To Rent, or Not to Rent? That is the Question

I’ve always been of the opinion that no government should dictate who I can let stay in my property, regardless of whether a “rent” is received or not. I don’t see how it’s their right to enforce something like that. In a multi-family residence with bylaws, determined by the owners, or even the management company, that’s another matter, because an owner must adhere to the bylaws, and the bylaws are created by democratic voting, so in effect, they are governing themselves. This gives the owners a way of maintaining harmony in the building, and to this I agree—as an owner I’d have a voice.

In New York City, about 75% of the properties are “co-ops.” Co-op ownership means you acquire shares in a corporation that owns the building. When you own a condo, you own your individual unit along with a portion of the common areas…which is the case in France. Condos in New York typically come with a higher price tag but have lower monthly fees. Co-ops, while often cheaper initially, involve higher monthly costs and a very rigorous approval process—the Board of Directors must actually approve your purchase, which often leads to discrimination. They are not required to divulge the reason for a rejection! In addition, the bylaws can be very strict. For example, the co-op we once owned in the West Village of Manhattan would only allow rental of the property for two years, and for the privilege of renting, we paid a fee of one-third of the monthly dues. This increased the rent for the tenant, who also had to have board approval. Short-term rental was absolutely forbidden.

The battle between landlords and city rental law restrictions is worldwide. It might not have started with Airbnb, but it was certainly exacerbated by the popularity of the rental portal. The company, now a six billion dollar company, had modest beginnings. Brian Chesky and his buddy, Joe Gebbia, living in San Francisco, couldn’t afford his rent, but they had a bright idea. Coinciding with the Industrial Designers Society of America conference, which resulted in a shortage of hotel rooms, the pair seized an opportunity and turned their rental home into a bed and breakfast, providing air mattresses for guests to sleep on and Pop-Tarts for breakfast. That was just the beginning of Airbnb…clearly because Chesky and Gebbia weren’t the only guys looking to make a buck from their property. Plus, it was 2008, when more and more people were able to work remotely using the internet, creating the need for more and more transient housing.

From my perspective, this is a key factor. We now live in a very global and mobile world. According to the Pew Research Center, “About a third of U.S. workers who can work from home now do so all the time.” What this means is that they can also work from anywhere and have multiple homes. Multiple homes can get very expensive and renders the property vacant part of the time—so generating a revenue when not using the property, by renting it and providing accommodations to someone else, is a very intelligent way of managing the asset.

The battle with Airbnb-style short-term rentals is multi-faceted. The cities got upset because they are facing serious housing shortages and are seeking solutions. And they weren’t able to collect taxes like they can from the hotel industry. Hotels got upset because people preferred staying in homes with amenities (such as kitchens and washing machines) to hotels. Neighbors got upset because transient strangers were entering and leaving their buildings, often with suitcases and making a lot of noise.

The other side of the coin we discovered is the convenience of renting an Airbnb! Don’t be fooled into thinking that the very people complaining about the short-term rentals aren’t also the ones taking advantage of them when they are traveling!

In France, the rental laws are enforced (or not) by each municipality. Paris is the strictest of all—the most touristed city in the world is also the toughest in which to find short-term housing. Nice is right behind it. In an article by Le Figaro, “Seasonal rentals have become enemy number 1.”

According to Explore Nice Côte d’Azur reporting on July 11th, tourist homes and furnished rentals in Nice saw their overnight stays increase by +16% and +18% respectively compared to May 2023. The upturn was also seen in hotels, which gained +9% in overnight stays and +3 occupancy points. We are not surprised.

France is renowned for its abundance of second homes, with nearly 1 in 10 properties serving as holiday residences. Both French nationals and international buyers pursue their dreams of owning a home by the sea or in the mountains. Popular areas for these second homes include the Breton coastline, where people enjoy fresh seafood and cider, the Alps with their picturesque chalets, and the sunny Riviera.

A 2021 study by the National Institute of Statistics and Economic Studies (INSEE) revealed that these properties constitute approximately 10% of all homes in the country. Data from 2017 indicated that there are 3.2 million second homes in France, with around 90% owned by French residents and the remaining 320,000 by foreigners. The largest group of foreign second-home owners are British, followed by Belgians, Italians, and Swiss. These homes are predominantly found in specific regions, with over a third (33%) located in mountainous areas and about 18% on the coast, particularly along the west coast and the Mediterranean.

Since 2022 in Nice, owners wishing to change the use of their property (from residential to commercial) in order to obtain the City’s right to offer short-term rentals (excluding primary residences) have had to prove that the change of use is authorized in their condominium bylaws. This in itself, the classification of the property, is questionable by lawyers and lawmakers—why does a residential property need to be deemed commercial in order for it to be offered for short-term accommodation?

The city administrators did not question the right of this change of usage in their need to find long-term housing and satisfy the tax authorities, the hoteliers and the residents who object to the transiency in their buildings. Instead, they used the change of usage regulation to considerably reduce the number of authorizations, with nearly 70% of requests having been refused,” as the City Council stated in a press release.

Some of our clients experienced an outrageous misuse of the power—even when their condo rules allowed the rentals, the city rejected their request…just because they could. However, the Nice administrative court has put a stop to this regulation, annulling it outright.

“This is an incomprehensible decision. At a time when the deputies have just adopted on first reading a text that attacks the tax niche of furnished tourist accommodation, when our country is facing a housing crisis, and when our services are contacted daily by co-owners complaining of nuisances caused by the proliferation of furnished tourist accommodation, the Administrative Court has gone completely against the grain,” says an indignant Christian Estrosi, Mayor of Nice.

The legal stumbling block was a “disregard for the right of ownership guaranteed by the Constitution,” according to a press release from the administrative court this past February. This provision “discretionarily subjects this authorization to the prior agreement of the general meeting of co-owners of a building, even though the co-ownership’s bylaws do not provide for it, notably in cases where the bylaws are silent on the question of furnished tourist rentals, or in the absence of co-ownership bylaws,” explained the court.

Xavier Demeuzoy, a lawyer specializing in the regulation of furnished tourist rentals, commented: “The Nice court’s decision is a reminder to elected officials that the tightening of short-term regulations is limited by constitutionally protected rights, starting with the sacrosanct right of ownership. The Nancy administrative court handed down a similar decision on April 25, 2023, pointing out that this provision allows “the general meeting of co-owners to disproportionately infringe the rights of each co-owner.”

The mayor of Nice intends to appeal this decision, but I am thrilled at the court’s viewpoint that an owner has rights over their own property!!

In practice, few co-ownership bylaws expressly authorize or prohibit short-term furnished tourist rentals. Le Figaro claims that short-term rentals have existed since 2015, but I can attest to the fact that they have existed long before that, and co-ownership bylaws are 50, 60 or even 80 years old. The Nice regulations, which required co-ownership approval, appeared to be a disguised ban, closing the door on any authorization, given that no co-ownership in France would be in favor of issuing such an authorization. The First Civil Chamber of the French Supreme Court (Cour de Cassation) handed down a ruling in January specifying that short-term activity was not necessarily a commercial activity, and therefore contrary to the bourgeois provisions of a co-ownership bylaw.

Yeah! This is good news for homeowners who wish to provide accommodation when they are absent from their properties and perhaps a bit of a slap on the wrist to city administrators who are using these homeowners to reach their goals to provide more long-term housing, appeal to their constituents so they will more easily get re-elected and who aren’t willing to look at the real reasons they have a housing shortage…which is NOT because of short-term rentals.

The REAL reasons are 1) fewer building permits being issued (which may be connected to changes in property tax rules), 2) the rising cost of building materials and 3) tougher environmental legislation. Short-term rentals are an easy scapegoat for legislators who can’t solve these problems…and who suffers? The average homeowner.

To all of you who submitted a request for short-term rentals and were rejected, try again. This may be your lucky day!

Note: For more information, visit the official government website.

A bientôt,