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New Rules for Landlords of French Property

Friday 15 May 2009

There have been some important recent changes in the legal and tax framework for landlords of French property.

Rental Guarantees

Those who rent out a property in France often take out some form of guarantee against the non-payment of rent. This may be either an insurance policy against the non-payment of rent, or the use of a third party guarantor, often a relative, but sometimes an institution.

In some cases, landlords have adopted a belt and braces policy of insisting on both an insurance policy and a third party guarantee. Insurers have also sometimes made securing a guarantor a condition of taking on insurance of the rent!

A change in the law now proscribes this practice. In future, a landlord can only use one or the other.

The aim of the change is to try and increase access to rental housing for a greater number of people, although critics argue that it may well have the reverse effect: landlords may simply decide to sell rather than rent out property. It could well also increase insurance premiums.

The use of a third party guarantor is also now forbidden if the landlord is a French property company, other than for companies that may be entirely family owned.

Rental Deposit

Since 2008 a landlord of unfurnished accommodation is only entitled to hold a deposit of one month’s rent.

To get around this limitation, some landlords have insisted that a tenant deposits a sum of money in a blocked bank account, accessible to the landlord in the event of arrears of rent. This practice is no longer permitted. A landlord of unfurnished accommodation can now only ask for one month’s rental deposit.

There are no controls on the amount of the deposit for furnished accommodation.

Surface Area

A tenancy agreement must now stipulate the surface area of the property. The requirement does not apply to existing tenancies, and there appear to be no sanctions in the event of non-compliance. Neither is there guidance on just how the surface area is to be calculated.

Rental Receipts

A landlord is required to provide a tenant with a rental receipt, but some landlords have imposed a charge for sending a receipt to the tenant! This practice has now been proscribed. The receipt must be provided free of charge.

Taxation

The tax allowance for landlords of furnished accommodation taxed as a ‘micro-entreprise’ has been reduced from 71% to 50%.

However, those who let chambres d’hotes and registered gites are excluded from this change. We have spoken to several tax offices about this exception, none of whom seemed aware of it. If you fall into this group (as we know many of you do) then check carefully your tax notice when you receive it later this year.

Professional Landlord

The test of eligibility for becoming a professional landlord has been made tougher.

Broadly speaking, you now need to have rental income of at least €23,000 per year, which must at least 50% of your other earnings.

Where previously pension income was excluded from the definition of ‘other earnings’, this is no longer the case.

However, expats wanting business registration as a landlord in order to obtain access to the French health system, can register as an auto-entrepreneur.

The status of 'professional landlord' only applies to those letting furnished accommodation.

Eviction

The ability of a court to delay eviction of a tenant for up to three years has been reduced to one year.

As it has also been accompanied by a separate instruction from the Minister of Housing to local préfets that no tenant is to be forcibly evicted without alternative accommodation being available, the impact of this measure remains in some doubt.

Energy Conservation

Landlords are eligible to receive a tax credit for energy conservation works to a rental property, as well an entitlement to up to €30,000 interest free loan for such works.

New Rental Property

As we set out in our last Newsletter, there have been some significant changes in the tax incentives available to those seeking to invest in new rental property in designated areas of the country. These are particular rental schemes, so do not have general application.

You can read more in our comprehensive guide to Letting Property in France.

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