Property - Long Term Lettings In France
Much has been written about short-term or holiday lettings, the best type of property for this and the best way of managing it. However, less is heard about long-term lets. These investments appeal to buyers who want to get on the property ladder in France, but for one reason or another are not able to use their property for several years (here we are looking at unfurnished accommodation, the furnished variety being subject to different rules).
As in the UK, there are laws governing rentals and protecting the rights of tenants. Contracts are initially for a period of three years, but if at the end of this time both parties are in agreement, the lease can be extended, again for a three-year period.
If the tenant wishes to terminate the agreement, he or she must give two or three months’ written notice, depending on the terms of the rental agreement. It is possible to have an agreement drawn up for less than three years, but the owner must confirm the end of the agreement in writing, again two or three months beforehand.
Deposits and rent
At the time of the initial agreement, an état des lieux is drawn up, a document giving details of the condition of the property. When the tenant leaves, the original document is checked against the condition of the property at that time. A deposit cheque of no more than two or three months’ rent is payable at the start of the term and any damage or noncompliance with the terms, such as failure to maintain the property in good decorative order, can be deducted before it is returned to the tenant.
The rent on an unfurnished property can only be increased once a year, on the anniversary of the agreement, and only in line with fixed indices. Even if a tenant vacates the property and a new occupant is found, the rent can only be increased if allowable work is carried out to the property before the new arrival takes possession, at a cost equivalent to one year’s rent.
If the property has not been let before, a suitable figure can be calculated by looking at similar properties in the area. For a rough guide, a month’s rent on an annual let is approximately equivalent of what you would expect to pay for a week in high season on a holiday let. Obviously this is only an estimation, but it can be a useful guide.
If it becomes necessary to terminate the agreement, the laws governing this are very much on the side of the tenant. For example, even if the period of the agreement expires and notice has been given that it will not be renewed, the owner cannot evict the tenant during the winter months. So, if an agreement terminates on, say, October 30, the tenant would have the right to remain, continuing of course to pay rent, until at least March 31 of the following year.
Even then, the only recourse if they refuse to leave would be to take them to court, a process that could take years rather than months. In exceptional circumstances (generally when the owner wishes to occupy the property personally) the tenant can be given six months’ notice in writing, but here again the same rules apply.
Having said this, the majority of owner/tenant relationships are amicable, but the exception always proves the rule and if you happen to be on the receiving end, the experience won’t be pleasant.
The other important point to consider if contemplating a long-term let is the costs involved. Initially, there is the drawing up of a rental agreement, best done by a notaire or an agent who is correctly registered. There will be fees to pay, and if the agent also compiles the état des lieux, there will be an additional charge. There will also be a fee for collecting rent and ensuring any repairs are carried out.
Apart from this, the owner is responsible for insuring the building or, in the case of an apartment, paying their share of the communal insurance. The movable contents are insured by the tenant.
Local taxation
The part of the local tax system that relates to the building (the taxe foncière) is payable by the owner, while the taxe d’habitation falls on the tenant. The rental agreement will stipulate who is responsible for which repairs.
Other expenses owners should be aware of concern the income received, and in some cases social security contributions. Allowable expenses can be deducted before the calculation of these, as can interest on any loan against the property.
It is important to research costs and to calculate your revenue carefully, while at the same time weighing up any potential downsides. If it is imperative that the property is free of tenancy at the end of three years, it may be better to risk a lower, less certain rental income through holiday or short-term lets.
• Patricia Smith, A La Carte Languedoc. Tel: 0033 (0)4 68 46 06 27 www.languedocproperties.com