Property / Autumn 2015: an update from Lodgis on the summer's major reforms

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Numerous reforms have affected the property market during 2015. Some of them came into force over the summer: standard agreements, fee capping, the decree on the furniture required in a furnished let and the rent control rules. Lodgis has looked at the impact of these changes for landlords and tenants.

Are we moving towards standard rental agreements?

Since 1 August 2015, landlords have been required to use a standard agreement when they let an unfurnished or furnished property as a main home. For a furnished property, this standard agreement includes the statutory wording from the law of 6 July 1989. It differs from an unfurnished rental in terms of the rental period (one year with a roll-over clause compared to three years for an unfurnished property), the option to stipulate a set fee for service charges rather than a provision followed by a later adjustment and the deposit, which is limited to a maximum of two months' rent, compared to one month for an unfurnished property.

The rental agreement must now be accompanied by an information sheet detailing the tenant's and landlord's rights and obligations and a summary of the co-owned building rules. These new documents, which are in addition to the technical audits, do not introduce any major changes. However, they make rental agreements considerably longer and are not an efficient source of information for tenants, who are often reluctant to read through 30 pages of appendices to rent an apartment for a couple of months!

Furnished lets: fees and equipment

The estate agency fee cap is the same whether the property is furnished or unfurnished. The fee paid by the tenant to the agency for organising visits, handling the paperwork and drawing up the rental agreement cannot exceed the sum paid by the landlord, and must be equal to or less than a threshold per square metre of living space rented. This threshold is set at €12 per sqm in areas where the housing market is very tight, such as Paris. Regardless of the type of let, the maximum fee for the start-of-tenancy inspection is €3 per sqm. The legislation specifically stipulates that no further fee can be charged for the inventory, despite it being such a vital but time-consuming process in the case of a furnished let.

A list of required furniture and equipment for a furnished let has also been established by a decree dated 31 July which enters into force in early September:

Lodgis does not see this decree bringing any changes compared to current case law. "This furniture and equipment would be sufficient for a student, but completely inappropriate for a manager or a professional on a posting who will require comfortable accommodation with high-spec equipment. An internet connection is essential, for example," said Maud Velter, Associate Director, Lodgis. If any of the furniture or equipment stipulated in the decree is missing, the tenant should inform the landlord. If the landlord fails to take action, the tenant should take the case to the arbitration committee now responsible for handling disputes between tenants and landlords in furnished accommodation.

Rent controls in force in Paris since 1 August 2015

The flagship measure of the ALUR law, rent controls for both furnished and unfurnished lets, entered into force in Paris on 1 August 2015.

In a decision dated 20 March 2014, the French Constitutional Council indicated that to ensure zoning was fair, accommodation categories and geographical areas should be defined precisely enough that the reference rent would reflect all the criteria usually taken into account when setting a rent. However, OLAP (the Paris Area Rent Observatory) does not have sufficient data to zone areas in such a targeted way.

For lack of data, an arbitrary 11% premium is added to furnished lets compared to the reference rent of an unfurnished property, regardless of the type of apartment or the geographical zone. This premium makes sense for accommodation with basic equipment as laid out in the decree of 31 July 2015, mentioned above. However, the difference premium for a furnished let is often far greater than this, as furnished apartments are generally very well appointed (television, washing machine, dishwasher, household linen, internet connection, etc.), and this is of course taken into account when setting the rent. The ALUR law does however provided for an additional rent to be charged to cover the equipment and services provided with the accommodation.

Overall, these various measures will not revolutionise the property sector. Although a standard agreement can be reassuring, the number of appendices is disappointing, and the list of furniture established by the decree does nothing other than summarise existing case law. Lastly, the rent controls will not help resolve Paris's housing shortage; there is a risk that they will be a source of disputes and push landlords out of the market.

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