Short-term rentals and prior authorization regime

Short-term rentals and prior authorization regime

The law on the Modernization of the economy, law n ° 2008-776, dated 4th of August 2008 introduced changes to articles L 631-7 et seq. Of the construction and housing code.

This law has had a considerable impact since it attributed a competence initially granted to the Prefect, to the mayor so that the latter is competent to issue authorisations to change the use of residential premises.

Even before the enforcement of this new law, which was to take placeon 1st of January 2009, a municipal decree was issued in Paris on the 14th, 15th, 16th, and 17th of December 2008 in order to give jurisdiction to the mayor of Paris, replacing the prefectural decree of the 1st of December 2005. A company had tried to question the legality of this regulation but had been rejected by the Administrative Court of Paris in a judgment on the 29th of November 2012 (judgment n ° 1107051 / 7-1), subsequently confirmed by an unpublished decision from the Paris Court of Appeal (decision n ° 13PA00424), dated the 1st of July 2014.

The town hall of Paris (the municipality) subsequently adopted various municipal regulations (in 2008, in 2014 and then in 2018) in order to set the conditions for issuing authorisations for changes in the use of residential premises and the determination of compensation. Through these various regulations, the city of Paris wished to supervise short-term furnished rentals, which exploded with the arrival of various websites such as AirbnB or Abritel (belonging to the Homeaway group, le bon coin etc.) …

These adopted municipal by-laws provided in particular the conditions and modalities for the issuance of prior authorisations.

Two companies owning real estate in Paris have decided to offer these properties for short-term rental, except that this project of furnished rentals for a short period had not been declared to the mayor of Paris and therefore had not been able to obtain the prior authorisation allowing the change of use of the property.

The city of Paris has brought proceedings against these companies for non-compliance with its regulations in force established with regard to articles L 631-7 et seq. of the construction and housing code. The companies assigned brought this conflict before the national courts and were dismissed of their request, the latter were fined and it was recalled that the real estate owned was real estate for residential use, therefore a short-term rental was at odds with the use of such real estate.

Having been condemned on appeal, the companies lodged an appeal in cassation to challenge the legality of the regulation made by the city of Paris with regard to articles L 631-7 et seq. of the construction and housing code, which would be in contradiction with the directive 2006/123 EC of the European Parliament and of the Council, dated 12th of December 2006, relating to services in the internal market.

The Court of Cassation decided to refer the matter to the CJEU for a preliminary ruling, as provided for in article 267 of the Treaty on the Functioning of the European Union.

The Court of Justice of the European Union rendered a judgment on the 22nd of September 2020, in joined cases C-724-18 (Cali Apartments SCI) and C-727/18 (HX). In this judgment delivered by the Grand Chamber of the CJEU, the Court answered the various preliminary questions asked.

The first question referred for a preliminary ruling concerning the application of the directive 2006/13 / EC “ to rental for payment, even on a non-professional basis, repeatedly and for short periods, of furnished premises for residential use not constituting the principal residence of the lessor, to passing customers who do not elect domicile there, in particular with regard to the concepts of providers and services

The CJEU answers in the affirmative (at paragraph 45), indicating that ” it is appropriate to answer the first question that articles 1 and 2 of the directive 2006/123 must be interpreted as meaning that this directive applies to a regulation of a member state relating to rental activities for remuneration of furnished premises intended for housing to transient customers who do not elect domicile there, carried out repeatedly and for short periods, both professionally and non-professionally.
If a positive answer was given to the first question, the court had to consider the second prejudicial question, asking the latter whether: “national regulations, such as that provided for by article L. 631- 7 of the construction and housing code, constitutes an authorisation scheme for the aforementioned activity within the meaning of articles 9 to 13 of the directive 2006/123 […] or only a requirement submitted to the provisions of articles 14 and 15 [of this directive]?

The court answered this second question for a preliminary ruling by stating that article 4 of the aforementioned directive should be interpreted as meaning “that national regulations which subject to prior authorisation the exercise of certain rental activities of premises intended for living come under the concept of an “authorisation scheme” within the meaning of point 6 of this article.

The third question referred for a preliminary ruling concerned article 9 of the directive, the lattershould it be interpreted as meaning that the objective of combating the shortage of rental accommodation constitutes an overriding reason in the general interest making it possible to justify a national measure subjecting to authorisation, in certain geographical areas, the rental of furnished premises intended for living repeatedly for short periods to transient customers who do not take up residence there?

Thefourth question referred for a preliminary ruling concerned the proportionality of this measure vis-à-vis the objective pursued, in the event that the third question had been answered in the affirmative.

The5th question related to the existence of a possible opposition ofarticle 10, paragraph 2, under d) and e), of the directive [2006/123] to a national measure which makes the fact of renting conditional on authorisation for a furnished room intended for habitation “repeatedly”, “for short periods”, to “passing customers who do not take up residence there”

The 6th question concerned the existence of a possible opposition ofarticle 10 (2) (d) to g) of the directive [2006/123] to an authorisation system providing that the conditions for issue of the authorisation are set, by a deliberation of the municipal council, with regard to the objectives of social diversity, in particular according to the characteristics of the markets for residential premises and the need not to exacerbate the shortage of housing

The CJEU replied to the third and fourth question by indicating that: “article 9, paragraph 1, under b) and c), of the directive 2006/123 must be interpreted as meaning that national regulations which, for reasons aimed at guaranteeing a sufficient supply of housing intended for long-term rental at affordable prices, submits certain rental activities for remuneration of furnished premises intended for housing to transient customers who do not elect domicile there, carried out repeatedly and for short periods, to a prior authorisation system applicable in certain municipalities where the pressure on rents is particularly marked which is justified by an overriding reason in the general interest relating to the fight against the shortage of housing intended for rental and proportionate to the objective pursued, in that this cannot be achieved by a less restrictive measure, in particular because an a posteriori control would intervene too much to have real efficiency.

The CJEU answered the fifth and sixth question by indicating that :article 10, paragraph 2, of the directive 2006/123 must be interpreted as meaning that it does not preclude national regulations establishing a system which makes the exercise of certain rental activities for remuneration of furnished premises intended for housing subject to prior authorisation, which is based on criteria relating to the fact of renting the premises in question “repeatedly and for short periods at travelling clientele who do not take up residence there ”and which entrusts the local authorities with the power to specify, within the framework set by these regulations, the conditions for granting the authorisations provided for by this system with regard to the objectives of social diversity and depending on the characteristics of the local housing markets and the need not to exacerbate the housing shortage, with an obligation to compensate in the form of an accessory and concomitant transformation if necessary in housing of premises having another use, provided that these granting conditions comply with the requirements set by this provision and that this obligation can be satisfied under transparent and accessible conditions.

The CJEU thus confirmed that the application of the directive 2006/123 / EC to the regulations of a member state for “rental activities for remuneration of furnished premises intended for housing to passing customers who do not elect domicile there, carried out repeatedly and for short periods, both professionally and non-professionally. ” that the system of prior authorisations comes under the concept of an authorisation system as provided for in article 6 of that directive.

This prior authorisation system is justified since it aims to guarantee a sufficient supply of housing intended for long-term rental at affordable prices, particularly in municipalities where the pressure on rents is particularly sensitive and is marked by a compelling reason of general interest aimed in particular at combating the housing shortage.

This regime is therefore perfectly proportional to the objective pursued and cannot be considered as a restrictive measure, in particular because it cannot be the subject of a less restrictive or an a posteriori measure which would intervene too late and whose effectiveness would be less.

The court also recalls the role of the national authorities who must specify, within the framework of national regulations, the “conditions for granting authorisations provided for by this system with regard to the objectives of social diversity and according to the characteristics of the local housing markets and the need not to worsen the housing shortage, by attaching them, if necessary, to an obligation of compensation in the form of an additional and concomitant transformation into housing of premises with another use, provided that these conditions of use grant comply with the requirements set by this provision and that this obligation can be met under transparent and accessible conditions. »

Following this judgment of the CJEU, the Court of Cassation took note of this, in a decision n ° 17-26.156 dated the 18th of February 2021, since it rejected the appeal filed by the company Cali Apartments SCI, indicating that the requirement of proportionality of the conditions for granting the authorisation for change of use complied with the provisions of article 10 §2 (c) of the directive 2006/123 / EC, that the fight against the housing shortage was an overriding reason in the general interest and that in this sense the regulations adopted by the city of Paris were legally justified, that the provisions of the article that “L. 631-7, paragraph 6, of the construction and housing code met the requirements of clarity, objectivity and unambiguity of article 10 (2) (d) and (e) of the directive 2006/123 (…) It follows that articles L. 631-7, paragraph 6, and L. 631-7-1 of the construction and housing code comply with the directive 2006/123 of the 12th of December 2006. »

The city of Paris can thus subject short-term rentals to a prior authorisation regime, as provided for by articles L 631-7 et seq. of the construction and housing code, the terms and conditions of which are expressly stated by the municipal regulations taken, this is absolutely not contrary to the various provisions of the directive 2006/123/EC.

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