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Money Matters and Legal / In Law

Buying smart: navigating the debate on short-term rental apartments in Paris

Rental Investors : Paris Façade : Anissa Putois

Mayor Delanoë continues to press his position that rentals of under one year (9 months to students) are unlawful unless the apartment in question has “commercial”, rather than “residential”, status. Like minds disagree as to whether this position is correct and sustainable in the courts, but either way there are some things that can be done to avoid problems.

The Mairie has  continued to rely on neighbor complaints as their basis for going after individual owners to end their rental activity.  The Mairie’s official position is that these short-term rentals reduce the number of long-term rental apartments that would be on the market otherwise, and are the reason why real estate prices in Paris, particularly in high-tourist neighborhoods, have soared in the last years.

According to Kathryn Brown of Paris Property Group, that position “defies reality. Paris is a strong market with conservative mortgage lending and intense international interest, and that is why it stood fast in the face of deteriorating property values in most major markets over the last years. To lay the blame on short-term rentals, which themselves answer an important need for tourist housing in Paris that is otherwise not met in the over-booked hotels, is to redefine reality.” What’s more, she says, is that “its a fallacy that cracking down on short-term rentals in Paris will make Saint Germain des Près affordable to low income families. That just isn’t going to happen.”

The thousands of rental apartment owners in Paris, and the dozens of agencies that represent their apartments, remain hopeful that the Mairie will see the error of its ways and instead try to address the important housing needs faced by Paris residents by more efficiently collecting tax on the income from rental properties to fund new housing projects in and around the city. Our hope is that one owner with the right, sympathetic profile, will decide to take the Mairie on and ask a court to rule on the legality of the Mairie’s position and actions. To be seen…

In the meantime, people interested in buying an apartment in Paris and using vacation rental income to offset their expenses should do what they can to ensure that they are purchasing a property that has the least chance for problems going forward.  Kathryn suggests that buyers watch out for these red flags when considering a purchase:

Good: other commercial activity in the building

Are there any boutiques or professional offices in the building? If the Mairie’s position holds, owners have the option of purchasing commercial status for a residential apartment. Buildings with other commercial activities will likely be more “rental-friendly”.

Bad: other co-owners already grumbling about rental activity

Have your real estate agent check several years worth of the building meeting minutes to help you discover if there have been any such complaints in the building.  Has the building management distributed any letters to the owners to that effect? How is the climate between owners – is there a lot of strife or a nosy troublemaker in the building? If there is a live-in concierge, feeling them out with tactful questions on the issue can reveal a lot.

It’s also a good idea to ask the seller, and/or his agent, if they have had problems or complaints in the past. While the real estate principle in Paris is caveat emptor (buyer beware), the market is active enough that a seller will probably not outright lie about that situation if asked directly, and instead choose to find a buyer who doesn’t ask or isn’t concerned. At least one attorney we know thinks that they could be liable for your future troubles if they did.  Once you buy, make sure that you attend one or more of the annual meetings and establish friendly relations with your neighbors.  This will help ward off any trouble before it has a chance to get started.

Where there are already complaints, or the strong potential that there will be, one option is to look at renting medium-term (1+ months).  Longer term rentals will reduce the turnover of visitors in the building and can help pacify neighbors as they see familiar faces over a period of weeks or months and the renters become part of the fabric of the building.  These medium term rental contracts can be designed to comply with the Mairie’s position, and  if managed correctly, medium-term rentals can net only slightly less than short-term (about 1% less according to one management company), because lower rents are offset by less-frequent cleanings and lower booking and management fees. Like with short-term rental properties, good management and high occupancy rates are the key to success.

It’s anyone’s guess what will happen next. But with 20,000 vacation rental apartments in Paris and a shortage of hotel accommodations, vacation rentals won’t go away anytime soon.  Smart planning and flexibility will help ensure the lasting value of your investment property.

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