Holidays lettings in France - Tips and tricks by Valérie Augros Holiday lettings in France: tips and tricks Valérie Augros International Journal of Tourism, Travel and Hospitality Law PRE-PRINT

Holiday lettings in France: tips and tricks Travellers are offered with a wide range of tourist accommodations such as hotels, clubs, beds and breakfasts, camp sites, etc. And among them, can be found holiday lettings. Holiday lettings represent in France - and now in most attractive countries around the world - one of the most favourite types of tourist accommodations. With the development of Internet Platforms such as Airbnb, holiday lettings were clearly facilitated and then became very popular. This type of accommodation was even more successful following the Covid-19 pandemic, when more traditional tourist accommodations such as hotels were neglected. With holiday lettings, the travellers would be enthusiastic in experiencing local authenticity while lessors offering tourist accommodations to let would be able to gain greater incomes… At such point that European capitals, including Paris, observed significant and negative changes in terms of development of congested touristic areas as well as of housing shortage for local inhabitants. This phenomenon now even expanded to smaller cities and holidays lettings activities are seriously questioned in touristic territories with regards to difficulties for local inhabitants to find a home residence at a fair price but also to live in such areas where growing nuisance and incivilities from some careless tourists are observed. In France, it was therefore decided to regulate the development of holiday lettings activities through various legal mechanisms and to remedy the inconvenience resulting from such activities. A more and more restrictive approach in recent legislations was then adopted to control housing shortage (I). However, older existing legislations that were disregarded, reappeared in an unexpected way to limit, when possible, troubles resulting from excessive holiday lettings (II). I. The regulation of holiday lettings through innovative specific legislations to remedy housing shortage Under French law, holiday rental accommodations are traditionally defined under Article D.324-1 of the tourism code as houses or apartments offered for rent to persons who are not domiciled there, but are who are rather considered as passing people for a short stay either on a daily, weekly or monthly basis. Initially, a person who wished to let a furnished tourist accommodation only had to address a simple declaration to the municipality. Nonetheless, given the flourishing development of Internet platforms such as Airbnb and their unexpected effect on housing shortage for local

inhabitants, it was necessary to set strict guidelines for short-term holiday lettings. Various legal instruments were adopted to this end.1 Therefore, the lessor (whether the lessor is the owner or simply a tenant of the accommodation offered under holiday letting – see hereinafter on the interest of this distinction) will have to comply with two main conditions, as follows: 1. The lessor must have made a prior declaration to the municipality, unless the accommodation constitutes his main residence – in which case holiday rentals would generally be permitted only up to 120 days per year pursuant to article L.324-1-1 of the tourism code.2 However, in Paris and other French cities with more than 200,000 inhabitants, the prior declaration has been completed by a “letting permit”. This consists in an express authorisation to be obtained from the mayor to offer lawfully a specific accommodation for holiday rentals, which does not constitute the main residence of the lessor and will be rented more than 120 days per year. 2. When the holiday lettings constitute a regular activity, a formal request for a « change of use » of residential premises has to be effected. This is a very formal and strenuous procedure subject to local urbanism rules, whereby the municipality can decide under certain conditions to authorise, or not, such an activity in particular premises. In such a case, the properties will be deemed to be premises of commercial nature exclusively dedicated to holiday lettings and not anymore as residential premises that could be offered under long-term rental for housing for instance.3 This results from construction rules: in France a distinction is made between properties which are used as housing and properties which can be used for business, industrial purposes, etc.4 The legal scheme for holiday lettings is regularly amended and completed and now becomes quite complex for lessors. Failure to comply with the above-mentioned legal framework can give rise to a significant fine of the lessor pursuant to Article L.324-1-1 of the tourism code, for instance a fine of up to euros 5,000 in case of failure to make the requested declaration, up to 1 Law n°2016-1321 of 7 Oct. 2016 said « Loi pour une République Numérique » ; Decree n°2017-678 of 28 April 2017 ; law n° 2018-1021 of 23 Nov. 2018 portant évolution du logement, de l'aménagement et du numérique said « Loi ELAN ». 2 However, in a recent case, a French court decided that this limit of 120 days per year could be extended; in that case it appeared that the lessor was travelling more than 8 months per year for professional reasons, and the court decided to disapply the 120 days period. It referred to the exception set out in article 2 of the of the Law n°89-462 of 6 July 1989 which defined the “main residence” by reference to the duration of the stay. Paris, 29 Sept. 2022, n°21/20664. 3 Article L.631-7 French Construction and Housing Code. 4 NB: under French law holiday lettings are considered as a business activity and not as a civil activity (as would be long-term renting), whether this is carried out on a professional or nonprofessional basis.

euros 10,000, for failure to comply with the 120 days duration if the accommodation let is the main residence; and up to euros 50,000 for failure to proceed with the change of use pursuant to article L.651-2 of the French Construction and Housing Code. Indeed, French municipalities that are now directly benefiting from this legal framework, and in particular the city of Paris, are keen to pursue indelicate lessors who are offering holiday lettings more than 120 days a year without any letting permit and/or without change of use of premises subject to holiday lettings. Such a legal framework was in addition approved by the European Court of Justice.5: This case concerned two lessors who offered studio apartments in Paris, for rent for short periods to a transient clientele via a website, repeatedly and without prior authorisation. They were prosecuted for breach of Article L.631-7 of the French Construction and Housing Code. The Cour de Cassation (highest court in France) on appeal formed by the lessors, decided to refer this matter to the European court of justice for a preliminary ruling. Indeed, the lessors who were held to pay, each, a fine of euros 15,000 considered that these provisions did not comply with European principles, and in particular with the provisions of the Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market. In its decision, the European Court of Justice considered in particular that the French legislation relating to prior authorisation and change of use applicable to holiday lettings, was not only justified by an overriding reason relating to the public interest consisting in combating the rental housing shortage but was also proportionate to the objective pursued. Referring to this European decision, French courts are now applying the above-mentioned scheme with severity against lessors who are unlawfully letting their accommodation on a short-term basis to tourists via Internet platforms.6 Further obligations were imposed in parallel to Internet platforms in addition to the lessors’ ones. Indeed, Internet platforms that are dedicated to advertise offers for holiday lettings must comply with various obligations. They have: 1. To inform clearly the lessor who wishes to advertise his accommodation for short-term lettings on the platform website, of his own obligations in application of articles L.324-1-1 of the tourism code and L.631-7 onwards of French Construction and Housing Code; 2. To obtain a sworn statement from the lessor that he fulfils with such rules and that he has made the requested declaration or authorisation to rent; 5 ECJ, 22 September 2020, C-724/18 & C-727/18. 6 E.g. Cass. Civ. 3, 18 Feb. 2021, n°17-26156. CA Paris, Pôle 1 Ch.2, 7 July 2022, n°21/20085: in this case, the lessor was for instance held liable to pay two fines, one of euros 40,000 for absence of change of use and one of €5,000 for non-declaration to the city of Paris.

3. To publish the rental advertisement together with the declaration (authorisation) number of the lessor obtained from the municipality; 4. To ensure that the accommodation is not rented for more than 120 days a year if this constitutes the main residence of the lessor. In addition, Internet platforms are also subject to control by municipalities that they comply with the above obligations. Upon a simple request from the mayor, they have to communicate information as to the number of days of rentals for each tourist accommodation they advertise on line. The purpose of this is to verify the real use made of properties in the concerned city – in other words, to find out whether the accommodations are still available to inhabitants as residential homes or offered to tourist lettings. Another purpose is to ensure each municipality receives payment of the tourist tax, where applicable, given that the tourism code introduced specific obligations for platforms in this respect. Failure for Internet platforms to comply with such obligations can also give rise to significant fines: - Up to euros 12,500 for failure to inform the lessor correctly - Up to euros 50,000 for failure to respond to the requests made by the mayor, - But also in some cases to damages (see hereinafter). For example, the city of Paris recently decided to issue proceedings against an Internet platform that failed to mentions in 1,010 offers for holiday lettings advertised on its website, the respective declaration numbers of the lessors. The court ruled that failure to advertise the declaration number constituted a breach and held the platform to pay a fine of euros 8,000 per incomplete advertisement, making a total fine of euros 8,080,000 to the benefit of the City of Paris!7 French courts are nowadays applying the recent above-mentioned provisions destined to control holiday lettings, with a particular severity against both lessors of holiday lettings and Internet platforms that are advertising offers. They further decided to apply other older dispositions, to limit the inconvenience originating from expanding holiday lettings. II. The reference to older existing legislations to remedy inconvenience resulting from holiday lettings 7 TJ Paris, 1 July 2021, n°19/54288.

The fast-growing interest for holiday lettings led to refer to other legal rules to contain such a phenomenon. This was first found in the tenancy legislation as well as the old theory of “accession”8 in property rights. Holiday lessors may hence encounter unexpected trouble from… the owner of the premises. This will be the case (only) when the holiday lessor is at the same time a tenant. In other words, the lessor is not the owner (landlord) of the premises to be let, but rather a tenant who is sub-letting the accommodation for short-term holiday rentals. In such a case, the holiday letting will be considered as a sub-let. However, under French law, an authorisation to sub-let must be expressly obtained from the landlord (either in a clause provided by the main tenancy agreement or later in a formal authorisation of the landlord). Indeed, in the absence of such an authorisation to sub-let, French courts have concluded that the landlord would be entitled not only to request the eviction of the tenant (the main tenancy agreement would thus be terminated) but also to claim the sub-rents obtained from holiday lettings on top to the contractual rents, on the basis of the “accession theory”...9 According to this theory, the landlord (owner of the property) is entitled to the “fruits” or incomes generated by the exploitation of the property: all rents - including sub-rents - shall be paid to the owner after deduction of possible costs (for instance commissions, etc.)! This severe and quite dissuasive solution is now constantly applied in situations where a tenant sub-let his accommodation without his landlord’s consent, for holiday lettings. He will face eviction and will be deprived from all the incomes produced by the unlawful sub-lets. Internet platforms are often joined into proceedings against the tenant and may thus be litigated for their own negligence. For instance, in a particular case, an Internet platform was held liable to pay damages (moral damages at euros 3,000 and material damages at euros 1,664) as well as “fruits” (i.e. commissions received by the platforms in the total sum of euros 1,869) to the owner of the accommodation unlawfully sub-let as holiday letting by the tenant. It was inter alia observed by the court that the Internet platform failed to inform correctly the lessor of his own obligations. Given its negligence, the platform provided the lessor with the means to free himself from his contractual obligations towards the landlord.10 8 This old theory was developed in articles 547 and 548 of the civil code and experienced a new interest by lawyers in their dispute against indelicate lessors. 9 Cass. Civ. 3, 12 Sept. 2019, n°18-20727. 10 TI Paris, 6 Feb. 2018, n°11-17000190.

Holidays lettings are sometimes leading to occurrence of neighbours’ nuisances or disturbance. A solution to avoid such nuisance was then found in condominium (homeowners association) rules and rules relating to neighbours’ disturbance. Indeed, it appears that condominium rules often provide for a quiet use of the premises installed in buildings. In addition, rules relating to neighbours’ disturbance enable the disturbed neighbours to bring litigation against the indelicate neighbour for damages and/or for preventing him to cause further disturbance. Recently, French courts rendered severe decisions against holiday lessors, when repeated nuisances were observed by the homeowners’ association. In summary proceedings, a court decided for instance to grant to the homeowners’ association a provision of euros 2,000 on damages and to prohibit further holiday lettings.11 In another case, two companies that were owning several apartments in a building, and offered them as holiday lettings through various Internet platforms, were sued by the homeowners’ association. Nevertheless, given significant disturbance for other residents (noise at night, insult to residents, smoking or taking drugs in the stairs, etc.) the two companies were compelled to stop holiday lettings to tourists for only 16 months, as an unlimited prohibition to rent was found excessive by the court.12 Upon appeal, the court infirmed the prohibition to rent decision but rather ordered the two companies to take appropriate measures to stop neighbours’ disturbance against a daily fine of euros 1,500 for any reported infringement.13 Attractiveness of holiday lettings should now be measured with regards to recent court decisions applying strictly various applicable legislations. All concerned parties should act with prudence when intending to let or to offer for let tourist accommodation. Valérie Augros 11 CA Montpellier, 29 Oct. 2020, n°19/04215. 12 TJ Paris, ref., 12 May 2021, n°20/56124. 13 CA Paris, 11 Feb. 2022, n°21/10676.