French Buy to Let Leases

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Here is the French Property Company's guide to the French landlord/ private tenant situation. Here we are talking about normal unfurnished long term leases (minimum three years).

At the end of a lease, if the owner has not demonstrated his wish to take possession of the property, either to occupy it or to sell it, or for any other serious and legitimate reason, the tenant can continue to stay in the property. There are three possible scenarios....

The Owner wishes to continue the rental on the same terms

The owner does nothing. The lease is renewed for a period of three years if the owner is an individual, 6 years if the owner is a company. The rent can only be increased by the average variation over 4 quarters of the INSEE Cost of New Construction index, as long as there is a condition to that effect in the original lease. There is no need to draw up a new lease: the rental is subject to the terms of the original lease.

The Owner wishes to draw up a lease of less than three years

If the owner is a private individual, he can propose a lease with a term of less than three years, with a minimum of one year, if a precise event obliges him to regain possession for professional reasons or family (example:- retirement, need to house a family member)

He must give notice to the tenant 6 months before the expiry of the lease.

A new lease i.e. drawn up; it must state the precise event which justifies the term of the lease being less than three years. The owner must confirm to the tenant when that event will happen two months before the end of the lease by registered letter with delivery receipt. or by the hands of a bailiff.
The rent, in this case, can only be increased by the average change in the INSEE Cost of New Construction index over four quarters.

The Owner proposes renewing the lease with a new rent.

The length of the lease must be three years, if the owner is an individual and six years if the owner is a company.

The owner can propose an increase in the rent, only if the rent is obviously undervalued with regard to rents for similar properties in the same neighbourhood.

He must make his proposal to the tenant at least six months before the end of the lease.
His proposal must include the text of article 17 c of 'la loi du 6 juillet 1989 (JO du 8 juillet 1989)'. The proposal must contain exact references which justify the new rent.
The increase in the rent will take place in stages.
An owner who proposes a new rent cannot in any case give notice before the end of the lease that's running.

Either the tenant accepts the proposed new rent: he confirms acceptance of the new rent to the owner in written form.

Or the tenant does not accept the proposed new rent: he states that he does not agree, in writing, to the owner four months before the end of the lease, or he does not answer at all.

The owner or the tenant can, without any fees or charges, put their case before the 'commission départementale de conciliation', which usually has its offices at the local Prefecture or the DDE, either in writing sent by registered post with proof of delivery or delivered by a bailiff.

The 'commission de conciliation' will summon both parties and try to find an agreement. At this commission, the tenant can show his own examples of comparable rents etc... The commission will give an opinion in a maximum delay of two months. - If no agreement is reached before the expiry of the lease, the owner should go to a 'juge d'instance'.
- If before the end of the lease, nobody has gone to the 'juge d'instance' and if no agreement has been reached, the lease is renewed on the same terms as the first one. That is to say with the same rent, for three years if the owner is an individual, six years if the owner is a company.

The renewal of the lease can take the form of a written contract or, if the initial lease conformed to all legal requirements, of a simple avenant mentioning the amount of the new rent.

In all cases, whatever the renewal conditions, there can be no increase in the size of the security deposit paid by the tenant when he first took possession.

During the lease, only the tenant has the right to stop renting and quit the property. If the owner wants to take possession of his property before the end of the lease, he can only do it if the tenant is in breach of the lease agreement.

The owner wants to regain possession at the end of the lease

He can do it, but only in the following cases, be it for him or a member of his family to occupy the property as a principal residence, be it to sell the property, or for a serious and genuine and legitimate reason ; notice must always be given at least six months before the end of the lease.

The owner takes possession of his property to occupy it

He can take back possession to live in it himself, or to be lived in by any of the following: - his wife/husband, common law wife of at least one year's standing, the partner to whom he is tied by a PACS, his antecedents, his descendants or those of his wife/husband, or of his common law wife/husband, or of the partner to whom he is tied by a PACS. He must give notice to the tenant explaining the reason for ending the lease and the names and addresses of the beneficiaries who are going to live in the property.

The owner sells his property

The tenant has the first option on buying.

The owner must give the tenant notice detailing the sale price and the conditions of the sale (mention in this notice the total area of the property is not a legal requirement). The offer must include the text of the five first subparagraphs of the article 15-11 of the loi du 6 juillet 1989.

The offer is valid for the two months following on from the formal legal notice of offer.

If the tenant accepts the offer:
He has a delay of two months to complete the sale, the two months delay start from the date when he sent his answer to the owner.
The allowed delay for completion of the sale is 4 months if the tenant states that he is seeking a mortgage. If at the end of that period, the sale has not been completed, the tenant must vacate the property.
If the tenant has not accepted the offer in the two first months after receiving the formal and legal notice of offer, he must vacate the property by or before the end date of the lease.
If the property is later offered for sale on better terms: the owner or the notaire must inform the tenant of the new sale terms; this notification, which is effectively a new sale offer, is sent to the tenant at his new address or, if he has not notified anyone of a change of address, at his old address. The tenant has a month to reply: if he accepts the new offer, the tenant has two months to complete the sale (or 4 months if he is seeking a mortgage).
Special case: if the property belongs to a company, the offer of sale is not associated with the notice. Four months before the expiry of the initial lease, the lease can be renewed in writing for a term inferior to 6 years. At the end of this term, the lease is terminated.

The owner has a serious, real and legitimate reason

Non compliance by the tenant with the terms of the lease (repeated late payments, not maintaining the property, troubles with the neighbours …) can constitute a legitimate and serious reason for giving notice. The written notice must state the alleged reason.

What ever the reason for notice being given by the landlord, if the tenant leaves the property before the end of the notice period, he only pays rent and other charges for the period when he actually occupied the property.
At the end of the lease, if the tenant is more than seventy years old and has revenue inferior to one and a half times the SMIC, an owner, giving notice, must propose to the tenant an alternative suitable rental property. The only exception to this is where the owner is himself over sixty years old or has revenue inferior to one and a half times the SMIC.

Special attention should be paid to the formalities
Whatever the intention, new lease or renewal of lease or notice to quit, the owner must inform the tenant in writing either by registered letter with delivery receipt or delivered by a bailiff at least 6 months before the expiry of the lease. Any co tenants named in the lease, their partners (where the tenants have informed the Landlord of their marriage) must also be informed in the same way.

The owner must have proof that the letters were rec'd at least six months before the end of the lease.

The tenant can end the lease at any time

The tenant can end the lease by giving three months notice at any time in the lease...

One month's notice is allowed in the following cases:
- Relocation by his employers, loss of employment, or taking up a new job after being unemployed, or starting his first employment.
- If he is aged more than sixty years old and must move on health grounds;
- If he is on the RMI (social security)

.
The notice period starts from the date when the landlord receives the written notice, be it by registered letter with proof of receipt or from the hands of a bailiff.

Even if the tenant leaves the property before the notice period has expired, the tenant must pay the rent and charges for the full notice period unless in the meantime a new tenant has, with the landlord's agreement, taken possession.

Disclaimer. This is published as information only; we take no responsibility for the legal exactitude of the above article.

If you would like more information or have any questions please contact our leaseback and property investment desk

Rob Thorne of the French Property Company Ltd