Crackdown on Private Landlords - Paris moves to free up housing in the city centre

Recent moves made by the City of Paris to apply laws restricting the rental of apartments in central Paris may have significant effects for thousands of private owners, in Paris and abroad.  According to the Prefecture de Paris, nearly 38,000 apartments in Paris are being rented for short stays and moves to prosecute some owners of these properties have begun.The reasons cited for the application of this law is to alleviate the chronic shortage of affordable housing in the city centre (see our posts about this from 2006).   Bonapart Paris's Owner, Susie Hollands and well known blogger about French life and property, Tony Tidswell, held a meeting with François Plottin, Chef du Bureau, at the Mairie de Paris’ Direction du Logement et de l'Habitat in Paris on Wednesday, 19 November and Thursday 26 November 2009.

Hidalgo : "Jeudi noir défend une cause juste"
envoyé par LEXPRESS. - L'info video en direct.

Report on L'Express on the housing shortage in Paris.

It is technically illegal for any owner of a property in Paris not classified as commercial to re-let their property for any period of less than one year. The sole exception is for student rentals, where the term can be no less than nine months.    Property owners are obligated to make sure their apartments, and the rental activity, comply with the law, in order to satisfy the legal aspects Paris has set for retail rental "commercial activity" and we are assisting our owners to regularise their situations  Any apartment advertised for short-term rental can be considered as having been rented, and therefore scrutinized under the law, by the authorities.

The team in charge of this re-application of the law confirmed the department holds files of many properties currently being advertised for short term/vacation rentals. These owners are in danger of prosecution, according to Tidswell.  "Penalties are severe and a fine of 25,000 euros can be imposed." The only circumstance where an owner can apply for special consideration is by having the property reclassified as a commercially-zoned property (changement d’usage en locaux à usage professionnel ou mixte).  If this is granted then an owner is authorized to rent short-term/vacation rental.

"This law potentially affects about 300 of my client-owners, many of them based in France the UK and the US," Susie Hollands, owner, Bonapart Consulting. "What I'm advising is that they switch to longer term rentals of one year or go through the legal process to change their apartment's legal status to commercial."    While the law has not been fully applied, Bonapart recommends a pre-emptive approach to what can be a serious situation for owners.

For apartment renters, there is currently no infringement of the law, but, as the apartment is rented irregularly, any property insurance could be invalid. A family or individual coming to Paris and renting a private apartment could be must ensure they have sufficient personal and accident coverage.  They must also note that any agreement they have for rentals exempts them from any liability or hazard that may occur at the site of the property (fire, water damage, public liability etc).  

Comments

[susie hollands bonapart consulting]

I am receiving non-stop emails from clients, owners, those involved in Banking, Renting property, Servicing property and individual owners from outwith our company. It does not seem that after we met the Chef du Bureau at the Department of Logement that the rules are clear. The Mairie de Paris and the Prefecture de Paris feel very strongly that this activity of short term seasonal rental has artificially forced up the price of lodging for ordinary Parisians, they (and I myself) have no wish for Paris to be turned (further) into a Ville Museé...they cited Venice in Italy as an example.

They mean to crackdown on the rental activity simply by making some high profile prosecutions.

Truly, this will be hard, they have a job on their hands to gather evidence and push this through but they have a larger team than originally thought and two year's worth of dossiers and evidence collected on various owners and rental agencies.

They are efficiently carrying out orders and like it or not, those of us in Paris with any involvement with furnished rental business have to act to scrutinise our activities and start to comply with this newly applied legislation.

[susie hollands bonapart consulting]

by email:

Thank you for your email and attachments.

The article and letter extract are most intersting. They show that the Paris authorities are determined to crack down on holiday lettings. Until someone challenges the 'Règlement Municipal' in Court, as being contrary to Mandatory French Statutes govering rentals, owners are indeed at risk of being imposed penalties.

[susie hollands bonapart consulting]

VIA EMAIL

Dear Susy,

Yes, many of us in this industry are already aware of this issue.

May I ask why you feel it best to disseminate this information (broadly) ?

Also, I do take some exception your implying it would be "easy" for owners to apply for and OBTAIN the required 'change of usage' approval from CH (city hall). This is not really a practical solution, given that most Paris properties would require the "compensation" factor. Likewise, given that each property's building (Syndic + Copropriété) would also need to approve the change of usage, again, this is not likely to happen.

[susie hollands bonapart consulting]

I do believe it is important that people know about this, especially those with significant investments or investment plans in Paris.

I agree, changement d'usage would be very difficult.

[susie hollands bonapart consulting]

By email:

As I understand it, owners are now being prosecuted under a law that has been on the books but is now being more fully enforced. So this could reduce the pool of rental apartments for visitors, but visitors are not being prosecuted – they just may not be covered by insurance as they are not legally renting. Is this going to put some companies specializing in short-term rentals out of business??

[susie hollands bonapart consulting]

Yes, it could have this effect. and it could mean less properties for visitors. Visitors could not be prosecuted, the danger and responsibility lies with the apartment owners.

From a Town Hall point of view, it's very clear, it's to be stopped. From the agencies here in Paris, they are mobilising, have legal teams and apparently the support of the Paris Tourist board.

Susie

[susie hollands bonapart consulting]

This is very disturbing news. We bought the apartment for the sole purpose of longer-term rentals (2 - 9 months). If we can no longer do this, we will have to sell it. We do not want to rent it out for 12 months at a time and we certainly can't let it sit empty.
What are our options? How difficult and expensive is it to comply with the law to classify the apartment as commercial?

Richard

[susie hollands bonapart consulting]

I will absolutely keep you informed. Your situation is much, much more clear and easy than for owners renting weekly. Longer stays of 2 months plus should be manageable, I will keep you informed as I learn more.

It is not at all easy, in fact very difficult and costly to reclassify the apartment as commercial

[susie hollands bonapart consulting]

BY EMAIL

Thank you very much for sending this to me. This is frightening considering I thought we had done everything legally. We have paid French taxes, declared all of our income, paid for insurance, etc. And it still sounds like there might be a problem. But . . .

I think we are protected as we own the apartment as an SCI and then we rent from the SCI on a monthly basis. But I will forward to our French accountants and get their input. Again, my sincere thanks on sending this on to owners. You were kind to share this information.

[susie hollands bonapart consulting]

BY EMAIL
Hi Susie
In our case, what would you advise? Is there a way you can get the apartment rented for one year plus? If we go for the "Loueur meublé professionnel" (by registering to the RCS), do you know the tax impact?
Thank you very much for your kind collaboration, as usual.

[bonapart consulting]

It is not advisable to set up as right now as the status of this statut is currently unclear vis a vis the new legislation

[susie hollands bonapart consulting]

BY MAIL
I look at it this way. You (Vingt) are offering a service to the nation of France by helping students and other wealthier people navigate the labyrinth of Frog legislation, enabling them to stay in France for short periods.
Your service helps fill their universities with fee paying students and tourists who pay eye-watering prices for coffee on the Champs Elysee, all of which grease the wheels of French commerce. To make a minimum stay of 9 months is just stupid. It´s nearly impossible to get a visa for more than 3 months so a corresponding three month apartment lease should be quite normal. Another case of buttock clenchingly unjoined up thinking by French bureaucrats. Take it up with Sarko. I would.

[Expat Observer]

Frankly, this comes as no surprise. Whether or not the current official response is political pandering or a real effort is another thing. But the Parisian housing situation is a disaster for everyone from students through the middle class (if you are single).

The extremely high rents (consider avg monthly rent of 900-1200 euros vs avg monthly salary of 1500-1800) plus the fact that there are almost zero apartments in the rental market right now can only lead to mounting tension.

A response from Parisian politicians will be demanded. If something does not change, I'm sure the manifestations will (again) follow.

[Giacomo Della Porta]

Great news for students and professionals who don't have a lot of money. Why should a young teacher who works in Central Paris not be able to live near his work just so that tourists can have a rental for two weeks and pretend to have an authentic Parisian experience. Even the rates charged to tourists are outrageously high. This means that scholars (and others with legitimate reasons to be in Paris) who need to be in residence for a month or two in order to work at various libraries and archives can barely afford to eat because they must pay so much for rent.

[susie hollands bonapart consulting]

thanks for this comment, I sympathise and I understand as we have many requests to help people who are on very tight budgets. Many friends in research and the arts have left Paris simply because it was unaffordable here with an average one bedroom even in the outer areas 900euros.

[Bruce, Toronto Canada]

We rent weekly from an individual who typically inhabits their own apartment on a day to day basis, but moves to their country home when they have short term rental clients. I'm curious as to whether this condition would be subject to the same enforcement.

From our perspective this measure, if thoroughly enforced, would have the effect of us spending less time (=$)in the capital as we find a week or two in a hotel to be too expensive (let alone too uncomfortable)

Regards.

[paris property]

THERE IS NO SHORTAGE of apartments available for rent in Paris on long term leases - anyone willing to take at least twenty minutes before making unqualified judgements can log on to www.seloger.com or www.explorimmo.com and find more than 10 000 available across Paris from 350 EUROS per month to 3500 EUROS a month ( a lot cheaper than London and New York) and this does not include the 3500 FNAIM traditional estate agencies in Paris, all with at least 10 unfurnished apartments on their books or Century 21 with a strong unfurnished portfolio - or the leading institution owners like AXA and AGF who always rent unfurnished - it seems absurd and an infingement of some basic rights to prevent somebody who wants to rent or wants to rent out for less than 12 months for a price that they mutually agree on - ( imposing an impossible threshold of having to pay double the apartment price for the privilege has serious legal implications in French law and European law ) The Paris town hall has also purchased at least 50 buildings over the last years for subsidised housing which is a good thing and in accordance with government policy but Paris needs jobs and tourism and economic activity aswell for its residents and estimates for the number of direct jobs depending on the temporary rentals up to 12 months are way above 15 000 - sound economic, moral and employment arguments will win through - Paris has a chronic shortage of apartment residences 62 only, for a city of 2 million inhabitants with 24 million visitors for business and pleasure a year, only 16 million of whom stay in a hotel for an average of two nights stay - if those visitors staying from one week to 51 weeks cant stay in an apartment they wont come ! Paris should not be just for the rich who can stay in a hotel for weeks on end that is if they can get a room with 83 % occupancy ...

[anonymous]

Whilst sharing information is comforting (we are all in the same boat), this does too easily give rise to panic and indeed everyone here is panicking, as did I when I first got wind of this legislation. I am a Loueur Meublé Professionel (thus own all properties rented out) however do not yet understand whether this makes a difference as far as legislation is concerned. From what I understand the panic can be explained by the following 'interpretation' of the Code de Construction:

1/ Any 'bail' should be for a minimum of 1 year.
2/ If less, the 'bail' is commercial but of course you cannot have a 'commercial' bail in residential property
3/ Easy - you buy up commercial property in the neighbourhood equivalent to twice the size of the residential property.
4/ You get a letter from the Mairie confirming that you're an outlaw
5/ You get a wapping fine and end up pacing up and down in a cell in some grimey French prison (do not under any circumstances go and see 'Le Prophet' - it will only fire your panic.

Ok, frightening stuff BUT articles laid down by the Code de la Construction et de l'Habitation are not aimed at routing out the vacation rental market in Paris. Fears are a purely a result of interpretation of the law. Please air your views on the following points of interpretation of the legal text:( apologies for the French - overview in English below):

1/ Modifié par LOI n°2009-323 du 25 mars 2009 - art. 69
Toute personne qui loue un logement meublé, que la location s'accompagne ou non de prestations secondaires, bénéficie d'un contrat établi par écrit d'une durée d'un an dès LORS QUE LE LOGEMENT LOUE CONSTITUE SA RESIDENCE PRINCIPALE. A l'expiration de ce contrat, le bail est tacitement reconduit pour un an sous réserve des dispositions suivantes.

According to this article an individual who rents a property AS HIS/HER MAIN RESIDENCE is entitled to a contract of a minimum of one year. Not the case for tourists who pop over for a week or so. How thus is the conclusion drawn that if a tourist rents for a week that is construed to be a 'commercial' agreement??? Take the scenario of a business traveller from the US who signs a lease on a property for 11 months but intends to come to Paris only intermittently during that period. His main residence is in the US where he pays all his taxes. He neither pays taxe d'habitation in France nor the EDF, GDF, charges de copropriété etc. According to the law, the owner is not legally bound to provide him with a 12 month contract. Why then does one assume the contract is commercial?

2/ Interpretation of the word 'bail'. What is a 'bail'? A contract drawn up between an owner/agency and guest laying down the date of arrival, departure, the fact that they can't smoke or bring their dog. Does this constitute a 'bail'. Until 1st January 2001 all 'baux' were subject to the 'droit du bail'. The contract between guest and agency/owner were not then subject to this which would suggest the contract is not a 'bail' but a form of 'licence' much like when you stay in a hotel. As above (apologies for any repetition), under a standard 'bail' the renter would take charge of 'charges', edf etc etc. Guests do not.

As far as I understand, the focal point of all this legislation are 'baux' laying down minimal periods in the face of the supposed housing crisis in urban areas of 200000 plus inhabitants (or 100000? - another inconsistency). Vacation rental companies/owners were never the subject of this.

3/ Is there any evidence as far as anyone is aware of such 'interpretations' being confirmed as correct, i.e has an owner/agency been prosecuted?

4/ As far as the vacation rental market is concerned a far bigger concern for the French authorities is surely the number of illegal offshore companies who give the market a bad name. Throw in with that those who operate without the required 'carte professionelle'.

5/ The Tourist board are dedicated to promoting this activity. If the law was in force since 1st Jan 2009, why are they still doing so. Surely that alone confirms that nothing is clear...

All in all it has ruined my weekend. Hopefully in not panicking we can all help to put eachothers minds to rest. Realistically however, only a good lawyer is going to do that...

Go and see Le Prophète, it's a masterpiece...

[VINGT paris culture blog]

Le Prophète

http://www.ivyparisnews.com/2009/10/un-proph%C3%A8te.html

[cw]

Susie,

It's now Feb 2010, has anything more developed? Are the prosecutions of high profile agencies happening?

[The Editor]

Hello readers - as soon as I have anything concrete to report I will post again. For the moment, there has been no change to the current situation. A prosecution would take some time to bring about, the authorities would need to identify, warn, then bring to court the person renting their property. If the owner decided to stop or change his rental activity there would be no case.

For any owners who plan to rent their property when they are not in Paris, I have given a synopsis of the situation and explained the current legislative position. The choice to invest in property with a view to rental is then up to the individual and each person has "taken a cview" and decided themselves what to do. Some chose to invest elsewhere and others went right ahead.

The important thing is that the information is in the public domain and people have the information they need to make up their own minds before investing a large sum of money based on a return on investment scenario that involves a rental activity. This was my aim when I decided to inform our customers and readers of our blog about this situation.

[Ian Williams]

this to me is against human rights; you suddenly dispossess a person from his income, for the benefit of an other one, without financial compensation;
this law acts as retroactive, since it demolishes something you might have done ten years ago (buying an appartment and renting it out when you are away;
to help "supposed shortage", I suggest to evict 70% of useless bureaucrats from their offices, and offer the premises at affordable rent to key workers;

also cap civil servants and politicians income to the level of a secondary teacher, and use the savings to help needy people;

[Elaine Thomas]

On top of the fear that the City Hall in Paris will crack down on short term rentals, how about renting from all these agencies operating outside Paris? These agencies sign rental agreements with the renters but will not disclose who is the real owners of the apartment. If there is any issues between the renters, agencies and or the owners, what are the recourse? Also, is it illegal for these agencies who operate outside of Paris and do not have a French Real Estate license to conduct business in France? If there is legal problems with the rental, do renters have any claims in the French court?

[VINGT Paris]

Excellent point: yes, those agencies are also acting with no carte professionnelle which is a legal requirement to rent, manage or sell real estate in France. So they de-facto, have no insurance.

My worry would be from an owner renting through an off-shore company is particularly vulnerable, if there were any damage and liability issues at his property, while it was being rented.

Check the website of the company before you do business for these important facts.

As a small business owner who goes through the pain of running a small company in France France, pays French tax on rental income derived here, abides by French employment law and hiring practises, I can assure you it is not a level playing field.

Do I sound bitter?! We are quite simply undercut by our offshore competition who have significantly reduced running costs and spend the surplus on marketing!

For the renter...if you lock yourself out or your toilet explodes during your trip, make sure that you book with a company with capable personnel on-the-ground in Paris to help you out!