In France, the short-term rental market continues to rise. We are now the first on the European market!
As we explained to you in our latest article, the public authorities are trying to control this growth. Anxious to limit this activity and the repercussions that LCD can have on the tranquility of buildings, condominiums are also waging war on owners who intend their real estate investment for the short term. To do this, they rely on the ban on commercial activity in the building, which may be provided for by the condominium regulations.
As an investor, you are probably wondering if your short-term rental business is commercial? And above all, can it be prohibited by the co-ownership of the building in which you want to invest?
The law is still very vague on this subject. But the French courts have taken up the issue and have recently positioned themselves on the side of investors!
In many condominiums, regulations may prohibit the exercise of a commercial activity, especially with a bourgeois housing clause. There are two types.
The exclusive bourgeois housing clause: any activity other than housing is prohibited there, as is short-term rental! Be careful when buying: carefully inspect the condominium regulations to be sure that they do not include an exclusive clause.
The simple bourgeois housing clause: it simply specifies the bourgeois residential character of the building. For condominiums whose regulations contain this clause, case law has authorized the establishment of liberal professions. Commercial and craft activities remain prohibited in these condominiums, except in certain cases. For example, if the lot on the ground floor allows commercial activity.
But is short-term rental business considered a commercial activity? Is it forbidden in buildings as soon as a bourgeois housing clause is present in the condominium regulations?
Until now, case law has tended to equate short-term rental activity with a hotel business, and therefore a commercial one. But the trend is in the opposite direction!
The new element that comes into play in determining the commercial nature of short-term rentals: the services that are associated with renting.
This movement was initiated by the Nice Judicial Court, March 3, 2023. The judges decided that the short-term rental business was not commercial in nature. The activity is considered commercial if services are offered, but it remains civil if the rental is pure and simple.
This new qualification has been refined by the Court of Cassation on January 25. In this case, the High Court judges decided that while the provision of services associated with the rental “such as cleaning, transfers to the airport, the provision of breakfasts” is optional, it does not make it possible to assimilate this rental to a commercial activity.
But in practice, what does that mean?
This means that, from now on, case law does not automatically equate short-term rentals to a commercial activity. It becomes one when associated services, similar to those offered by a hotel, are included and not optional.
This means that for condominiums, it will become more and more difficult to prohibit short-term rental activity in buildings. As soon as the associated service is optional, the simple bourgeois housing clause will no longer be able to prohibit short-term rentals.
Recent developments in case law therefore tend to recognize short-term rentals as a civil rather than commercial activity, unless additional non-optional services are included. This legal orientation could make it more difficult for condominiums to prohibit short-term rentals.
However, investors should carefully check the condominium regulations before investing to ensure that their short-term rental activity will not be prohibited by a restrictive clause. Our team of experts can advise you on all of these essential aspects of your LCD investment and help you create a successful hosting. Take appointment with one of our experts to discover our A-Z solution.
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