LUXEMBOURG Law and Practice Contributed by: Claire-Marie Darnand, Victorien Hémery, Johan Léonard, Benjamin Marthoz and Tom Storck, Stibbe
Unless there are creditors benefiting from privi - leged rights, no other creditors may take prec - edence over the rights of secured creditors. 3.7 Subordinating Existing Debt to Newly Created Debt Contractual subordination is allowed under Lux - embourg law. The existing creditor may agree to subordinate the existing secured debt con - tractually to newly created debt by entering into an inter-creditor agreement or subordina - tion agreement. This will determine the rights of each class of creditors (senior, mezzanine, jun - ior) with respect to, in particular, their rank and subordination, the payment arrangements and the enforcement of security interests. In theory, contractual subordination survives an insolvency situation of a Luxembourg borrower. 3.8 Lenders’ Liability Under Environmental Laws A lender holding or enforcing security over a real estate property or shares should not be liable for environmental damage, provided it did not cause the damage to the environment itself, nor otherwise controlled the activities of the opera - tor of the real estate property at the origin of any environmental damage. 3.9 Effects of a Borrower Becoming Insolvent A specific regime applies for insolvency pro - ceedings. Debtors who qualify for bankruptcy must submit their filings to Luxembourg courts within one month. However, due to the pandem - ic, this deadline was temporarily suspended until 30 June 2022. The assets subject to the financial collateral arrangement(s) shall not be considered part of the assets subject to insolvency proceedings
(estate), enabling the beneficiary to enforce the relevant security regardless of the opening of insolvency proceedings and regardless of other estate creditors. Moreover, any actions taken during the “suspect period” cannot be contested by the court-appointed receiver. Mortgages over real estate property remain in full force and effect even in the case of an insol - vency proceeding. 3.10 Taxes on Loans Under existing rules, the registration of a mort - gage loan or mezzanine loans related to real estate triggers a registration tax of 0.29%, cor - responding to a 0.24% registration duty and a 0.05% inscription fee, with both rates being applied to the total secured debt (usually borne by the purchaser). 4. Planning and Zoning 4.1 Legislative and Governmental Controls Applicable to Strategic Planning and Zoning See 2.8 Permitted Uses of Real Estate under Zoning or Planning Law . 4.2 Legislative and Governmental Controls Applicable to Design, Appearance and Method of Construction The construction of new buildings or the refur - bishment of existing buildings is subject to the municipal building regulations ( Règlement sur les Bâtisses – Rb), which provide detailed rules regarding the design, appearance and method of construction. Each municipality in Luxembourg sets its own municipal building regulation.
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