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PROPERTY

Five things to know about renting out your French property

Many people who buy a second home in France hope that as well as it being a pleasant bolthole, they will also generate some rental income. But it's a bit more complicated that just posting an advert and waiting for the money to roll in.

Five things to know about renting out your French property
Your French holiday home could be a source of income. Photo: AFP

While of course renting out your holiday home – either on a long-term or a short-term basis – is perfectly legal in France, there are several things that you need to consider first.

1. Short-term or long-term rental?

For most people who want to keep some time for themselves at their place in France, short-term rentals are the most attractive option. However, the income stream is always a little unreliable, so if your circumstances have changed and you need to make some money then long-term rental might be the better option.

There’s no limit to how many days per year you can rent your second home for, but if it’s a short-term lease, the same tenant cannot stay for longer than 90 days.

If your property is furnished, you also cannot offer long-term rental agreements of less than one year (or three years if it is unfurnished), so you’re looking at a reasonably long-term commitment.

If you’re planning to rent out your place on a long-term basis, be aware that the law in France is heavily weighted in the tenant’s favour. If you end up with a bad tenant you may find it difficult to get rid of them (especially in winter, the law prevents landlords from evicting tenants who are in arrears between the months of November and March). 

2. Register the property

If you decide to rent out your home, you will need to tell your local mairie and register the property as a rental property. You will also need to apply for a ‘non professional SIRET number’ to prove that you are properly registered as offering rental accommodation. This can be done at your local tax office.

If your property is in a zone tendu (an area where there is a housing shortage) the mairie may require authorisation to make the change, and there may be charges involved. You can find a list of zones tendu here.

3. Tax

You may think that if your permanent residence is outside France, you don’t need to contact French tax authorities. But the law states that if you’re earning money from your French property then you will have to start making annual tax declarations.

There are some quite generous tax breaks for landlords in France, meaning that you might end up not having to pay very much, but you still need to hand over tax declarations. You will need to tell the tax authorities in your home country about this income as well, but double taxation deals between France and most other countries mean that you won’t be taxed twice on the same income, you simply need to tell two sets of tax authorities about it.

As the building owner, you will continue to pay taxe foncière even if it’s rented out, but if you lease on a long term-basis the taxe d’habitation will then be paid by the tenant.

READ ALSO Essential information about the French annual tax declaration

4. Professional landlord or amateur?

This isn’t about whether you conduct yourself in a professional manner, it’s about what type of accommodation you are renting and the type of tax you pay.

With income from a rental property you either pay tax under the Micro regime or the Réel regime.

There are quite a few rules around this, but basically Micro is more straightforward but Réel, which involves declaring yourself as a professional landlord, has more financial advantages such as a lower tax rate and deductions for mortgage costs. It is nonetheless a complicated process, so we would suggest you get professional advice.

5. Extra costs

As well as taxes on your income from the rental, there are extra costs to consider. Insurance is not compulsory for landlords in France but is strongly advised.

It’s not just to cover breakages but to protect yourself if, for example, your tenant seriously injures themselves falling down the stairs and launches legal action against you. This type of scenario will not be covered by standard home insurance, and some home insurance contracts specifically forbid renting the property out, so you will need specialist landlord insurance.

If you are not based near the property you will also need to consider who will clean the place between rentals and arrange for keys for the tenants. In some areas, especially those popular with tourists, there are agencies that provide these type of services but in other places finding someone to do this kind of irregular work with short notice can be difficult.

And finally . . . a word about Airbnb

Renting out your property via Airbnb is perfectly legal, with some people using the platform for year-round holiday lets and others just letting out their property for a few weeks of the year while they themselves are away.

However, local authorities in several parts of France, including Paris and Strasbourg, have enacted special rules to curb the ‘Airbnb effect’ that was pricing so many local people out of the rental market. So make sure you check local rules first if you plan to use Airbnb. 

Member comments

  1. Wondering how all this applies to doing vacation rentals on Air BnB? And if you have to net a specific amount before paying tax on earnings?

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PROPERTY

What restrictions are there on foreigners buying property in France?

Purchasing property in France as a foreigner has several extra hurdles - here's a look at some of the restrictions and other challenges you will want to be aware of beforehand.

What restrictions are there on foreigners buying property in France?

There are several things to consider before buying property in France. You may want to visit the area during different seasons to be sure that you enjoy it rain or shine, and you will want to consider how much you would end up paying in property taxes, as well as whether or not it will be a main residence or second home.

The law

Let’s start with the good news – there are no official rules in France against non French-citizens purchasing property, neither is there any requirement to be resident in the country in order to buy property – indeed foreign second-home owners make up a small but significant slice of the property market.

Revealed: Where in France do foreigners buy second homes

But in practice there are a number of challenges foreigners face when buying French property, especially if they need a mortgage.

Property sale process

Before making your decision, learn the steps to buying property in France and the expected timeline.

Roughly, there are five steps: making your offer, a cool-off period, signing a ‘Compromis de Vente‘, providing the notary (notaire) with your deposit, and signing the ‘Acte Authentique de Vente‘ (deed).

READ MORE: How long does it normally take in France to buy a property?

The French property purchase system is likely to be different to what you are used to – especially the role of the notaire.

Also Americans might be surprised to learn that in contrast to the US system of having a realtor who guides you through the entire process, in France – as in most of Europe – buyers are expected to do much work of the house-hunting work themselves.

Bureaucracy

There are a few extra steps added if you need a mortgage, but generally all foreign buyers should be prepared to have a valid ID (passport), as well as other documents including your marriage and/or divorce papers (to demonstrate your civil status).

At some point in the process, you will need to open a French bank account, even if that ends up just being for utilities after you’ve made the purchase. The earlier you can open a French bank account, the better.

You should know that purchasing property in France does not automatically give you residency rights. If you are not an EU citizen, then you will need a residency card or visa to spend extended time in France.

READ MORE: EXPLAINED: What type of French visa do you need?

Getting a mortgage

While there are no laws stopping foreigners from buying property in France for most people the biggest obstacle is getting a mortgage, as there are conditions that many foreigners cannot fulfil.

In France, the vast majority of loans are guaranteed by banks, and one bank’s offer to you may not be the same as another’s. You are free to contact several banks to find the best offer for your situation.

READ MORE: French property: How to get a mortgage in France

While there are alternative options besides banks, such as a ‘vendor loan’ (prêt vendeur) – where one sets up a credit contract directly with the seller of the property via a notary – this is much less common.

The biggest issue is that banks will require that foreigners prove that they will be able to legally remain in France for the entirety of the repayment period. As such, it can be very challenging those on short-term residency cards, to be accepted for a mortgage loan.

For the same reason, it is very difficult for non-residents to get a mortgage via a French bank.

Foreigners can also consider international options, or independent, specialised mortgage brokers, like those geared toward expats – however some have minimum income levels and minimum property purchase prices.

Another point to keep in mind is the fact that French banks also look favourably on ‘stable’ employment statuses, such as CDI (indefinite) work contracts, which, by their calculation, reduce risk of unemployment. It’s not impossible to get a mortgage if you are self-employed, but it’s harder.

Additionally, age can be a factor – lenders tend to be less likely to award mortgages to those nearing or above retirement age.

Americans – The situation is even more challenging for Americans in France, as banks can be reticent about working with Americans due to FATCA – which, according to the US dept of treasury, requires that “foreign financial institutions (FFIs) report to the IRS information about financial accounts held by US taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.”

This has forces French banks to collect and maintain more information about their American customers. If the banks fail to disclose information to the IRS, they risk exclusion from the US market as well as penalties.

In a survey about the effects of citizenship-based taxation on Americans in France, one respondent said: “Multiple banks have denied me a mortgage because I am American.

“We used the services of a mortgage broker and when we went in for the final presentation a few weeks ago, only one out of the many banks queried offered us a mortgage, and it wasn’t even a good offer.”

READ MORE: Divorce, stress and fines: How citizenship-based taxation affects Americans in France

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