Rent control is a reality in the French capital. This is a particularity, also existing in other towns in the region, involving define a rent according to specific criteria. Therefore, it is impossible to set the amount randomly, otherwise you will find yourself in default with the legislation. Any rental contract remains affected by this constraint, which is why we are providing you with clarification on the situation.
What does rent control mean?
First, rent control was applied to the City of Paris between 2015 and 2017. Then, the measure was canceled following a court decision. But since July 1, 2019, the regulations have been in force again and it is impossible for you to escape them from the moment you are interested in rental investment, whether it is a house or an apartment.
For the moment, this is a large-scale experiment to take place over a period of five years. Any rental contract established in Paris is thus affected by this measure and therefore you must take into account the reference rent in Paris to determine the exact amount for the future tenant. Even if you are tempted to increase your rent, know that this remains particularly regulated.
As a Parisian owner, we advise you to carefully follow these different rules, that is to say to comply with the reference rent in Paris in order to determine the price of renting an apartment or a house.
Prices remain defined by the Île-de-France prefecture with an annual ceiling which will be revised. Please note that the price depends on a set of criteria such as the type of rental, namely furnished or unfurnished, the area in which the accommodation is located, the date of construction of the building as well as the number of rooms. Systematically, you find three indications, namely the reference rent, the reduced rent with a 30% discount and the increased rent with a 20% bonus.
The last indication remains possible to increase the price of the rent, provided that the accommodation justifies additional services such as a specific location, a breathtaking view or additional equipment.
How to determine the amount of rent in Paris?
At first glance, you might be disturbed by the rule concerning rent control. All the more so as the situation becomes more complex, because the rules to follow are not the same if you undertake work, as part of a lease renewal, for a first rental or a change of tenant.
Let’s take a situation in the context of a rental between two successive tenants. As the owner of your apartment or house, it will not be possible for you to charge a higher rent to new tenants than that charged with the old one compared to the increased reference rent. An exception still remains when there has been no rent review in the last 12 months. This time, you apply the rent reference index based on INSEE references.
The situation is once again different when you have undertaken compliance or improvement work. As a result, you can apply an increase of 15% to the cost of the work as long as this increase does not exceed the increased reference rent. However, the work must meet specific requirements with an amount equivalent to at least 50% of the rents received during the previous year. Finally, the last special situation applies to lease renewal. The owner can perfectly reassess the rent, provided that it is done 6 months before the end of the contract.
Does rent control apply to all Parisian housing?
Generally speaking, it is impossible to circumvent rent controls from the moment you want to get started in rental investment in Paris. Indeed, the administrative measure applies in the context of a change of tenant, in the context of a lease renewal or for a first rental since July 1, 2019.
Perhaps you already have current leases, rental contracts or tacit renewals which were established before June 30, 2019. These specificities are then not affected by rent control. In addition, please note that the measure only concerns rentals applying as part of a main residence.
This is particularly the case for a furnished rental lease for a period of one year, an empty rental lease for three years or a student lease for a period of nine months. Without forgetting the application of the measure on the mobility lease. When you are in this type of situation, it is essential to scrupulously respect the law by paying attention to respecting the increased reference rent. Otherwise, you expose yourself to a fine of €5,000 when the rental is made through a natural person. Otherwise, a legal entity risks a fine of €15,000.
In addition, the Île-de-France prefecture remains responsive by directly applying this request so that you reimburse the overpayment to your tenant, while adjusting the rent accordingly. Even if these measures appear restrictive, they aim to limit the increase in rents. Rest assured, you can still launch your real estate investment project with peace of mind, but with the support of a seasoned professional.
Indeed, the rules are very numerous and as a newbie, you risk getting lost very quickly. So, to optimize your real estate project, while being in accordance with the legislation in force, do not wait any longer to be supported by a specialized company, capable of providing you with the right advice.