Furnished rentals : validation of the regulation limiting rentals by the CJUE

The EU Court of Justice was referred to the French Court of Justice for a preliminary ruling concerning French rules that require cities with more than 200,000 inhabitants (including Nice) to request a change in the use of premises when an owner intends to rent out a furnished property for a short period of time to customers who do not live there (Airbnb type rentals in particular).

While this principle is outlined in the Building and Housing Code, it refers to the City Council to set the conditions which must be met to obtain such an authorisation. Generally, these will be limited in time, and/or will be necessary to proceed with compensation (understand that if you wish to devote X square metres to furnished rental, it will be necessary to transform X square metres of premises intended for a professional activity into housing).

In short, the aim of this system is to reduce the housing shortage, and to avoid turning a touristy city into an open-air hotel without inhabitants.

In Nice, these conditions have become considerably more stringent over the years.

To date, the authorisation without compensation is only issued for 6 years, and only to actual people (as opposed to companies for example).

Penalties for non-compliance with these rules are also very heavy (up to 50,000 EUROS fine), and the city of Nice has set up specific verification brigades for this type of infringement.

In any case, the decision of the European Court of Justice was awaited by many owners.

In a decision dated September 22, 2020, the Grand Chamber of the Court ruled (cases C-724/18) that the French regulations were in conformity with European law.

It noted in particular that “the objective pursued cannot be achieved by a less restrictive measure, in particular because a posteriori control, for example, by means of a declaratory system accompanied by sanctions, would not make it possible to immediately and effectively curb the continuation of the rapid transformation movement that is creating a shortage of housing intended for long-term rental“.

Is this the end of the litigation in this area ?

In my opinion: not really… The principle of supervision is certainly recognised, but the decision of the European Court of Justice moves the litigation to a more local level.

Indeed, the European Court of Justice specifies that the following must be taken into account: “the practical arrangements for satisfying the obligation of compensation in the locality concerned, ensuring that this obligation is capable of being satisfied by a plurality of compensation mechanisms which meet reasonable, transparent and accessible market conditions”.

Now, I will only take here the example of the local market in Nice. To my knowledge, it is impossible to acquire commercial securities that would allow “accessible” compensation, and consequently the legislation in Nice seems to me weak on this point.

The judgment also says nothing about the justification for subjecting companies to more restrictive rules than actual people.

In any event, it must be remembered from the said judgment that the principle of regulating furnished rentals is justified, but it remains to be seen in practice what application is made on a case-by-case basis by the municipalities.