As you know, the short-term rental market is doing very well and is constantly evolving. But strict and complex rules can hamper investors who sometimes even give up using their furnished home for a short period of time. One of the major challenges is that of changing use. To avoid legal and financial pitfalls, it is important to understand this crucial rule in short-term rentals.
In this article, we explore this concept and give you our tips on how not to get in the way of its complexities.
Some town halls take measures to limit the short-term rental market, which they often assume is responsible for the saturation of the residential rental market. They subject short-term furnished rentals to an authorization to change use.
The change of use, provided for in article 637-1 of the Construction and Housing Code, involves the transformation of a premises for a use other than that for which it was originally authorized. In the context of LCD, this means converting real estate intended for residential use into a temporary rental to people passing through.
What is a residential space?
Article L637-1 of the Construction and Housing Code states that a premises is “deemed” to be for residential use if it was allocated to this use on 1 January 1970 and that it keeps this use regardless of subsequent uses. Contrary to what one might think, short-term rental premises are not for residential use.
According to the Construction and Housing Code, in cities with more than 200,000 inhabitants, in the departments of Hauts-de-Seine, Seine-Saint-Denis and Val-de-Marne, the change of use of residential premises is subject to prior authorization by the local authorities.
In cities with more than 50,000 inhabitants where the residential rental market is under strong pressure, town halls can request that the change of use be subject to their prior authorization.
Failure to comply with the change of use rules can lead to severe consequences for LCD investors. In addition to financial fines, municipal authorities can order the immediate cessation of the LCD and even the confiscation of real estate.
But in practice, we see that prosecutions initiated by town halls are very rarely successful. Under French law, the proof is the responsibility of the applicant and therefore, in this case, with the town hall, which is prosecuting. It was then that she was confronted with showing the change of use and, more specifically, the assignment to residential use on January 1, 1970.
It is almost impossible for a town hall to prove the change in use on this date with regard to the declarative means of the time and, above all, by the simple fact that the declarations (made by the owners) had no repressive purpose, since they aimed at the establishment of the calculation of the Cadastral Rental Value. Very often the documents are not precise and indicate a date after January 1, 1970.
Some cities subject the authorization of the change of use to compensation: the owner who requests the change of use of a premises to operate it as a short-term rental, must offer the city another premises that will be given to him for long-term rental.
In some cities, this rule is very restrictive. For example, in Paris, the compensation must be 3 m² for 1 m² removed. That is to say, for a 20m² premises for which a change of use authorization is requested, the owner must submit a premises of at least 60m² for long-term rental.
Some cities, such as Toulouse and Montpellier, are less restrictive and allow the change of use without compensation for a natural person's first two assets.
1. For buildings built before 1970, ask the personal tax office for the situation of use of the premises on January 1, 1970. If you don't get a response from the tax authority, you can assume there's no evidence.
2. For buildings built after January 1, 1970, a prima facie, a change of use is necessary unless it is, for example, a mansion or property that does not have a perfectly qualified use. In this case, the help of a lawyer who specializes in this field will be invaluable.
3. To comply with the compensation rule, you can divide your property: transform part of the surface into short-term accommodation and allocate the rest to long-term rentals.
4. Finally, last but not least advice: entrust your property and your project to professionals who will be able to analyze the legal situation and advise you strategically.
To take advantage of the booming short-term rental market, it is crucial to understand the complex rules of change of use. While sanctions may seem daunting, the proof of the change in use often belongs to municipal authorities, offering investors room for manoeuvre. By relying on the knowledge of our experts and entrusting your project to us, navigating in this field will necessarily be lucrative.
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