10. What can I charge in Rent for a French Rental Property?

1. 10.1. New Tenancy
   10.2. Annual Increase
   10.3. Improvement Works
   10.4. Renewal of Tenancy
   10.5. Service Charges

10.2. Annual Increase - L’indice de Référence de Loyers (IRL)

It is normal practice to include in the tenancy agreement for an increase in the rent to take place each year, based on an index of price increases.

In the past, the price index normally used for the annual rent increase was that for construction costs.

However, with construction costs rising significantly in recent years, in January 06 the Government introduced a new index, which was a weighted composite of three existing indices - cost of living, cost of construction and cost of maintenance/improvement.

Since January 08, this composite index has been abandoned, as it was also still causing rents to rise too rapidly.

The new index is merely the cost of living index, less increases in tobacoo and and rents.

It is published each quarter by the government statistical agency called ‘INSEE’.

The formula for calculating the increase in rent is the average over the last four quarters of the increase in the index.

Accordingly, the maths work as follows:

New Rent = (R x Ii) /Iii

where:

• R = the amount of the current rent
• Ii = the value of IRL index for current period
• Iii = the value of IRL for same period previous year

More simply, you can also refer to the INSEE web site and obtain details of the quarterly indices.

The IRL must be used for both furnished and unfurnished lettings, provided in the latter case, the property is the principal residence of the tenant.