Renting out my apartment?

You first need to determine what kind of rental customer you seek. Roughly speaking, you can rent to permanent residents, often local French people, to business people with a temporary project, often international, and to the tourist market, with multiple short stays.

 

You need to decide whether you want to rely on agents or whether you can do it all yourself, or via friends you may have in Paris. For all types of rental, Paris has good agents to service you. We can bring you into contact with trusted parties. They find you an occupant and can take care of the whole process, up to managing small repairs and maintenance for you.

 

Deciding upfront what the purpose of you apartment will be, may impact the kind of apartment you buy. For rental to business people for instance, some areas are better. The same applies for tourist rental.

 

The French government has introduced new rental legislation for landlords and tenants (called "ALUR").

 

France, and the city of Paris, look at the rental market very critically. New regulations as per August 1, 2015 have entered into force regulating the rental levels in Paris for both furnished and unfurnished apartments and houses. 

 

This legislation may impact owners in Paris who rent out their apartments.
 
One of the main purposes of the new laws is to keep or make housing in Paris affordable for all layers of French society, and prevent that the city will become a reserve for the rich and the wealthy only. Pieces of this legislation will progressively enter into force over 2014 and 2015. It is impossible in the context of this update to summarise the 174 pages law change, so we mention the most important elements hereinafter for owners:
 
  • For normal rentals of unfurnished apartments ("location vide") the law stipulates that the Prefect (sort of "governor") for Paris may stipulate a compulsory meridian rental level to be applied for new rental contracts or renewals of the rent (the latter normally after 3, 6, or 9 years of rent). The meridian will depend on the nature of the apartment, location and its comfort. The private owner and tenant may mutually deviate from this meridian rental level at signature or renewal of the contract by an increase of 20% or a decrease of 30% from the meridian. The meridian rental levels for all areas in Paris will be published shortly.
  • During each rental period of 3 years, the rents may be increased by not more than a certain inflation index, unless the owner executes - in agreement with the tenant - specific works to improve an apartment.
  • For apartments of good quality, e.g. in cases of specific comfort (e.g. eco-friendly isolation, terrace), location or - simply - of good quality the rental price may be increased by an additional amount. 
  • Special procedures apply to establish the rental levels in case of disagreement. 
  • The owner will have to provide each new tenant with up to date technical diagnostics (on the state of the electricity, asbestos, etc) of the apartment.
  • If the owner rents out his apartment in a furnished way ("location meublée") to a tenant who will use the apartment as his principal residence, the minimum rental period will be 1 year and the same rental price adjustment rules will apply as for normal rentals of unfurnished apartments. The rental price level may be increased by a pre-determined amount allowing for amortisation of the furniture.
  • If the owner wants to rent out his secondary apartment for touristic purposes (short term stays by subsequent tenants, where the tenant will not use the apartment as his principal residence), he will have to submit a request for a permit from the local town hall and will have to inform his tenant of the apartment building "house" rules. Arrondissements in Paris may take a general exception to this obligation to ask for a permit.
  • Apartment owners who occupy their own apartments for at least 8 months as principal residence for own use are allowed to freely rent out their apartments in the remaining 4 months for touristic short term stay purposes without having to ask for the permit.

 

The interpretation of terms like "principal residence" and "occupy for own use" are still fluid and subject to further interpretation and regulation. We will keep you posted on further developments on this new piece of legislation. In the long run an uncertain factor is whether - in the event that during the next elections of the Presidency of France (in about 4 years time) the current president Francois Hollande would lose - new French governments would (not) change this ALUR legislation. So far, in Parliament the largest opposition party UMP (formerly led by ex-president Nicolas Sarkozy) has been vigorously against most of the new provisions.

 

Overall conclusion
As an overall conclusion, we can say that the "ALUR" legislation will not heavily impact rental properties of good quality in Paris. For apartments that are kept for own use, the impact will be even less. It is unclear whether the new rules will have an impact on property prices, as these are the outcome of a much larger set of influences, including increasing foreign and domestic demand. Investing in property remains a long term affaire......!

Under News you find a link to an article setting out the most relevant regulations.

 

How can ParisScarabee Househunters help?

We make sure your apartment gets rented out in a reliable and financially favorable way through a local rental agent. On your behalf we manage all steps in the rental proces and keep in close contact with you at all stages. We charge our remuneration on an hourly rate basis.

 

What are the costs and benefits of leasing out your apartment on a permanent basis?

The rental income depends on the location, quality and size of your apartment. For permanent rent, it averages some 35 Euros per m2. The tenant pays the taxe d’habitation, his own utilities, and up to 2/3rd of the monthly building association charges. You, as the owner, pay the rest, plus any unforeseen repairs, and the fee of an agent if you use one. The rental income is taxed in France.

 

What are the costs and benefits of leasing out your apartment on a seasonal holiday basis?

Rental income per weekend, week or month depends on the location, quality and size of your apartment, like for permanent rentals. Normally in this case the apartment would be leased out with a fully equipped kitchen, furniture and so on. The rental yield is normally higher than for permanent rentals, but the maintenance costs will be higher too.

 

You could totally outsource the management of the rentals and maintenance of your apartment to specialised holiday rental agencies. We can introduce them to you. Their remuneration can vary: sometimes the tenant pays a commision (often 20%) to the agent, whereas the cost of management of maintenance, plus the cost of repairs, is paid by you. In this case, the agency normally takes a fee equal to 15% of the rental income for their maintenance management. Overall, if all work (management of rental and maintenance) is outsourced the agent may wish to charge you up to 35% of all rental income.

 

The taxes on rental income 

French government levies foreigners (non-French tax residents) 35,5% taxes on the net rental income, made up of 20% income tax and 15,5% social tax. You can deduct some expenses before taxation, like interest, depreciation, maintenance, and monthly building association charges. However, the European Court of Justice case has ruled on February 26, 2015 on the matter whether this social tax can be levied by France from EU residents (not residing in France) on revenues from French property. The Court has ruled favourably for EU residents that the social tax is contrary to EU law and should be annulled. 


The French income tax rate on rental income therefore should not be higher than 20% for EU residents. A EU resident who could benefit from a favourable ruling should timely protect his rights for a reimbursement of social tax already paid or request for delay of payment. 


The French tax administration has meanwhile issued a guideline as to the procedure these EU resident tax payers have to follow to submit their refund claims for the years 2012-2015. Non EU residents should seek professional advice as to the tax rate applicable in their case given the many recent court cases. 


The French government has introduced proposals to increase the annual taxes due by non French tax residents from the tax years 2016 onwards to overcome the budget expense caused by the annulment of the social levies. 

 

Read more in French on the French tax authorities website. 

 

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