Residential sector: rent control on initial rent levels and listings

In the residential sector, a control system on initial rent levels was introduced by the so-called “ALUR” Law No. 2014-266 dated 24 March 2014. It was however a failure since administrative courts cancelled the prefectoral orders issued in application of this law in Paris and Lille[1].

It is in this context that the so-called “ELAN” Law No. 2018-1021 dated 23 November 2018[2] introduced a new rent control program on initial rent levels on an experimental basis which was extended until 23 November 2026[3].

Each local authority must submit its application to experiment this program in all or part of its territory where rental tension is high. To be able to apply the rent control program, four conditions must be met:

• There must be a significant difference between the average level of rent observed in the private rental sector and the one observed in the public housing sector;
• There must be a high average rent level;
• There must be a low rate of housing projects over the past 5 years;
• There must be limited prospects for housing production.

In the areas concerned by the rent control system, rent caps are applied. The local authorities set the reference rents by area and by type of accommodation. The rent (excluding charges) may not exceed the increased reference rent, so-called “loyer de reference majoré”, which is the average rent increased by 20%.

Currently, rent control applies in:

• Paris[4];
• Lille, Hellemmes and Lomme[5]
• two areas of the Greater Paris region: the areas so-called “Plaine Commune”[6]and “Est Ensemble”[7]
• Lyon and Villeurbanne[8].

This list is expected to grow. Indeed, the rent control program is expected to come into force in Bordeaux[9] and Montpellier[10] later this year. Furthermore, the 3DS law has extended the deadline for local authorities to submit applications to implement the rent control on initial rent levels until 23 November 2022[11].

Obligation to mention the control on initial rent levels in rental listings

As of 1st April 2022, listings for properties to rent subject to the rent control on initial rent levels published by professional agents must state[12]:

• the amount of the monthly base rent (“loyer de base”);
• the amount of the increased reference rent (“loyer de référence majoré”): this amount is the maximum rent authorised by the rent control program;
• the amount of any rent supplement (“complément de loyer”): landlords are entitled to add this supplement when special comfort and location characteristics justify it. This supplement can enable landlords, if certain conditions are met, to raise the rent above the increased base rent.

The corresponding amounts must be preceded by the indication "area subject to rents control" (“zone soumise à encadrement des loyers”).

It is also important to note that the font size of the amount of the monthly base rent must be larger than the increased reference rent and the potential rent supplement.

Real estate agents must take necessary actions in order to be ready to comply with this new obligation.

[1] Administrative Court of Appeal of Paris, 3rd ch., 26 June 2018 No. 17PA03805 / Administrative Court of Appeal of Douai 2nd ch., 3 July 2018 No. 17DA02260

[2] Article 140, I of the Law No. 2018-2021 of 23 November 2018 on changers in housing, land management and digital technology (ELAN)

[3] Article 85, 1° of the “Differentiation, Decentralisation, Deconcentration” (3DS) Law No. 2022-217 dated 21 February 2022

[4] Prefectoral order dated 28 May 2019

[5] Prefectoral order dated 30 January 2020

[6] Aubervilliers, La Courneuve, Epinay-sur-Seine, L’Ile-Saint-Denis, Pierrefitte-sur-Seine, Saint-Denis, Saint-Ouen-sur-Seine, Stains and Villetaneuse

[7], Bobigny, Bondy, le Pré-Saint-Gervaux, Les Lilas, Montreuil, Noisy-le-Sec, Pantin and Romainville

[8] Prefectoral order dated 29 September 2021

[9] Decree No. 2021-1145 dated 2 September 2021

[10] Decree No. 2021-1144 dated 2 September 2021

[11] Article 85, 2° of the 3DS Law No. 2022-217 dated 21 February 2022

[12] Article 2 of the order dated 26 January 2022 amending the order dated 10 January 2017 on consumer information by professionals involved in a property transaction