This is France

It is some time since I posted in this blog, or got news of the initiatives for the regulation of Paris rentals.

Looking at the blogs and adverts it seems that it is “Business as Usual” for owners and agencies in Paris this summer.

I know that a group of owners and agents are “girding their loins” for a scrap with the city council an I understood that the team in city hall taking this action are waiting for “legal opinions” over several immanent prosecutions, so it is either the “calm before the storm” or a “storm in a teacup”.

There are other technical and legal consideration for property ownership and rentals in France, not just this ‘large city’ legislation threatened initially in paris, so I may extend the use of 2337.com into the general interest about this as a reference point.

Some of the agencies who have created a business out of renting apartments in Paris as vacation properties have formed a group called “la Federation des Loueurs d’Appartements Temporaires” (FLAT) – the full list of prospective members represents about one fifth (7,000+) of the estimated (by the Mairie of Paris) 38,000 private apartments in Paris currently let as short-term, usually vacation, rentals.

The agencies who are planning to form a committee to address the problems they now face, represent 700 apartments or about 2 percent of the short term lets in Paris.

The next couple of months will be interesting, the committee plans to set out an agenda and actions to ascertain the size of the threatened legal action against landlords who break the laws in paris and to determine if there are ways to comply with the laws and regulations in force.

This seems a sensible approach, although it does seem foolhardy to invest in and establish a business which is based on an illegal activity, even though, until now, no serious threat has been made to enforce the laws.

Most of the posts and comments in this bog relate to apartments in Paris which have been rented from agencies. These agencies usually take a lease on a property and then re-let it for short-term rental, from a few days to a month or more. This, in nearly every case advertised, is illegal.

I have heard that some agencies are getting together, largely prompted by this blog, to form an action group to lobby for the laws to be challenged and changed. I am concerned that many of these agencies have not fully informed the owners of the properties that they, the owners, are facing fines and possibly imprisonment. Renters are also at risk, insurances and deposits through cancellation of a properties availability may be invalid.

However, most rentals are still direct from a private owner. Many people have invested in property in Paris intending to rent them out short-term to overseas visitors and getting a much greater return on their investment than a normal one year minimum lease.

I am getting many stories of visitors coming to Paris who have had bad experiences from these sort o rentals – I will be publishing some of these as examples, but the main issue is that it this sort of abuse that the Mairie and prefecture of Paris wishes to stop. There are thousands of private individual owners renting their own apartments illegally and the sheer numbers are too much for the departments to prosecute them all, at present, but the plan is to shortly make some high profile prosecutions and ‘encourage’ other owners to obey the laws.

This will have an impact on the agencies who advertise larger numbers of apartments to rent – their protests are not likely to change long established laws and this mushrooming industry generated by the Internet is likely to fade away.

It will still be possible to ‘live like a Parisian’ – there will be correctly licensed and registered apartments, but the free for all which has caused the City of Paris to cry ‘enough’ will soon be over.

I am receiving non-stop emails from clients, owners, those involved in Banking, Renting property, Servicing property and individual owners from outwith our company. It does not seem that after we met the Chef du Bureau at the Department of Logement that the rules are clear. The Mairie de Paris and the Prefecture de Paris feel very strongly that this activity of short term seasonal rental has artificially forced up the price of lodging for ordinary Parisians, they (and I myself) have no wish for Paris to be turned (further) into a Ville Museé…they cited Venice in Italy as an example.

They mean to crackdown on the rental activity simply by making some high profile prosecutions.

Truly, this will be hard, they have a job on their hands to gather evidence and push this through but they have a larger team than originally thought and two year’s worth of dossiers and evidence collected on various owners and rental agencies.

They are efficiently carrying out orders and like it or not, those of us in Paris with any involvement with furnished rental business have to act to scrutinise our activities and start to comply with this newly applied legislation.

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In this blog I am posting about the threatened prosecutions of owners, by the City of Paris, who are renting private apartments in Paris for short term rentals, especially vacation rentals.

Short term is defined for a period of less than a year, or nine months if it is to a student. Any period less than that is illegal and subject to heavy penalties.

These laws are for properties designated as residential. A commercial property, that is one rated and designated in the planning as commercial is not the subject of these notes. The designation ‘commercial’ made by the local Mairie, it is nothing to do with the ownership of the property or the activity, business or use of the property. Simply registering an office or a business at an address does not make that address a ‘commercial’ address.

The area concerned is central Paris, although the laws do apply to any city in France with a population greater than 100,000 people.

There are only a few posts and some responses here in this blog and I advise anyone interested to read though these and check the links I give.

I have several reasons for blogging about this subject. I do have a genuine concern that many people are innocently taking unreasonable risks through having ignorance of this matter and are also being ‘duped’ by some unscrupulous agents and advisers who are fully aware of the intentions of the governing bodies. – I am looking for valid opportunities to create a service to assist owners and renters. – I have a personal interest in that my daughter has had difficulty finding a place to live in Paris center, which has revealed to me the scale of the problem.

I’m being asked what my conclusions are from two extensive interviews I have now had recently with the heads of the departments and offices concerned with enforcing these laws and who are currently in the process of applying to the Judiciary for prosecutions.

So far I have just blogged about the facts which I have been given. I publish here, an email exchange I have had today where I say more about what I personally understand from studying this matter.

==

On Sun, Nov 29, 2009 at 9:47 AM, wrote:

I’d like to read the rules you describe, but I can’t find them, either on the Paris site which you mention or on the site of Direction de Logement et Urbanisme. Can you give me the specific reference? Are these guys really going to go after the 38,000 people who rent tourist apartments in Paris? That seems to me a decision that could have serious economic consequences for the city. Moreover, it would put tremendous pressure on already-scarce hotel space. This seems to me like a definitely bad idea, from a “French” –i.e “Paris” point of view. Where will these hundreds of thousands of tourists go? They are, after all, an important source of income for the local economy: will we end up with no tourist apartments in Paris, when every other city in the world offers tourist apartments? This is crazy.I can’t believe the lobbies for the restaurants, etc, would accept this decision with no objection.

But I’d like to read the original (French) dox.. (BTW, I note that the “priorities” of the Bureau de Logement make no mention of any kind of crack-down on these so-called “illegal” apartments. I wonder if this isn’t the hobby-horse of a few people in an office in the Hotel de Ville. I really find it hard to believe that this is serious public policy.

But of course many serious public policies are definitively nuts, so why not adopt this one?

Thanks, Michael Padnos

==

Hello Michael

There are links on my blog at http://2337.com to the actual law relating to Article L651 – recent modifications include the increased penalties applied.

I have no doubt that the department is very serious about taking some high profile action very soon. They have shown me files last week, which they have prepared to present to a Judge with the intention to prosecute..

In my opinion, from conversations with the bureau concerned, I doubt if there is any current plan to prosecute the thousands of individual private residential owners who rent out their own apartments for a few weeks each year. These private owners probably account for most of the 38,000 apartments mentioned. However, I am certain that in the very near future there will some legal action taken against a few people who let their properties through a third party agency. These actions will result in some strong publicity and make it crystal clear that anyone renting an apartment that is not classified as a commercial property for period of less than one year (nine months for a student let) is breaking the law and risks heavy fines or imprisonment.

It will then be up to each owner to decide whether to risk flouting the law and getting caught. I guess much like deciding whether to speed on a road or jump a red light, if you get caught, you will pay.

Another point to consider is that in addition to breaking the zoning laws, an owner is likely to be breaking the law relating to the agreement with the co-propriete of their apartment building and other local laws by renting short term. These illegal actions will also invalidate any insurances, so an owner will be taking a big risk. Most cases concerning property or taxes (this illegal rental activity concerns both) brought to court in France are through the denouncing by neighbours, so the neighbours of an apartment owner renting to holidaymakers will soon be visible on the new enforcement agencies radar.

The actual difference to the vacation accommodation in central Paris, even if all the apartments were suddenly taken off the market, would be well under two percent of the available tourism accommodation. As this is not going to happen overnight, I do not see how this would make any difference to tourism revenue in Paris as there will be other accommodation services to fill this demand, not just hotels. The are many correctly registered tourist apartments in Paris, new aparthotels are being opened and the hotel industry is being overhauled (recently similar laws cracked down on the hotel industry and cleaned that up).

There will always be apartments in Paris for vacationers to rent short term, simply these will be correctly registered and insured, not illegal and exploited as most are at present.

The bureau is quite happy to announce their imminent ‘crack down’ to the press and have asked me to invite any journalists for an interview with their directors. This is serious public policy approved not only by the Mayor personally, but also now by the prefecture.

My reasons for publishing as much as I can about this is to counter the crooked practice of some agents and individuals, who, despite knowing about these laws for over a year, are continuing to tell clients looking to buy property in Paris that they can the get a good return on their investment by renting out short term to vacationers. By making this false statement they themselves are taking a risk and an ‘investor’ could sue them for misrepresentation.

Other reasons I have are to investigate alternative services and examine them to see if there is a business opportunity, I would also like to see a lot more of these short term lets come into the local housing market.

An important part of the charm of Paris is that central Paris is still a living and breathing city where real people live, not a sterile business center which the city of London (and many other major capitals) has become. Take away this element of local shops, markets, cafes and the ‘life’ of Paris and you will destroy what makes Paris so special and thus destroy a reason millions of tourists visit. So it is not a blow against tourism, but the reverse (this was told to me by the head of the bureau last week – and I tend to agree with him)

There are options, a change of use can be applied for, although this would be very expensive to get and it would not be granted if any one neighbour objected (or if the local Mayor did not agree). It would be expensive as an area of commercial property (in most cases double the area) in a similar situation would have to surrender their commercial rights and revert to residential.

I do not think this policy is ‘nuts’. If your business is the rental of residential properties for tourism in Paris and you sublet or arrange rentals for private owners, then your business depends on those owners continuing to break the laws. If you know about this and do not advise them of the risks, then they could sue you. If you are an owner/landlord you are risking heavy penalties if you continue to rent accommodation illegally.

This initiative of the local governing authorities in Paris will ‘clean up’ some very unsavory operations of offshore companies who have evaded taxes, deceived their clients and are putting property owners at risk. It is hoped that it will also stop some of the parasitic activities of ‘agents’ in Paris who blatantly tell clients and investors untruths about the rental market for residential lettings.

Tony

This post should be read in context with the two other posts and comments following them.

To get a clear picture on what is happening and what may be planned to happen in Paris relating to the enforcement of the laws to stop private property be rented to short term (less than one year) tenants in central Paris. I asked for another meeting with the management of the offices dealing with this at city hall in Paris yesterday (November 26th).

Last year I worked with a company who rented luxury apartments in central Paris and I have been developing rental websites for France for over 12 years, so I know a little about this business. At present I am not involved, although I can see some opportunities which will evolve from these initiatives by the government.

With me at this meeting was Susie Hollands who operates a services and property company in Paris. I have known Susie for over a year and she is one of two people in France in the real-estate business who I find to be honest and reliable (very rare for realtors) – the other is a gentleman who has a good agency in the south of France near Cannes.

We were left in no doubt that this formidable (and now substantial) team intent to first actively prosecute some highly visible property owners. The publicity is likely to cause a reaction where private landlords will have to think very seriously about renting their properties, either directly or though an agency, or risk fines or possible imprisonment.

In fact there are three laws being flouted if a residential property in central Paris is rented for less than 12 months (nine months in the case of a student) – I have given details of the ones relating to urbanism in the links on this page, I will put others on as soon as I can.

A lot of this information is accessible on the Paris website http://paris.fr – you have to dig deep on the site to reach this page and this particular information is only available in French – the team at City Hall agreed yesterday to try to make it available in English and to post more information, meanwhile I will try to add what I can to this blog.