Renting your furnished apartment What every property owner needs to know

Words: Géraldine de Fouquières & Alice Duriez Photos: Alice Duriez
Essentials

Since 1st August 2015, renting a primary place of residence in France falls under the Alur law. We take you through the changes that this law brings and what you need to know as a property owner.

1/ Am I affected by this law?

The Alur law is applicable across France but rent control only concerns certain large urban areas such as Paris.
(Parisian suburbs Seine Saint Denis, Hauts-de-Seine and Val-de-Marne will be included in late 2018.)
The Alur law applies to furnished and unfurnished apartments for rent.
– Unfurnished lease = lease for main place of residence for a period of 3 years renewable automatically.
– Furnished lease = lease for main place of residence equipped and furnished for a period of 12 months automatically renewable or 9 months for a student lease.

Furnished unfurnished lease apartment Paris law

2/ What furniture must be provided?

Your furnished rental MUST INCLUDE the following at minimum:
– bedding including duvet or blanket;
– curtains, shutters or blinds allowing light to be shut out in rooms to be used as bedrooms;
– stove;
– oven or microwave oven;
– refrigerator and freezer or, at minimum a refrigerator with a freezer compartment that can be set to -6°C;
– necessary tableware and kitchen utensils for meals;
– table and chairs;
– shelving;
– lighting;
– housekeeping material suited to the property features.

3/ How should I decide on the rent?

Rent control
Furnished and unfurnished apartments are concerned by rent control, which is set by decree from the Paris prefecture.
To find out the maximum rent allowed excluding charges, have a look at the official website for the French government department of housing.
Rent supplement
To add a rent supplement, the apartment must provide location advantages or luxury features in relation to a similar apartment in the same geographic sector.
Note: the rent supplement may be contested by the tenant only within three months following signature of the lease.

4/ Can I raise the rent in the event of lease renewal or a change of tenant?

If the lease is renewed, rent increase can be applied in accordance with benchmark rents Indice de Référence des Loyers (IRL) and takes effect on the anniversary date of the lease.
To find out what increase to apply, use the following formula:
(Current rent [including fixed charges] x new IRL effective on the date of increase) / IRL on the date the lease was signed or the previous increase date = indexed rent
If you are late in informing your tenants of a rent increase (i.e. after the lease renewal date), it will be applied to rents payable after that date.
Note: you may only raise rent based on the rent paid the previous year

5/ What further guarantees can I require my tenant to provide?

Only in the following situations may certain further documents be required:
– for students or trainees: guarantor + unpaid rent insurance or guarantor + full rent (per trimester or semester for example) paid upfront
– other profiles: guarantor + payment upfront (trimester, semester, etc.)
You may not request a bank guarantee for a tenant renting as a main residence as it is illegal to force the tenant to hold funds in an escrow account.
Important: if the rent is paid up front, you cannot ask for a security deposit.
Furthermore, the tenant may request at any time to switch over to monthly payments. If this is the case, you may not oppose the tenant but they must settle the corresponding security deposit.

Paris apartment tenant owner

6/ What sum can I request from my tenant as a security deposit and under what conditions is it returned?

Payment before the tenant moves in
– Unfurnished apartment: 1 month’s rent excl. charges
– Furnished apartment: 2 month’s rent excl. charges
Return of deposit when tenant moves out following outgoing inventory and return of keys
– If the outgoing inventory conforms to the ingoing, you have one month to return the security deposit.
– If there are discrepancies in the outgoing inventory, you have two months to return the security deposit.
Important: if the security deposit is not returned to the tenant within the abovementioned timeframes, the sum owed to the tenant will be added to 10% of the monthly rent for each additional month.
This mark-up is not owed if the reason for the delay is because the tenant failed to provide their new address.

7/ When should you give notice?

Tenant
For unfurnished and furnished apartments, the tenant has one month’s notice to give upon departure, at any time during the rental period.
Owner
When the lease expires or is up for renewal you can provide the tenant with notice that they must leave (if there is a justified reason, for example if the owner or a close relation wishes to occupy the apartment, the sale of the apartment or another real and serious issue).
– Unfurnished apartment: 6 months’ notice
– Furnished apartment: 3 months’ notice
Attention : the owner must send notice by registered letter with proof of delivery or served by a bailiff or delivered personally with receipt of delivery.

8/ Who is liable for agency fees?

Tenant
Fees are capped at €12 per square meter.
Owner
Fees are freely fixed by the agencies (but cannot be less than the portion paid by the tenant).

9/ Am I liable for fees charged by a third party for inventory services?

Tenant
Fees are capped at €3/m².
Owner
The owner pays for the remainder of the fees.
Example: a bailiff charges €400 incl. VAT for a 30m² apartment, the tenant pays €90 (30m² x €3) and the owner pays €310 (€400 – €90).
N.B. : outgoing inventories are payable by the owner alone.

inventory incoming outgoing rent apartment Paris

10/ Am I entitled to inventory directly with my tenant?

Yes, but you must conduct a joint inventory (where both parties or a representative for each party are present). This joint inventory must be written and signed upon arrival – if not, you may not conduct an outgoing inventory. Click here to download a sample inventory.
Note: should a disagreement arise during the inventory (incoming or outgoing), do not enter into conflict. Suspend the meeting and organise a new one with a bailiff present. The fees will be split evenly between tenant and owner.

11/ What about taxes? How do I declare the income provided by the apartment rental?

For non-professional furnished apartment lessors (Loueur Meublé non Professionnel / LMNP)
Rent income is subject to income tax under the category trade and commercial profit (bénéfices industriels et commerciaux) and not property income (revenus fonciers)
– If rent income is less than or equal to €33,100, it is declared under the “micro-bic” regime with a standard abatement of 50% instead of 30% in the “microfoncier” regime for rent income under €15,000. However, no charges or expenses may be deducted from this sum.
– If rent income is higher than €33,100, this falls under the “régime réel” which means all charges may be deducted, which abates the cost of property and furniture through rental income.
For Professional furnished apartment lessors (Loueur Meublé Professionnel / LMP)
Under this category, at least €23,000 must be declared in annual rental income. All charges and depreciation may be deducted from total income.

IMPORTANT INFORMATION

Note that a tenant that has signed a rental agreement covered by the civil code (secondary or seasonal residence) and who can prove that he/she did not have another main residence when the lease was signed may at any time refer the case to a judge and request that the lease be reassessed as a main residence.
This entails a risk that rent will be lowered if it does not respect rent control regulation, as well as paying legal fees and paying damages to the tenant.
Even if a secondary residence lease has expired and the tenant has left the apartment, they are still entitled to have the lease reassessed as a main residence.

CONCLUSION

It is less risky for an owner to sign a lease for a main residence with a reasonable rent supplement, if necessary.

rental furnished apartment supplment lease residence