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French Property News, February 2007
Purchasing a buy-to-let property or renting out an empty
property in France may be a tempting proposition – the running
costs can be covered by letting which can also provide a stream of
income. The rules of the French Lease Act, 6 July 1989, which
regulates leases of unfurnished properties, are statutory, but the
law does not apply to seasonal, commercial or furnished
lettings. These rules should be carefully considered before
letting a property – a tenant who does not pay his rent or who is
difficult might seriously affect the use or the value of the
property.
the lease
The lease must be in writing and should
indicate all the names of the parties involved, the lease period,
date for receipt of rent (date from which the tenant takes over the
property), deposit (which should not be more than two months' rent)
and terms and conditions of payment (the amount of the rent and on
what terms it can be increased), a description of the premises and
its proposed use (ie dwelling, dwelling and professional use).
The normal period of a lease is three years if
the landlord is an individual or six years if the landlord is a
company. However, it is possible to have a lease agreement
for more than three years and up to a maximum of 99 years. In
exceptional circumstance, such as if a professional or family
matter affects the conditions, the duration can be reduced to one
year which would allow an early repossession.
If there is a clause in the contract the rent
can be reviewed every year. Any increase cannot be more than
the rental index, which is published by the French
authorities. Should any work be carried out on the premises,
the landlord may decide to increase the rent following the
completion of the work. Should he want to increase the rent
by more than that stated in the previous contract, the landlord can
ask the tenant to sign a new lease. The new rent can be
increased to bring it in line with the rental price of a similar
dwelling in the same town, but the landlord must prove the amount
is in accordance with the local market.
If the tenant fails to pay the rent, the
landlord may have a number of contractual solutions available to
him. He can ask for a third party to act as guarantor should
the tenant not be able to pay the rent. Additionally, he can
insert a clause stating that the lease is automatically void if the
tenant fails to pay the rent or arrears within the timescales
specified by a judge, the lease can not be terminated; if the
tenant fails to pay, the lease can be terminated, unless the judge
grants further time.
During the lease the landlord cannot terminate
the contract unless:
- he wants to sell the property empty, in which case he must give
the tenant first refusal to buy it. If the tenant can't or
doesn't want to exercise his right to buy the property within the
two months' notice period, the landlord can then sell it to another
purchaser. The tenant's pre-emption right only applies to a
sale or exchange, and the landlord is free to dispose of his
property as a gift
- the landlord, his spouse, or his ascendant/descendants, his/her
French civil partnership's partner, decides to live in the
property, in which case the dwelling must be used as a primary
residence
- the landlord has 'legitimate and serious grounds' not to
continue the lease with the tenant (ie if the tenant does not
comply with his obligations as defined in the lease); this includes
the requirement to carry out major renovation work which can't take
place while the tenant remains in the premises and the non-payment
of rent by the tenant
To terminate the lease the landlord must
notify the tenant at least six months before it ends and it is
preferable to give notice through a bailiff. If the tenant is
over 70 years old, and his yearly income is less than 1.5 times the
French minimum wage (SMIC), the landlord can't terminate the lease
until accommodation complying to the tenant's needs is found in the
same area. This does not apply if the landlord himself is
more than 70 years old or if his income is less than 150% of the
minimum salary.
It is important to understand that the law
protects the tenant more than might be expected. Evicting a
sitting tenant can take a few years as a court order will be needed
– in a recent case it took 16 years to evict a tenant! The
tenant, however, can terminate the lease at any time during the
agreement. Generally he must inform the landlord by recorded
delivery letter three months before the end of the lease.
However, there are exceptions when the tenant may leave within a
month. Tenants are well protected in France. The
current requirements imposed by landlords – guarantors, deposit,
bank's guarantee – underline the dysfunction of a system where both
interests are not equally preserved.
the property
Gas and electricity must be safe and in a good
state of repair as well as being well ventilated. The
property must be well lit with heating and water. If the
property is in a condominium, the landlord must provide the tenant
with the rules of the building. The tenant must insure the
property (assurance locative) and must prove he has done so.
The landlord must also insure the dwelling (assurance
proprietaire non occupant).
An inventory (etat des lieux) is
compulsory. It can be performed by both parties or by a
bailiff and must be carried out before the start and at the end of
the agreement. Two copies of the inspection results must be
provided to both parties and be signed by them. The report
must detail the state of the property and provide a list of
fixtures and fittings which are rented as part of the
agreement. Two copies of the inspection results must be
provided to both parties and be signed by them. The report
must detail the state of the property and provide a list of
fixtures and fittings which are rented as part of the agreement,
for example, the bathroom and kitchen, the state of the external
parts, and so on. At the end of the lease, the tenant must
hand over the property to the landlord in the same state as when he
took it over, allowing for wear and tear and any 'act of
God'. Should one of the parties refuse to acknowledge the
etat des lieux, then the property is presumed to be in a
good state.
According to law, the tenant cannot sub-let
without the landlord's authorisation. If the tenant goes
ahead without his permission, then the landlord can demand
termination of the lease. It is important to note the lease
is personal and cannot be transferred to another person.
For more information, contact Christophe
Dutertre in Blake Lapthorn's French Private
Assets and Tax team on 023 9253 0379; email christophe.dutertre@bllaw.co.uk.
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