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Money Matters and Legal / In Law

The loi ALUR/Duflot regulating aspects of property rentals is delayed

Loi Duflot - Paris Property Group

One of the French government’s flagship laws has been censured on the grounds that parts of it may be anti-constitutional. The law would have altered key aspects of rental agreements, including short-term rentals.

The loi Accès au logement et un urbanisme rénové (ALUR: improving access to housing and updating town planning) is also known as the ‘Loi Duflot’, after Cécile Duflot, the housing minister. The bill had a bumpy ride through parliament but was finally passed on February 20th. On February 24th, however, senators belonging to the right-wing UMP party referred the law to the Conseil Constitutionnel (Constitutional Council). Its role is to ensure that laws do not infringe on the French constitution.

The senators objected to several key measures that they figured would place excessive constraints on property owners’ rights:

1.    Rent capping in urban zones where demand for rentals greatly exceeds supply.

Prefects would be required to set a median rent. Owners would not be allowed to charge a rent more than 20% above that level, except for a particularly comfortable or well-situated apartment. Nonetheless, the tenant would have the right to contest that higher rent. Rent capping would not apply to furnished properties or to those that are let on a seasonal basis.

2.    The requirement for an owner of a furnished pied-à-terre to register a change of use in order to rent the property on a short-term let.

This measure aimed to curb what the government saw as over-speculation in real estate for profitable short-term letting, thus restricting the number of rental properties available for longer-term lets. The senators saw this as restraining owners’ legitimate right to earn additional income from their property when they are not using it.

3.    The requirement for owners to grant exclusivity of their property to one letting/property agent.

Owners would not be permitted to place the property with more than one property agent or to advertise it themselves. The senators considered this was anti-competitive.

In addition, members of the Chambre des Députés (members of parliament), also belonging to the conservative UMP party, believed there had been a lack of transparency during debates about the measure that established a universal rent guarantee. Under the current system, the tenant pays a deposit to indemnify the owner against possible non-payment of rent. The loi Duflot changes this system: the tenant would no longer pay a deposit or provide guarantors and the government would underwrite any non-payment of rent instead.

The loi Duflot provisions should have come into effect around September 2014. However, their referral to the Constitutional Council throws this up in the air. We will bring you further news as it becomes available.

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