Newsletter No. 26 – Real Estate Law
LEGISLATIVE AND REGULATORY NEWS
Housing Contract
Decree No. 2015-587 of May 29, 2015
Defense of Property Rights
Bill of May 20, 2015
Accessibility
Ratification Bill of February 4, 2015
JURISPRUDENCE
SALE
Promise of sale
Suspensive condition without fixed term
PROPERTY
Trustee
Appointment of trustee
Trustee's appeal against a CNIL decision
Property rights
Subsoil ownership
LEASE
Commercial lease Rent
indexation and revision
Residential lease
Limits on landlord's participation in subletting
REAL ESTATE AGENT
Remuneration
Validity of combining remuneration
LEGISLATIVE AND REGULATORY NEWS
ALUR Law: Standard Housing Contract
The law of July 6, 1989, as amended by the ALUR law (law no. 2014-366 of March 24, 2014, concerning access to housing and urban renewal), mandates the use of a standard residential lease agreement. The decree of May 29, 2015, implementing articles 3, 8-1, and 25-7 of the law of July 6, 1989, clarifies the scope of this requirement and defines a standard lease agreement for unfurnished rentals and another for furnished rentals. The text is further supplemented by a notice outlining the respective obligations of each party, the content of which was established by a decree of May 29, 2015. This system entered into force on August 1, 2015.
The use of standard contracts applies to leases of premises used for residential purposes or for mixed professional and residential purposes, which constitute the tenant's primary residence, with the following exceptions:
- joint tenancies of furnished accommodation formalized by the conclusion of several contracts between the tenants and the lessor;
- rental accommodation subject to a personalized housing assistance agreement or assistance from the national housing agency;
- rental accommodation belonging to a low-cost housing organization that is not subject to a personalized housing assistance agreement.
Generally, these standard contracts contain the clauses mandated by law but allow the parties some flexibility, enabling them to supplement the contract within the limits of applicable regulations.
In substance, the two standard contracts are divided into eleven sections, titled as follows:
Designation of parties
2. Purpose of the contract: this section contains a description of the accommodation, the intended use of the premises, where applicable, the designation of the premises and ancillary equipment of the building for the tenant's private use, the list of the premises, parts, equipment and accessories of the building for common use, and the equipment for accessing information and communication technologies.
3. Effective date and duration of the contract
4. Financial conditions: this section specifies in particular:
- the amount of the rent, if applicable, in tight areas, mention is made of the specific terms and conditions for setting it;
- recoverable charges;
- in the event of joint tenancy, subscription by the lessor to insurance on behalf of the joint tenants;
- the terms of payment of the rent;
- where applicable, exclusively when renewing a contract, the terms and conditions for reassessing a manifestly undervalued rent.
5. Works: Mention is made, where applicable, of the amount and nature of improvement or compliance work carried out since the end of the last lease or since the last renewal, of the rent increase during the lease following improvement work undertaken by the landlord or acquisition of equipment and of the rent decrease during the lease following work undertaken by the tenant.
6. Guarantees
7. Solidarity Clause
8. Termination Clause
9. Rental fees: Article 5 of the law of July 6, 1989 must be reproduced in this section, which also specifies the details and distribution of fees.
10. Other special conditions
11. Appendices: This final section lists the documents attached to the contract. These include:
- the extract from the regulations concerning the destination of the building, the enjoyment and use of the private and common parts, and specifying the share relating to the rented lot in each of the categories of charges
- the technical diagnostic file
- the information notice relating to the rights and obligations of tenants and landlords
- the inventory, an inventory and a detailed condition of the furniture
- where applicable, prior authorization for rental
- where applicable, references to the rents usually observed in the neighborhood for comparable dwellings.
Each party may require the other, at any time, to draw up a compliant contract. In the event of absence in the rental contract of any of the information relating to the living area, the reference rents and the last rent paid by the previous tenant, the tenant may, within a period of one month from the effective date of the rental contract, give formal notice to the lessor to include this information in the lease. In the absence of a response from the lessor within one month or in the event of refusal by the latter, the lessee may, within three months of the formal notice, seize the competent court in order to obtain the if applicable, the reduction of the rent.
Protection of property rights – projects
On May 20, 2015, senators introduced a bill aimed at strengthening the protection of property rights. This bill, which seeks to combat the unauthorized occupation of real estate, is structured around two main objectives. Firstly, it aims to prevent such situations, and secondly, it intends to establish a procedure in cases of unauthorized occupation.
The bill stipulates that, from the date of its entry into force, any occupation of a building free of charge must be formalized by an agreement signed between the occupant and the property owner. This agreement must include a commitment from the occupant to maintain the building, while the owner must commit to providing suitable housing.
The bill also outlines the termination of unauthorized occupation. When an occupant wishes to vacate the premises, they must notify the owner by registered letter with acknowledgment of receipt and must vacate the building within thirty days of the date of receipt of the letter. Similarly, when the owner intends to regain possession of their property, they must notify the occupant by registered letter with acknowledgment of receipt. The occupant will then have thirty days from the date of dispatch to vacate the premises. After this period, the owner may initiate the legal proceedings provided for by the law establishing the enforceable right to housing (DALO law), extended to include unauthorized occupation.
The second part of this proposed law essentially consists of extending the DALO law to cases of unauthorized occupation. The owner, tenant, or occupant free of charge may therefore appeal to the prefect to issue a formal notice to the occupant to vacate the premises. This occupant may be sentenced to one year in prison and a fine of €15,000. The text also aims to establish a 48-hour period, starting from the moment the owner, tenant, or occupant (even if free of charge) discovers the occupation by a third party, to have the offense officially recorded by a judicial police officer. If a judge confirms the unauthorized occupation, and at the owner's request, the prefect may use force to evict the unauthorized occupant from the property.
In the same vein, a bill was introduced on May 28, 2015, which seeks to extend to seven days, instead of 48 hours, the period during which the offense of illegally occupying someone else's home can be officially recorded (Article L 226-4 of the Penal Code, allowing for immediate eviction).
Accessibility
The bill ratifying Ordinance No. 2014-1090 of September 26, 2014, concerning the accessibility of public establishments, public transportation, residential buildings, and public roads for people with disabilities, was adopted by the Senate on June 2 and sent to the National Assembly, which examined the text in early July. The ordinance was ratified by Law No. 2015-988 of August 5, 2015.
This ordinance aimed to update the system established by the Law of February 11, 2005, for equal rights and opportunities. In this regard, it should be noted that the ordinance notably created accessibility plans for public establishments that did not comply with accessibility standards as of December 31, 2014.
JURISPRUDENCE
A suspensive condition without a fixed term stipulated in the preliminary sales agreement
3rd Civil Chamber, May 20, 2015 (No. 14-11.851) FS-PB:
By a private agreement dated November 1, 2004, a landowner sold a plot of land to a buyer subject to the suspensive condition of obtaining a zoning certificate. On May 21, 2010, the buyer sued the seller's heirs to compel the sale to be finalized.
The Court of Cassation upheld the appeal court's decision rejecting this claim. The appeal court had noted, firstly, that the zoning certificate had only been requested several years after the signing of the sales contract and after the proceedings had commenced. Secondly, it had held that the stipulation of a suspensive condition without a fixed term could not, in itself, render the obligation perpetual. Thus, in the absence of price indexation and revaluation coefficient, the court held that the parties had the common intention of setting a reasonable time for the fulfillment of the suspensive condition and deduced that the promise of sale was void.
Procedures for appointing the condominium manager
3rd Civ. April 15, 2015 (n°14-13.255) FS-PB:
The owners of a unit in a building subject to condominium ownership brought an action against the condominium association and the property manager seeking to have several decisions adopted at a general meeting, including the decision appointing the property manager, annulled. This claim having been dismissed by the Court of Appeal, the owners appealed to the Court of Cassation.
The Court upheld the lower court's decision, finding that the property management contract did not fall within the categories of contracts and agreements covered by Article 21 of the Law of July 10, 1965, as amended prior to the Law of March 24, 2014. According to the Court, the Court of Appeal, by failing to apply Article 19-2 of the Decree of March 17, 1967, as amended by the Decree of April 20, 2010, correctly concluded that, notwithstanding the lack of competitive bidding and consultation with the condominium council, the decision appointing the property manager had been validly adopted.
It should be noted that since the entry into force of the law of March 24, 2014, the appointment of the property manager must be preceded by a competitive bidding process. This decision therefore has limited scope, as it is only intended to apply to situations that arose before the entry into force of the ALUR law.
Appeal by the trustee against an administrative decision
CE 6 May 2015 (no. 366713):
In this case, the president of the CNIL (French Data Protection Authority) had ordered a condominium association to remove the CCTV camera it had installed in the security guards' workstation, where the control screens for cameras located throughout the rest of the building were also located. Finding that the association had not complied with the order, the CNIL's restricted panel, by decision, ordered the data controller to cease the continuous processing of this data and imposed a fine of €1 on the association, along with the additional penalty of publication. The condominium association requested the annulment of this decision.
However, the Council of State did not rule on the annulment of the decision itself, but rather on the standing of the property manager, who had filed the application on behalf of the association. In this regard, the Council reiterates that, in cases where authorization is required, the property manager, acting on behalf of the condominium association, is required to have, under penalty of inadmissibility of their claim, formal authorization from the general meeting of co-owners to initiate legal proceedings on its behalf. This authorization must specify the subject matter and purpose of the litigation. As the property manager's action was not preceded by any prior formal authorization, the Council considers that they lacked standing to sue.
Subsoil ownership
3rd Civil Chamber, May 13, 2015 (No. 13-27.342) FS-PB:
Deep within a plot of land belonging to the plaintiffs was a cellar accessible at ground level only from the neighboring garden, which belonged to the defendants. Believing that the seller of the property belonging to the plaintiffs held only a right of use over this cellar, which had lapse upon the sale to the plaintiffs, the plaintiffs sued their neighbors and the seller to have the latter's right of use declared extinguished and to have the plaintiffs' occupation of the cellar recognized as unlawful. The Court of Appeal held that the defendants were the owners of the cellar.
The Court of Cassation rejects the appeal against this decision insofar as "the presumption of ownership of the subsoil in favour of the landowners can only be challenged by contrary evidence resulting from a title, whoever holds it, or from acquisitive prescription".
Rent indexation
3rd Civil Chamber, May 20, 2015 (No. 13-27.367) FS-PBRI:
In this case, commercial premises were leased starting on February 2, 2006. On April 20, 2010, the tenant requested a rent review, which, after application of the indexation clause, amounted to €3,815,439. The tenant proposed that the rent be set at €3,256,335 and brought the matter before the rent court.
This request was rejected by the Court of Appeal and then by the Court of Cassation. According to the Court, in the absence of any change in local market conditions that had resulted in a variation of more than 10% in the rental value, there was no basis for a rent review under Article L. 145-38 of the French Commercial Code, which, by way of exception to the rule set forth in Article L. 145-33 of the same code, excludes the general principle of using rental value as a basis for rent adjustments.
Landlord's cooperation with subletting
3rd Civ. April 15, 2015 (n°14-15.976) FS-PB:
In this case, a landlord had granted a commercial lease to a hotel management company. Nine years later, he issued a notice of termination with refusal to renew, citing the conclusion of sublease agreements which, according to him, were irregular due to the landlord's lack of involvement in the transactions. The Court of Appeal upheld this termination.
The Court of Cassation, on the other hand, held that when the leased premises are intended for a hotel residence business consisting of providing guests with accommodation and services such as the rental of furnished or equipped apartments, and subletting is the very purpose of the tenant's business, the landlord is not required to participate in the subletting transactions.
Accumulation of real estate agent's remuneration
1st Civ. April 9, 2015 (n°14-13.501) FS-PB:
A real estate agent was entrusted with a search mandate for a property for which he already held a sales mandate. On the same day, the seller and the buyer entered into a preliminary sales agreement, with the agent receiving a commission of €20,000. The sale was ultimately finalized by a new preliminary sales agreement, concluded after the seller withdrew from the agreement. The real estate agent then sued both the seller and the buyer for damages. The Court of Appeal dismissed this claim on the grounds that a real estate agent cannot receive commissions from both the seller and the buyer.
With reference to Articles 6 of Law No. 70-9 of January 2, 1970, and 73 of Decree No. 72-678 of July 20, 1972, in their version applicable to this case, the Court of Cassation considers that no provision of these texts prevents a real estate agent from holding a mandate from a seller and a mandate from a buyer for the same transaction. On the contrary, according to the Court, the right to a commission exists for each mandate provided that the requirements prescribed by these articles are met.
