Presentation of the main provisions of Law No. 2014-366 of March 24, 2014 on access to housing and renewed urban planning (excluding provisions relating to urban planning law)

Among the most significant changes introduced by the Alur law is the introduction of a rent control system in so-called "tense" areas.

These areas correspond to areas of continuous urbanization with more than fifty thousand inhabitants where there is a marked imbalance between the supply and demand for housing, leading to serious difficulties in accessing housing across the entire existing residential stock, which are characterized in particular by the high level of rents, the high level of acquisition prices of old housing or the high number of housing applications compared to the number of annual move-ins in the social rental stock.

These provisions came into force on March 27, 2014 but remain subject to the publication of the decree defining the list of municipalities concerned.

I. Creation of local rent observatories

Local rent observatories can take the form of associations or public interest groups. These local rent observatories can be created at the initiative of local authorities, inter-municipal public cooperation establishments with their own tax base responsible for housing, or the State.

Their mission includes collecting rent data for a specific geographical area and making representative statistical results on this data available to the public. The reference stock for rent observation and analysis consists of all premises used for residential purposes or mixed professional and residential purposes, with the exception of those belonging to social housing organizations and mixed-economy companies for the construction and management of social housing, as well as those belonging to organizations holding accreditation for project management.

Local rent observatories are approved by the Minister for Housing, after consultation with the regional housing and accommodation committee or the departmental housing and accommodation council, provided they comply with methodological guidelines issued by an independent scientific body. Approval is granted only to observatories whose statutes ensure balanced representation of landlords, tenants, and property managers on their governing bodies, as well as the presence of qualified individuals on these bodies.

The observatories transmit all their data to the national association mentioned in the third paragraph of Article L. 366-1 of the Construction and Housing Code.

II. Rent control

The provisions relating to rent control were introduced in Article 17 of Law No. 89-462 of July 6, 1989, aimed at improving landlord-tenant relations. These provisions reverse the principle of freedom to set rent amounts.

A. Implementation of reference rents

In areas with high demand, the State representative in the department sets the following annually by decree:

• a reference rent, equal to the median rent calculated from the rent levels observed by the local rent observatory according to housing categories and geographical areas.
• an increased reference rent equal to an amount 20% higher than the reference rent.
• A reduced reference rent, set by reducing the reference rent, is equal to the reference rent less 30%.

These rents are expressed as a price per square meter of living space, by housing category and by geographic area. The housing categories and geographic areas are determined based on the structure of the rental market as observed by the local rent observatory.

B. Determination of rents

In areas covered by this decree, the base rent for rental properties is freely negotiated between the parties when the lease is signed, up to the limit of the increased reference rent. Outside these areas, rent for rental properties is unrestricted.
A rent reduction action may be taken if the base rent stipulated in the lease is higher than the increased reference rent in effect on the date the lease was signed.
A rent supplement may be applied to the base rent for properties with specific location or comfort features compared to similar properties in the same geographic area. The implementing provisions of this article will be specified by decree of the Council of State. The amount of the rent supplement and the property features justifying it are stated in the lease. These location or comfort features will allow for a total rent exceeding the increased reference rent.
A tenant wishing to contest a rent supplement has three months from the date of signing the lease to refer the matter to the departmental conciliation commission. In the event of a dispute, the landlord bears the burden of proving that the property offers superior location or comfort compared to similar properties in the same geographical area.

C. Rent review

Rent increases are stipulated in the lease agreement and take place annually on the date agreed upon by the parties or, failing that, at the end of each year of the lease.
The increase cannot exceed the variation in a rent reference index published quarterly by INSEE (the French National Institute of Statistics and Economic Studies). This index corresponds to the average change in consumer prices, excluding tobacco and rent, over the last twelve months. If the lease does not specify a reference date, this date is that of the last index published at the time the lease was signed.
If the landlord does not express their intention to apply the rent increase within one year of its effective date, they are deemed to have waived the benefit of this clause for the preceding year.
If the landlord expresses their intention to increase the rent within one year, the rent increase takes effect from the date of their request. The increase cannot therefore be retroactive.
When the parties have expressly agreed to improvements to the property that the landlord will have carried out, the lease agreement or an addendum to that agreement may stipulate a rent increase resulting from the completion of these improvements. In this case, the increase cannot be used as grounds for a rent reduction claim.

D. Renewal of the lease agreement

In areas with high demand, it is specifically planned that:

• The landlord can initiate an action to reassess the rent when its amount is lower than the reduced reference rent.
• The tenant can initiate legal action to reduce the rent when its amount, excluding supplements, is higher than the increased reference rent.

In both cases, either party may propose a new rent to its co-contractor, at least six months before the end of the contract for the landlord and at least five months before the end of the contract for the tenant.

III. Provisions aimed at ensuring the tenant's financial security

Among the provisions designed to ensure the tenant's financial security are the following rules:

A. Provisions relating to the security deposit

The provisions relating to the security deposit concern, in particular, its amount and the terms of its return. The law does not change the one-month limit on the security deposit for unfurnished rentals stipulated by Law No. 2008-111 of February 8, 2008 , but it limits this amount to two months' rent for furnished rentals.
Furthermore, a security deposit cannot be required when the rent is payable in advance for a period exceeding two months, instead of one month as before.
The deposit is returned within a maximum period:

• one month from the date the keys are handed over by the tenant, when the exit condition report is in accordance with the entry condition report.
• two months from the date of hand delivery, or by registered letter with acknowledgment of receipt, of the keys to the landlord or his agent

The return period is therefore reduced if the condition of the property is found to be satisfactory.
If the deposit is not returned on time, the amount due is increased by a sum equal to 10% of the monthly rent for each period started. However, the landlord may retain an amount corresponding to a maximum of 20% of the deposit until the annual closing of the building's accounts.

B. Tenant's notice period in high-demand areas

The tenant's notice period is reduced to one month in high-demand areas.

Part Two – Amendments to the “Hoguet” Law

The ALUR law modifies the conditions for practicing certain professions. Thus, the Hoguet law (law no. 70-9 of January 2, 1970, regulating the conditions for carrying out activities related to certain transactions involving real estate and businesses) now expressly states that it applies to individuals or legal entities who habitually perform the functions of condominium managers, even though this point was already established.
The amendments to this law apply to contracts concluded since March 27, 2014.
The law also establishes a training requirement for real estate professionals. Failure to complete this training will result in the non-renewal of their professional license.
The issuance of the professional license is subject to additional conditions. Individuals must demonstrate their professional competence and provide a financial guarantee that covers the reimbursement of deposited funds, securities, or valuables, including sums paid into the reserve fund mentioned in Article 14-2 of Law No. 65-557 of July 10, 1965, which establishes the status of co-ownership of buildings. Furthermore, only financial guarantors who have implemented internal control procedures, using risk monitoring frameworks and models, are authorized to issue the financial guarantee. A decree issued by the Council of State will define the procedures and conditions under which guarantors carry out their control duties over the funds they guarantee.
The law establishes a National Council for Real Estate Transactions and Management. This council's mission is " to ensure the maintenance and promotion of the principles of morality, integrity, and competence necessary for the proper performance of the activities [of persons subject to the Hoguet Law]." The Council proposes the rules constituting the code of ethics, the nature of the professional aptitude requirement, the nature of the professional competence requirement, and the nature and procedures for continuing professional development. The Council is composed primarily of representatives of those subject to the Hoguet Law. Consumers, chosen from among consumer protection associations, are also represented.
To ensure more effective oversight, a chapter on professional discipline is included. This provides for the creation of a disciplinary body, the Commission for the Control of Real Estate Transaction and Management Activities. The Commission can impose various types of sanctions, such as a warning or a temporary or permanent ban on practicing. Decisions rendered by this Commission are subject to appeal before the administrative courts.

Part Three – Information for purchasers of condominium units

The law for access to housing and urban renewal imposes new obligations on the seller of real estate subject to the condominium ownership regime, aiming to provide the buyer with better information about the property's condition and its legal and financial status.
Additional information and documents are now required when drafting the sales offer and signing the deed of sale.
With some exceptions, which will be specified, these provisions came into effect on March 27, 2014.

I. Provision of a summary sheet

 The property manager administering residential buildings must establish and update annually a summary sheet for the condominium. This sheet must be made available to the co-owners and includes essential financial and technical data relating to the condominium and its building, the content of which is defined by decree. Failure to comply with this obligation is grounds for dismissal of the property manager.
Furthermore, property management contracts must include an automatic fixed financial penalty against the property manager each time they fail to make the summary sheet available to a co-owner within fifteen days of a request. This penalty is deducted from the property manager's remuneration.
The implementation of these provisions is phased in according to the same procedures as those for the condominium register (see below). The provisions relating to the summary sheet are applicable from:

• December 31, 2016, for condominium associations with more than 200 units;
• December 31, 2017, for condominium associations with more than 50 units;
• December 31, 2018, for other condominium associations.

II. Information for the buyer

A. Information contained in the sales offer

Bids must include:

1. The status of a property in co-ownership
2. The number of lots
3. The average annual amount of the seller's share of the provisional budget corresponding to current expenses
4. If the condominium association is subject to proceedings due to financial imbalances

No details are provided regarding the penalty incurred when these details are not included in the offer.

B. The statements relating to the surface area in the preliminary sales agreements, purchase agreements or the authentic deed

The preliminary sales agreement, purchase agreement, or deed of sale must state the surface area of ​​the private portion of the lot or fraction thereof, as well as its living area. The surface area of ​​cellars and parking spaces is not included in the surface area of ​​the private portion. Failure to state this information may render the agreement null and void at the request of either party within one month of the execution of the authentic deed.
However, it is stipulated that the signing of the authentic deed of sale, which includes the surface area, forfeits the right to initiate or pursue legal action to annul the preliminary agreement or the preceding contract based on the omission of this surface area.
If the information is included but is incorrect:

• If the area of ​​the private part is greater than that stated in the deed, the excess does not give rise to any additional price.
• If the surface area of ​​the private portion is more than one-twentieth smaller than that stated in the deed, the seller, at the buyer's request, must accept a price reduction proportional to the difference. The buyer must bring this action within one year of the execution of the authentic deed, otherwise the right to claim is forfeited.

These provisions come into effect on June 24, 2014.

III. Documents required for the sale

In the event of the sale of a unit or a fraction of a unit, or the transfer of a real property right relating to a unit or a fraction of a unit in a building used wholly or partly for residential purposes, the following documents are attached to the preliminary sales agreement or, failing that, to the final deed of sale, in addition to the technical diagnostic report:

1. Documents relating to the organization of the building, namely, the summary sheet, the condominium regulations, the descriptive statement of division as well as the acts modifying them, if they have been published and the minutes of the general meetings of the last three years, if the seller has them;
2. The documents relating to the financial situation of the condominium association and the selling co-owner must include the amount of current expenses in the provisional budget and expenses outside the provisional budget paid by the selling co-owner for the two fiscal years preceding the sale. For condominium associations with more than ten units, the information must also include any sums that may still be owed by the seller to the condominium association and any sums that will be owed by the buyer, as well as the overall status of unpaid fees within the association and the debt owed to suppliers. When a reserve fund exists, the amount of the reserve fund's share allocated to the main unit being sold and the amount of the last contribution to the fund paid by the selling co-owner for their unit must be stated
3. The building maintenance log;
4. A certificate stating the area of ​​the private section and the living area of ​​this lot or fraction of a lot;
5. An information notice concerning the rights and obligations of co-owners and the operation of the bodies of the co-ownership association. A decree from the minister responsible for housing determines the content of this notice;
6. Where applicable, the overall technical diagnosis and the multi-year work plan.

In the absence of an attachment to the preliminary sales agreement or, failing that, to the final deed of sale, the buyer acknowledges that the notary or seller has provided them with the condominium regulations, the maintenance logbook, and the descriptive statement of division.
When the documents mentioned in points 1, 2, and 4 are not attached to the notified deed, the withdrawal or reflection period provided for in Article L 271-1 of the French Construction and Housing Code begins only from the day after these documents are provided to the buyer.

Part Four – Provisions applicable to co-ownerships

The changes to condominium law were primarily incorporated into Law No. 65-557 of July 10, 1965, which established the legal framework for condominium ownership of buildings, as well as into the French Building and Housing Code.
These changes include the creation of a condominium registration system, improved information for prospective buyers, and measures to prevent deterioration. This last point is addressed in two parts: improving condominium management to prevent debt, and preventing deterioration by facilitating the execution of repairs. Furthermore, the law modifies the regulations applicable to deteriorated properties. New rules govern the provisional administration procedure and the procedure for insolvency. Finally, the law provides for the reclassification of deteriorated condominiums by public authorities. These last two procedures will not be discussed further, as they are exceptional measures.

I. The condominium register

From December 31, 2016, for condominium associations with more than 200 units, from December 31, 2017, for condominium associations with more than 50 units, and from December 31, 2018, for other condominium associations, condominium associations are required to declare the following data in the register:

1. The name, address, date of creation of the syndicate, the number and nature of the lots which make up the co-ownership as well as, where applicable, the name of the trustee;
2. If the union is subject to legal proceedings due to financial imbalances;
3. If the union is subject to an order or injunction due to unsanitary conditions;
4. At the end of each accounting period, the essential data relating to the management and accounts of the union, derived in particular from the provisional budget, the union's accounts and their appendices, must be entered;
5.  Essential data relating to the building, obtained where applicable from the maintenance log and the overall technical diagnosis, provided that this is not already provided by the tax authorities.

In practice, the declaration is made either by a notary or by the property manager, and the data transmission is electronic. The entry into force of these provisions is identical to that adopted for the implementation of the summary sheet containing information relating to the co-ownership.

II. Condominium Management

A.  The trustee

When the property manager is not a professional, they must own one or more units in the condominium.
As of January 1, ²⁰¹⁵ , professional property managers are required to provide secure online access to digital documents related to the management of the building or the units they manage, unless the general meeting decides otherwise.
The property manager is also required to submit, upon their initial appointment and at least every three years thereafter, to a vote at the general meeting, a proposal to establish special reserves to cover maintenance or upkeep work on common areas and shared equipment that may be necessary within the next three years and has not yet been approved by the general meeting. They must also open a separate bank or postal account in the name of the condominium association, into which all sums or assets received in the name of or on behalf of the association must be deposited without delay.
The property manager must give three months' notice to resign from their position.

B. Obligation to contribute to expenses and work

The obligation for co-owners to contribute to the expenses and work incumbent upon them is reaffirmed by law. The text specifies, in particular, the insurance obligation and the various expenses to which co-owners are liable.
If the provisional payments are not made by the due date, the president of the regional court, ruling in summary proceedings, may order the defaulting co-owner to pay after a formal notice sent by registered letter with acknowledgment of receipt has gone unanswered.
The law stipulates that the vote of a defaulting co-owner is not counted in the majority calculation when the general meeting votes to authorize the property manager to take legal action to seize and sell a unit belonging to a defaulting co-owner.

C. Voting procedures in general meetings

The voting procedures at general meetings have undergone several changes aimed at facilitating decision-making within these meetings.
The list of decisions requiring a majority vote under Article 24, namely a majority of the votes of the co-owners present or represented, has been expanded. Decisions concerning the following are now also subject to this majority:

• The work necessary for the preservation of the building and the protection of the health and physical safety of the occupants, which includes work related to the building's stability, its enclosure, roof, or utility networks, and work to ensure that the dwellings comply with health, safety, and equipment standards. These decisions were previously made by a majority vote of all the co-owners.
• The procedures for carrying out and executing work made mandatory under legislative or regulatory provisions or an administrative police order relating to safety or public health. Previously, this decision had to be made by a majority vote of all co-owners.
• The procedures for carrying out and executing the works notified under Article L.313-4-2 of the Town Planning Code, in particular the possibility for the syndicate to assume project management of the works relating to the private parts of all or part of the co-owners;
• The adaptations to the condominium regulations made necessary by legislative and regulatory changes that have occurred since its establishment.
• The decision to undertake the comprehensive technical diagnosis provided for by the new article L. 731-1 of the construction and housing code, as well as the procedures for its implementation.

The list of decisions requiring a majority vote under Article 25, meaning a majority of votes from all co-owners, has been shortened. Decisions such as the following are now subject to this requirement:

• The appointment or dismissal of the trustee.
• Changes to the allocation of costs. However, when a majority is not reached but the proposal receives at least two-thirds of the votes, the assembly may immediately proceed to a second vote by a majority of the votes cast.
• Any delegation of authority concerning the implementation and monitoring of works and contracts financed within the framework of the provisional budget for expenses in co-owned properties with 15 units or fewer. In the latter case, the members of the management council must be covered by civil liability insurance.
• All works involving transformation, addition or improvement, which fell partly under the majority of article 26.
• The request for individualization of water supply contracts and the carrying out of the studies and works necessary for this individualization which previously fell under the majority of article 26.

Finally, it is planned that the same decisions as before will be taken by the majority of Article 26, by a two-thirds majority, namely decisions concerning acts of real estate acquisition and acts of disposition not relating to common areas or rights accessory to these areas, certain modifications of the condominium regulations, the procedures for opening access doors to buildings and the elimination of the caretaker position.

III. Preventing the deterioration of condominiums

A. The appointment of an ad hoc representative

The percentage of unpaid fees required to request the appointment of an ad hoc representative has been lowered from 25% to 15% for condominiums with more than 200 units.
The amendments to the provisions relating to this procedure aim to clarify the roles and responsibilities of the ad hoc representative and the court-appointed administrator. The ad hoc representative is tasked with preparing a report analyzing the financial situation of the condominium association and the condition of the building, along with recommendations for restoring the association's financial stability, while the court-appointed administrator acts as the managing agent.
The effects of the order appointing the administrator have been extended to include the suspension of the enforceability of debts incurred prior to the decision for a period of twelve months and to halt or prohibit any legal action seeking the termination of a contract for non-payment.

B. Role of the provisional administrator

The provisional administrator establishes a debt repayment plan with a maximum duration of five years.
At the administrator's request, the judge may cancel all or part of the debts. The canceled amount is distributed among the condominium association's creditors in proportion to the amount of their claim and incorporated by the provisional administrator into the debt repayment plan. The administrator may also request the judge to order the creation of one or more secondary condominium associations or the division of the existing association if it appears that the normal operation of the condominium cannot be restored otherwise.
The provisional administrator may propose to the State representative in the department that a safeguard plan be initiated. Furthermore, the administrator may sign any financial agreement for the allocation of public subsidies to the condominium association, provided that this agreement is not inconsistent with the administrator's assigned duties.

C. The strengthened provisional administration

Enhanced provisional administration may be ordered by the judge, particularly at the request of the provisional administrator, when the condominium's financial situation does not allow for the necessary work to be carried out to maintain and secure the building, protect the occupants, preserve their health, and reduce condominium fees to enable its financial recovery.
In this context, the administrator is authorized to sign a fixed-term agreement, on behalf of the condominium association, with one or more competent operators specializing in project management and securing financing for construction work.