John Howell & Co

Specialist international legal advice

France: Restrictions on your ability to let your home – especially in Paris?

SUNDAY, 14 February 2010
This content is archived.

For more up-to-date information, please see Guides Global
This content is archived. For more up-to-date information, please see Guides Global

The French appear to have woken up to a law that has lain, almost unused (in this context) for many years. They say they want to use it to cut back on the number of owners of second homes who are, unofficially, renting out their properties in France. ~This would be a big problem. There are, probably, well over 30,000 such apartments in central Paris and, probably, hundreds of thousands in France as a whole. Is it a ‘flash in the pan’ or does it suggest serious problems for people wanting to let their homes in France and, in particular, in Paris?

What is the problem?

Well, this depends upon your point of view!

From the point of view of the French hotel and leisure industry, the problem is that – in very difficult economic times, when it is hard enough to make a profit – they are faced by an avalanche of (what they see as) unfair competition. This is the competition from tens of thousands of owners of second homes who rent them out to people wanting to take a holiday in France. These complaints have been bubbling along for some years. It is hard to say that this is not unfair competition. Most are not looking to make a profit. Most don’t comply with all of the safety and other regulations with which the hotel industry has to conform. Many pay neither tax or social security on their income and many employ ‘helpers’ who also pay no tax or social security. This gives these owners a huge advantage and allows them to price their product at a level with which the hotels, B&Bs etc simply can’t compete.

Do not underestimate the political power of this sector of the economy.

From the point of view of the owners of the properties concerned, they usually bought the property often depended upon the maintenance of the (lucrative) status quo. Many of our clients in Paris have been making over 5% net return on their investment, which has also increased dramatically in value over the last few years.

Now they face the government trying to crack down on this practice and, possibly, the end of this income flow.

How has the problem arisen?

French housing and construct law states that "any change of use of a dwelling must be submitted to prior approval. (Art L631-7)"

Until late 2008, change of use applications were dealt with by a central administrative body – in Paris the ‘Préfet de Police’. This entity was (and remains) responsible for a whole raft of regulatory activities but they do so as part of the national administration.

Few people applied for permission to change the use of their property. Arguably, few needed to – especially if they were letting their main home for a few weeks per year.

In 2008 the responsibility (in most cases) shifted to local control – in Paris to the Mayor of Paris.

Moreover, following the change in the law, the Mayor of Paris passed additional legislation to strengthen very greatly, its powers to control this phenomenon. Of course, this was just when the recession was starting to hurt to hotel industry.

Please note that these new rules will apply just as much – and possibly, in practice, more – to local French people with a second home as it does to foreigners.

Other authorities in France are, without doubt, looking to see how Paris gets on before lobbying for changes of their own, so (as is often the case) what happens in Paris has broader implications for those interested in France.

The worst feature of the Paris legislation is that it requires a person wanting to turn a property from residential use (including regular long term lettings) to tourist use to make good the loss of housing caused as a result. You must put back into residential housing good quality housing of the same size (and, in central Paris, double the size) of the unit to be used for tourist purposes. For most people, this is a non-starter!

What is a tourist letting?

It is, put rather too simply, being interpreted as a letting which will NOT be the main residence of the tenant AND it is for a period of more than 1 year (9 months in the case of lettings to students).

Our clients who let out to students and visiting academics (also included in the exemption?) and who use the property themselves out of term time will see little change.

The others will.

Can you get round the rules?

What happens if I break/ignore the rules?

This is not a new problem. Similar issues have arisen in most other ‘tourism’ economies, such as Spain, Portugal & Florida. Each has taken steps to deal with the problem. All in different ways. The long term effect of those steps has been patchy.

On the one hand, breaking the rules is likely to constitute committing a criminal offence in France AND give rise to fines of up to €25,000. Worse still, it could impact on the legality of your insurance.

This law, of course, gives ‘carte blanche’ to your neighbours who don’t like your activities to ‘turn you in’ by way of denouncement. I have written about this feature of French society many times!

On the other hand, the French are notoriously non-compliant with rules of all sorts. Will they treat this any differently? Does Paris even mean business, or are they just firing a warning shot across the bows of persistent offenders who have annoyed their neighbours?

Time will tell.

My experience, based on 30 years of dealing with France and other countries which have tried to tread this path, is that – once better times come – it will be forgotten about! The accommodation is needed. It brings in a different type of visitor from those who stay in hotels – often visitors who stay much longer and spend much more money. Of course, I cannot guarantee this.