding of the rented good, non-observance of the lease terms by the tenant...).

The extension refusal for some of these reasons obliges the landlord to pay an indemnity (max. 3 years of rent) to the tenant.

In addition, at the time of the renewal, the lanndlord can propose to the commercial tenant new conditions (rent or others). If the tenant refuses but wants to preserve the hiring, the dissension is settled by the Justice of the Peace.

 

3.         The rents are free at the beginning of the lease. At the time of the renewal there is possibly a control of the Justice of the Peace (see point 2). In the course of a lease, at the end of each triennium, it is possible to obtain a modification of the rent by a procedure in front of the Justice of the Peace, if the rental value of the good varied (with the rise or the fall) from at least 15% in consequence of new circumstances.

 

4.           The tenant can be expelled at the end of the lease or when the owner refuses the renewal for reasons envisaged by the law.

Moreover, the lease can provide that the owner can terminate the lease every three years in order to use the commercial premises himself.

Lastly, the tenant can be expelled in the course of lease if it does not respect the contract. The procedure is the same one as for the lease of residence, except that it does not have there an obligatory phase of conciliation.

 

5.                      No fast procedure for non payment.

 

 

Subsidies for new constructions and renovation

 

1) There are subsidies for construction of new buildings. They depend on the various cases  and vary from year to year. They are often subjected to a maximum level of income.

 

2) There are also premiums for restoration which can be allotted to the level communal/régional/fédéral which varies year by year and can be dependent also on a maximum income.

 

3) These premiums can also exist for houses to put in hiring. They can also be subjected to the obligation to limit the rent or the acceptance of the control of the rent.

            The procedures of granting of these premiums are often very long.

 

 4) Premiums for acquisition/construction of commercial buildings: There are not in general premiums.  Certain areas however offer primes/réduction of taxes for the establishment of industries in particular zones.

 

 5) There is also aid for the acquisition of good for its own house or one second residence or the second housing in the form of deduction of mortage interests limited to the sum of the cadastral incomes and of deduction of borrowed capital limited (on the whole over the period of loan) to +/- 50.000 EUR. These aids are done in deduction of the incomes declared at the time of the annual declaration of the physical persons

 

 6) There are premiums for building insulation. These premiums are variable from one year to another and a level of being able with the other (levels Fédéral, Régional, Communal). The amount is also a function of the same parameters (year and geographical area). It would be too tiresome to want to make here the statement of all the premiums. In general these premiums are acquired at the time of the insulation (energy savings) of existing buildings.

 

Problems of the cities, planning and property obligations

 

1.         1. 1) Which are the problems related to the old centres and which is the policy of restoration applied?

In Belgium it is advisable to differentiate the problems related to the existence from the safeguarding of the inheritance of the problems related to the restoration of the urban centres. With regard to the safeguarding of the historical inheritance, there are even Secretaries of State (of the area) assigned to the conservation of the inheritance. A commission is charged to define which are the "remarkable" buildings which will be taken again on this list and which at the same time could not be the subject of restorations, modifications, assignments etc... without special permit of the authorities and which will be given nevertheless special subsidies for the conservation of this inheritance. This policy ended these last years in exaggerations caused by certain "green" organizations which wish and obtain classifications for not very interesting sites or in state of total decay. Useless to add that subsidies do not cover all the costs related to safeguarding with the buildings and that moreover the owner sees himself obliged, in certain cases, certain constraints of visit. With regard to the problems related to the urban centres, contrary to what one knows in some other European cities, in Belgium and more particularly in Brussels, the downtown area was forsaken with the profit of a "green" periphery more offering more parks. Initially these grounds were more attractive because of the relatively less cost, but this is strongly reduced today. This tendency to move away from the centre town grows blurred and one notes even a certain revival of the center of Brussels for example. That leads to  a policy currently supporting the revival of the buildings in center. Subsequently a great number of offices are concentrated today in the centre with a recent development of zones of offices in periphery, primarily towards the airport. All that, combined with a request unceasingly increasing for use of the car, leads to situations where the access towards the city is done more and more with difficulty with a more and more congested traffic.

 

2. Under which conditions the city extend? The assignment of the ground is subjected to plans of different installations according to whether they apply to the Flanders, Brussels-Capital or Wallonia. Each one of these plans, complexes, envisages constructible zones, of reserve, zones green etc... Moreover, the construction of offices tends to be limited in Brussels and the policy tends to support housing, even if in certain cases there are no more additional needs.

 

 

Ecology  

 

How ecology affect does the real estate in your country?   There is not direct legislation imposing of the limits related to ecological impositions for the moment for the dwellings. However the Flanders has just taken certain measures forcing to guarantee that the ground (sold for example) is free from pollution. Such a measure is not yet of application to Brussels or in Wallonia. Certain decisions of classification of sites answer requirements of associations ecologists, for example the classification of zones which were hitherto intended to constitute a land reserve and which are classified in green zones (parks) to satisfy requests of ecologists.

 

There are no compensation or indemnity for these depreciations related to these causes in general.

 

 

Taxation of real estate property

 

 1.        Taxation with the personal income tax 

a) Guiding principle

 The incomes of real goods are added to the other assessed incomes and the whle will be taxed according to the sections below. For the exercise of imposition 2003 (incomes 2002), the tariffs are as follows:.

 

 

Revenus exprimés en EUR
de 0 € à 6.730 € de 6.730 € à 8.920 € de 8.920 € à 12.720 € de 12.720 € à 29.260 € de 29.260 € à 43.870 € Au delà de 43.870 €	25% 30% 40% 45% 50% 52%

 

b) The taxable real incomes correspond according to case's:

 1.with the indexed cadastral income increased by 40% for the buildings given in hiring for the private uses and the second residences.

2.with the rent really perceived decreased of a fixed price for the loads for the buildings given in hiring of professional or commercial use.

3.with the cadastral income indexed for the buildings rented at agricultural ends.

 

 

A standard abatement of 3.953 EUR, however limited to the amount of the indexed cadastral income are granted to the owner who occupies the good personally.

The standard abatement is raised of 339 EUR for the spouse and each dependant of the taxpayer. If one of these people is handicapped, the deduction is still raised of 329 EUR per anybody handicapped. When the taxpayer is handicapped, it has right to an additional increase of 329 EUR.

The cadastral income can, under certain conditions, being reduced in the case of unproductiveness or one duration inoccupation of more than ninety days.

 

Interests of loans contracted to acquire (p.ex. to buy) or preserve (p.ex. work of restoration) is deductible from the real income.

 

Refundings of the capital are, under certain conditions, deductible from the earned income.

 

2.         Annual taxation on real estate.

  An annual tax on real estate is due by the owner, hereditary lessee, superficiary or usufructuary of a real estate. It strikes the built and not built properties, the material and the tools which are attached to the good. The tax on real estate is a percentage of the indexed cadastral income composed of three parts: a part for the Area, for the Province and for the Commune (these two last authorities apply additional taxes to the amount intended for the Area). The percentage of the advance payment of tax on real estate thus differs according to the commune where the good is located.

 

The cadastral income is defined as the annual clear rental value real estate. The current cadastral incomes are defined.

 

The advance payment of tax on real estate can be reduced for the following reasons:

 - poor dwelling: a reduction of 25% of the advance payment of tax on real estate is granted to the dwellings whose cadastral income is lower than 745 EUR 

- Taxpayer handicapped or recognized like large invalid of war: the reduction of the advance payment of tax on real estate for large invalid of war amounts to 20%, that for the handicapped head of household is 10% 

- Children and handicapped people with family obligations: these reductions are granted only if the family of the taxpayer has at least 2 children. The amount of the reduction differs in Flanders compared to the remainder from Belgium:

- In Brussels and in Wallonia: the reduction of the advance payment of tax on real estate amounts to 10% per nonhandicapped child and 20% per anybody handicapped   - In Flanders: the percentage of reduction is replaced by a contractual reduction whose amount increases with the row of the child. A handicapped child gives right to the same reduction as that applying to 2 non-handicapped children. These amounts are each year indexed.

 

Exemption or proportional reduction for unproductiveness: a proportional reduction in the payment of tax on real estate can be granted if a not furnished real estate is not occupied in the current calendar year during at least 90 days and no income paid. As the regional authorities are qualified as for the advance payment of tax on real estate, the conditions of attribution of this reduction differ from area to area.

 

3.         Successions.

  In the event of death of an inhabitant of the Kingdom, an inheritance tax death is due alll his inheritance (by law or by will).

 

There are compulsory heirs, in particular the husband surviving and the children. The quota of the heritage that these heirs receive depends on the marriage settlement of the husbands. The husband surviving at least inherits usufruct on half of the succession of the late one.

 

The value of usufruct is fixed according to the age of the usufructuary. The coefficients are:

 

 

 

 

The rates of the inheritance tax death vary between 3 and 80% according to the degree of relationship and the last residence of the late one. Since 1999, the tariffs are different in the 3 areas from Belgium.

 

No inheritance tax death is imposed on the donations made by the late one more than three years before its death, owing to the fact that on these changes, there is already a gift tax which was paid.

 

4.         Death of non inhabitant  The death of a non-resident, who leaves goods in Belgium, involves the current liability of a transfer tax per death on the gross amount of the real estate.

 

5.         Donation  The donations inter vivos of real goods must be done by notarial act and involve the redevability of a gift tax. The rates of the gift taxes vary according to the degree of relationship and the Area.

 

6.         Hiring of a real estate. 

The written  lease contract noting the hiring of a housing must be subjected to the formalities of registration. The amount of the registration fees rises to 25 EUR, increased of 5 EUR (for stamp duty) per recipient with the lease. The commercial or professional lease is subjected to a rate of 0,2% on the cumulated amount of the rents increased by 5 EUR ((stamp duty) per every part of the lease.

 

7.         Other taxes or rates:  Various taxes are perceived by the Regions, the Provinces or the Communes. Their importance varies from one authority to another. Let us quote for example: the tax on the grounds to be built, the tax on the buildings given up, the parking lots located in front of the houses, on the desks, the wells, antennas etc.