Key money: legal but unregulated
Key money is perfectly legal in Belgium. The law of 30 April 1951 on commercial leases neither prohibits nor regulates it. Its amount is freely negotiated between the landlord and the tenant, or between the outgoing tenant and the incoming tenant.
What is key money
Key money (also called “pas-de-porte” or “droit au bail” in French) is a lump sum paid once to obtain the right to occupy commercial premises. It reflects the commercial value of the location: premises in a busy shopping street command higher key money.
Not to be confused with
| Term | Nature | Recoverable |
|---|---|---|
| Key money | Access fee for the premises | No (unless clause) |
| Rental deposit | Security deposit | Yes (at end of lease) |
| Eviction compensation | Compensation for non-renewal | Not applicable |
| Rent | Periodic payment | Not applicable |
Two types of key money
1. Key money paid to the landlord
The tenant pays the landlord for access to the premises. It is a kind of “entry premium”. Amounts vary considerably:
- Standard commercial area: 5,000 to 25,000 EUR
- Prime location (Rue Neuve, Avenue Louise, Meir): 50,000 to 500,000+ EUR
- Shopping centre: negotiated on a case-by-case basis with the manager
Key money paid to the landlord is not refundable at the end of the lease, unless an express clause to the contrary is included in the contract. Negotiate this point before signing.
2. Key money paid to the outgoing tenant (takeover)
The new tenant buys the “right to the lease” from the outgoing tenant, often together with the business (clientele, brand, equipment). This is an assignment of the commercial lease that generally requires the landlord’s consent.
Negotiating the amount
The amount of key money is not governed by any law. It depends on:
- The location and footfall of the street
- The remaining duration of the current lease
- The condition of the premises and existing fittings
- The current rent (a below-market rent justifies higher key money)
- The reputation of the commercial area
Tax treatment of key money
For the landlord
Key money received by the landlord is considered taxable property income. It must be declared in the category of miscellaneous income or property income depending on its classification:
- If classified as a rent supplement: taxed as property income
- If classified as the purchase price of a right: taxed as miscellaneous income (33%)
The tax classification of key money has a significant impact. Consult an accountant before setting the contract terms. Proper tax structuring can reduce the tax burden.
For the tenant
Key money is depreciable over the term of the lease (minimum 9 years). It constitutes an intangible fixed asset deductible from the business’s taxable profits.
Key money of 45,000 EUR for a 9-year lease = depreciation of 5,000 EUR/year deductible from the tenant’s taxable profits.
Regional specificities
Brussels-Capital Region
The highest key money in Belgium is found in Brussels (Rue Neuve, Avenue Louise, Boulevard de Waterloo). The ordinance of 25 April 2019 on pop-up leases does not allow key money for short-term commercial leases.
Wallonia
No region-specific legislation. The federal law of 30 April 1951 applies. Key money amounts are generally more moderate than in Brussels, except in the city centres of Namur, Liege and Mons.
Flanders
The Flemish commercial market (Meir in Antwerp, Veldstraat in Ghent) generates key money comparable to Brussels. The decree of 17 June 2016 on the Flemish pop-up lease excludes key money for short-term leases (max 1 year).
Law of 30 April 1951 on commercial leases — Text on Justel. Civil Code, art. 1709 et seq. (freedom of contract).