Landlords / Guide
Posted at July 22, 2019

Rent Control in Paris

Rent control: gain or loss for all?

 

Owners of apartments for rent -whether furnished or unfurnished- are rendering a great service to France, for the state cannot shelter all those who can not buy their habitat. All the more so because, with money lacking, couples burst under pressure and instead of needing one home, they end up needing two. And the phenomenon is growing.

In short, the landlords are the State’s partner!
Whether in life or in business, a partner is an entity to respect and even to pamper, right? Yet, on July 1, 2019 a new coercive rule has reappeared: rent control!

In itself the rent control idea is good because Paris has become a ghost town where only the most fortunate - young bo-bo employees, long-time property-owners, tourists and foreign investors - can afford to live in Paris, while all the others pile up in subways, RERs and crowded trains every day towards the suburbs.

Yet, one should be aware that apartments in Paris are selling for a fortune, and that most homeowners have a loan to repay. Similarly, an apartment is expensive to maintain: property tax (increasing throughout France); commercial property tax for furnished rentals; PNO insurance; list of exponential diagnostics - currently 7, with most of them to be redone after a while; upgrading and regular work in the apartment (refurbishing after each rental, furniture expenditure and replacement, household appliances, bedding ...), and in the co-property (repairs or replacement of boiler, elevator creation or renovation, replacement of lead pipes, roof work and building renovation...); maintenance expenses, insurance contracts, …
The depreciation period is therefore quite long.

Yet, despite all these heavy investments and efforts, landlords are not protected by law - in the event of non-payment of rent. This constant threat hangs over them and, in turn, the justified anxiety it generates makes finding a rental more and more difficult for tenants.

Consequently, framing rents is equivalent to adding an extra weight on the shoulders of those who are not the rich investors that one imagines. Even more so, since it is a hassle to figure the principale out. Judge for yourself:
The software created for this purpose gives three references per m²: the reference rent, the rent minus (corresponds to the reference rent - 30%) and the rent plus (corresponds to the reference rent + 20%). To know the reference rent, it is necessary to inform on the number of main rooms, the construction date of the building, if the property good is furnished or not, and the address:


- Agence nationale pour l’information sur le logement (ADIL)
- Service public & Service public estimer son loyer
- Direction Régionale et Interdépartementale de l'Hébergement et du Logement (DRIHL)
- Le figaro, 5000 euros d’amende en cas de non respect.

New lease agreement

 

The rent excluding charges fixed in the contract for new rentals or relets may not exceed the median reference rent plus. The median rent and the median rent plus need to appear in the lease for the tenant’s information.

Renewal of the lease

 

Upon renewing a current lease for a tenant, the latter may initiate a claim for reduction of the rent if it is higher than the median reference rent plus.

Which dwellings are not affected?

 

The dwellings excluded from this rent framework are the following:

---> Everything you need to know about Company lease "Company Lease - Furnished rental Corporate"  <---

Which dwellings are affected?

 

The rule concerns unfurnished and furnished property, but it applies only to leases signed or renewed on 1 July 2019. It does not concern dwellings that have never been rented before, or those whose last rental dates from before the last 18 months.

In short, the dwellings concerned have to have the following three cumulative conditions:

  • furnished and unfurnished accommodation as main residence
  • use of residential or mixed-use housing (the tenant uses the dwelling as a principal residence and also for business purposes).

Consequences and effects

 

Rent controls will have perverse effects. Let's examine them:

  • landlords see the profitability of their property further reduced. As a result, they will have less resources to perform the necessary maintenance and improvement work.
  • Rental offers will diminish, for many landlords are already selling their property instead of continuing to rent it, and worse some landlords prefer to keep their apartments empty.
  • relationships between tenants and homeowners may become strained. To help tenants making claim for rent redaction from their owners, a whole arsenal is available on http://www.referenceloyer.drihl.ile-de-france.developpement-durable.gouv.fr/

Why rent control in Paris in 2019, when the same device was canceled in 2017?

 

Indeed, one wonders what has changed in this situation, when in 2017 the Administrative Court of Paris considered that "by fixing the rent reference for inner Paris only, the prefect of Ile-de-France has made an error of law". The judge stated that the prefect should have extended the framework to the entire Paris area -an agglomeration of 412 municipalities- as provided by the Alur law of March 2014.
Therefore, the question arises : is the Administrative Court’s decision null and void, or are the 412 communes of Paris now included?

Lastly, the system is to be experimental for a period of five years, until November 2023. Yet, on March 15th 2017, the “Conseil d'État” strongly protested and ruled that the rent regulation could not be implemented as experimental, whereas the law did not foresee it.

The landlords of France are puzzled, and they are not the only ones: Can a new law (Elan) invalidate a prior law (Alur), although the latter legislation remains in force?

Sources: Judgment of the Administrative Court of Paris of November 28, 2017

Is there a fine for non-complying landlords?

 

Sanctions, fines, convictions ... these words are now part of the daily lives of landlords. So what is the new threat?
Owners who do not submit to the new rental guidelines risk up to 5,000 euros fine, and 15,000 euros for legal persons such as companies.

 


In conclusion, the landlords are neither recognized nor encouraged despite their definite participation in the rental needs of France. Let's hope that these heavy financial and personal investments will not end up weighing too much on the shoulders of that "partner".
The question is : Will rent control be the straw that breaks the camel's back?

 

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