For several years now, short-term rentals have been criticised for the strain they place on the rental stock. Targeted by a number of laws, most notably the latest Finance Act, which significantly altered the tax rules, a loophole has been opened by a ruling of the French Supreme Court (Cour de Cassation). This was done through a decision concerning the clause d'habitation bourgeoise, but what is it?

What is the clause d'habitation bourgeoise?

This clause may be included in co-ownership by-laws to govern the use of private property. If it is ordinary or non-exclusive, it is possible to use the dwelling for the occupants' habitation or for the exercise of a liberal professional activity. If, on the other hand, the clause is exclusive, professional activity is prohibited!

How does this affect short-term lets?

There are some specific aspects to short-term letting, including when it is done via AirBnb, particularly in terms of the tax regime. In this case, the Finance Act 2024 has radically reformed the tax system. This type of use is sometimes considered to be parahospitality and can therefore be likened to a commercial activity. It is for this reason that some co-ownerships have taken legal action against owners who use their property in this way. These disputes have led the Court of Cassation to rule, but in what way?

The case law of the Cour de cassation!

In a ruling handed down on 25 January 2024, the Court of Cassation ruled that short-term furnished letting is not a commercial activity if certain conditions are met. In fact, it would be compatible with the "bourgeois dwelling" clauses in co-ownership by-laws. According to case law, the commercial nature of the business is linked to the provision of ancillary hotel and para-hotel services. In their absence, the activity remains purely civil. According to the tax code, the 4 services are :

• Breakfast,
• Regular cleaning of the premises,
• Supply of household linen,
• Receiving customers.

However, this does not mean that co-ownership regulations cannot restrict this right. It is possible to introduce a more restrictive clause, but in all cases, article 9 of the law of 10 July 1965 stipulates that each co-owner must not infringe the rights of the other co-owners of the residence. There are many tax and other constraints on short-term lettings. To find out more, don't hesitate to contact a specialist. The wealth management advisers at Wealth A7 can help you - contact us!

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