- Real Estate, Renting and Co-ownership
- Paco Shen - Charlotte Sterckx - Ulrike Beuselinck
- indexation , limitation of indexation , rental housing , indexation of rents , EPC label , EPB certificate , non-indexation of rents , law firm in Brussels , law firm in Belgium
News
Due to current inflation, indexed rents are significantly higher than the previous year's rents.
The Flemish Parliament has therefore approved an emergency decree under which the rent indexation for certain Flemish houses is frozen from 1 October 2022 to 1 October 2023.
In the Brussels-Capital Region, an ordonnance determines that rents of badly isolated houses cannot be increased due to indexation for twelve months. The Brussels-Capital Region has also introduced a measure for commercial rent.
From 1 November, rent indexation in the Walloon Region will also be limited depending on the EPB certificate of the houses.
Below, you can read to which houses the limitation of rental indexation applies and how the Brussels-Capital Region has regulated for commercial lease.
1. Rent indexation: basic principle
In Flanders (just like in Brussels and Wallonia), it is possible to increase the rent due to indexation on an annual base, in order to adjust the rent to the health index.
The rent can be increased due to indexation provided this is not contractually excluded and must be requested in writing by the landlord to the tenant.
2. Limitation of rent indexation
2.1 Flanders
2.1.1 The emergency decree and why it has been introduced
The emergency decree introduced a restriction on indexation in Flanders. This implies that indexation can no longer be applied on any rental property. Attention, this only concerns houses intended for main residence. It therefore does not concern student houses or second residence houses.
The 2018 Flanders Housing Policy Plan stipulates that all houses in Flanders must meet minimum quality standards. The optimisation of energy performance including both roof insulation and double glazing are part of this.
With this plan, the Flemish government is trying to encourage landlords to make their rental properties energy efficient. As long as rental properties do not meet the desired energy performance, they must at least remain affordable.
Rent indexation - during the time of the measure - will only be possible for houses that have an EPC label A+, A, B or C. If the rental property has an EPC label of D, rent indexation will be limited to half. For rental properties with an EPC label of E and F or whose EPC label is unknown, no indexation is possible.
| EPC-Label | Rent indexation |
| A+, A, B of C | 100% |
| D | 50% |
| E, F or unknown | 0% |
2.1.2 The application of the correction factor
To avoid the indexation of rents rising too fast after 1 October 2023, a second measure has already been foreseen. From 1 October 2023, a correction factor will apply to houses without an EPC label and those with a label D, E or F.
When calculating rent indexation, the increased health index between 1 October 2022 and 30 September 2023 will not be taken into account if the anniversary of the lease falls in this period.
Suppose you signed a lease on 1 November 2021. Without the correction factor, the rent indexation the following year would be calculated based on the October 2022 health index divided by the October 2021 health index.
Due to the correction factor, the calculation of rent indexation the year after will take into account the health index figure of November 2021 divided by the health index figure of October 2020.
2.1.3 Is retroactivity possible?
A request for indexation that will be possible again from 1 October 2023, cannot be retroactive for a period of three months. This is because during this period, there is a prohibition on indexation of rents.
If the EPC label improves during the period from 1 October 2022 and 30 September 2023, the landlord can still request an indexation of the rent. For houses that obtain an EPC label D during this period, the request cannot be retroactive for a period of three months. For the same reason, the property did not yet have a favourable EPC label during this period.
2.2 Brussels-Capital Region
In the Brussels-Capital Region, an ordonnance is effective since 14 October 2022, determining that rents of badly isolated houses cannot be indexed for twelve months and the limitation of the increasing of the rent due to indexation is entered into force immediately.
A clear difference can be noted compared to the Flemish Region.
Landlors in Brussels can only increase the rent due to indexation after the lease contract has been registered and if an EPB certificate is available and has been transferred to the tenant as precontractual information.
In addition, a landlord in Brussels can only apply indexation if the property has an EPB certificate A, B, C or D and. With an EPB certificate E, the rent can only be indexed for 50% and with an EPC label E, no index will be possible.
| EPC-certificate | Rent indexation |
| A, B, C of D (if registered) | 100% |
| E (if registered) | 50% |
| F, G or unknown and/or not registered | 0% |
Hence, the standards are lower in Brussels than in Flanders, where a D- certificate can only be indexed for 50% and no indexation is possible for a E-certificate
Moreover, another difference with Flanders is that there is no correction factor in Brussels. When this measure - which has a provisional duration of 12 months (i.e. until 13 October 2023) comes to an end, the rent difference in Brussels will suddenly be much higher.
2.3 Walloon Region
From 1 November, rent indexation in the Walloon Region will now also be limited depending on the EPB certificate of the houses.
For houses with an EPB certificate A, B and C, indexing will still be possible. Owners of buildings with EPB certificate D and E will have to limit their indexation to 75% and 50% respectively. Finally, rent for houses with EPB certificate F and G or of houses without a certificate cannot be indexed.
| EPC-certificate | Rent indexation |
| F, G or no certificate | no indexation possible |
| E | 50% |
| D | 75% |
| A, B or C | Indexation possible |
The measure applies only to leases whose expiry date is after 1 November 2022. Moreover, the measure applies for a period of 12 months, which can be extended if necessary.
If the measure is not extended from 1 November 2023, there is an adjusted calculation method for rent indexation for houses with an EPB certificate D, E, F or G.The base rent is the rent that was adjusted in the period between 1 November 2022 and 31 October 2023. The base index is the health index of the month preceding the anniversary of the lease falling between 1 November 2022 and 31 October 2023.
3. Limitation of indexation of commercial leases
The Brussels parliament has approved a proposal for an ordinance temporarily limiting the indexation of commercial rents.
With this, the Brussels parliament wants to protect Brussels traders suffering from high energy prices and give them breathing space again. The indexation of rents follows from the consumer price index, which is directly influenced by the rise in energy costs. Limiting the indexation intervenes in the fixed costs of traders. Consequently, the measure should ease the pressure on traders' liquidity and thereby protect jobs.
Commercial property owners will still be able to index the rent through the measure, but this will be limited. They will still only be able to do so in proportion to the health index without the energy component (electricity, natural gas, butane, propane, liquid fuels, solid fuels and motor fuels).
Based on data published by members of the Brussels parliament, this should reduce the indexation by about half, limiting it to a reasonable level.
The measure will apply for one year. Currently, the ordinance has not yet been published in the The Belgian Official Gazette although this will probably not be long in coming. After publication, the measure will enter into force the following day.
Unlike the restriction on indexation for residential leases, this measure for commercial leases was not modelled on the principle of the EPB certificate as it does not yet apply to the entire tertiary sector.
Should you have any questions on this subject, please do not hesitate to contact our specialists via info@seeds.law or +32 (0)2 747 40 07.
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Ulrike Beuselinck
Partner - Mediator
Koen de Puydt
Partner
