Restrictions on rent indexation soon to end (but not entirely).

In the context of the 2022 energy crisis, each of the Belgian regional governments imposed limitations on the possibility to apply indexation on the rent for residential properties. These limitations will soon come to an end, but not entirely, however, as pointed out in below short overview.

As a reminder: as a general rule these limitations only apply on the rent under residential leases. For other types of rent (and with the exception of retail leases in Brussels), no new limitations have been imposed recently, implying that the principles of indexation as laid down in article 1728bis of the Belgian Old Civil Code continued to apply.

Brussels Capital Region

An ordinance of 13 October 2022 inserted limitations in the Brussels Housing Code (article 224/2), on the indexation possibilities for rental housing. Similar to the limitations in the other Belgian regions, indexation has been linked to the energy performance of the properties concerned.

In the period from 14 October 2022 to 13 October 2023, the following limitations apply to leases which have an anniversary of their entry into effect on or after 14 October 2022:

• Properties with energy levels A, B, C or D: no limitations (other than the restrictions imposed by existing laws – cf. health index).
• Properties with energy level E: indexation limited to 50 % (of “normal” indexation).
• Properties with energy level F or G or with an unknown energy level: no indexation allowed.

However, also after 13 October 2023 indexation of rent for residential leases will only be allowed if the following conditions have been met cumulatively:

• Registration of the written lease agreement by the landlord (article 227 of the Brussels Housing Code), and
• The EPB certificate of the leased property has been communicated by the landlord to the tenant, at the latest at the time of execution of the lease agreement (article 217 of the Brussels Housing Code).

Flanders

In the Flemish Region restrictions on rent indexation have been imposed by the decree of 3 October 2022, also linked to the energy level of the leased properties. For residential leases that entered into effect before 1 October 2022, the following limitations apply in the period from 1 October 2022 to 30 September 2023:

• Properties with energy levels A+, A, B, or C: no (new) limitations.
• Properties with energy level D: indexation limited to 50 % (of “normal” indexation).
• Properties with energy level E or F or with an unknown energy level: no indexation allowed.

However, in some cases indexation does not resume as before after 30 September 2023. Even after that date (i.e., as from 1 October 2023), a correction factor will apply for rental houses without an energy label and for properties with energy level D, E or F:

• Properties with energy level D: a correction factor as set forth in article 4, § 1 of the decree shall apply to the rent (as indexed in accordance with article 1728bis of the Belgian Old Civil Code).
  • For leases with an anniversary date of the entry into effect of the lease between 1 January 2023 and 30 September 2023, this correction factor equals: (index 2022 / index 2023) * [1 + 50% * (index 2023 / 2022-1)].
  • For leases with an anniversary date of the entry into effect of the lease between 1 October 2022 and 31 December 2022, the correction factor equals: (index 2021 / index 2022) * [1 + 50% * (index 2022 / 2021-1)].

• Properties with energy level E or F or with an unknown energy level: a correction factor as set forth in article 4, § 2 of the decree shall apply to the rent (as indexed in accordance with article 1728bis of the Belgian Old Civil Code), determined as follows:
  • Health index of the month prior to the anniversary date in 2021 or 2022 of the entry into effect of the lease / health index of the month prior to the anniversary date in 2022 or 2023 of the entry into effect of the lease.
  • The earlier years (2021 resp. 2022) apply to leases with such anniversary date between 1 October 2022 and 31 December 2022, whereas the later years (2022 resp. 2023) apply to leases with such anniversary date between 1 January 2023 and 30 September 2023.

Parties cannot agree to overrule the application of this correction factor.

In the event investments have been made to increase energy performance (resulting in a better energy level), the landlord may in some cases still proceed to indexation of the rent, however not retroactively.

For properties with energy levels A+, A, B or C, again, no limitations apply as to indexation of rent (other than, obviously, those that apply to all rent indexations based on existing laws).

Wallonia

A decree of the Walloon Region of 19 October 2022 also imposed indexation restrictions, partially inserted in the Walloon Housing Decree (article 26). The indexation restrictions apply to residential leases that came into effect before 1 November 2022, for the period from 1 November 2022 to 31 October 2023 (included):

• Properties with energy levels A(+), A, B, or C: no (new) limitations.
• Properties with energy level D: indexation limited to 75 % (of “normal” indexation).
• Properties with energy level E: indexation limited to 50 % (of “normal” indexation).
• Properties with energy level F or G or with an unknown energy level: no indexation allowed.

The decree states that these indexation restrictions can be extended for up to one year (i.e., until 31 October 2024 (included)), but at the moment of preparation of this short overview, we are not aware of such extension.

In the Walloon Region also, certain limitations will continue to apply after 31 October 2023 (or 2024). For properties without an energy label, or with energy level D, E, F or G, the base rent for the calculation of the indexation will be the rent as adjusted between 1 November 2022 and 31 October 2023 and the base index will be the health index of the month preceding the anniversary (between 1 November 2022 and 31 October 2023) of the entry into effect of the lease agreement.

Similarly to in the Flemish Region, parties cannot contractually exclude the application of the correction mechanism.

Properties with energy levels A(+), A, B, or C are not subject to a correction mechanism.

Michael Bollen, senior partner | MRICS

Real Estate team

Laurius