Published on: December 13, 2024 | Article No: 281 | By: @rprasanth_kumar
Rent adjustments in France are regulated by specific rules to ensure fairness. Landlords can revise rents annually but limits based on the location, IRL, and energy efficiency ratings impose restrictions. This guide outlines the essentials of rent increases during rental contract renewals, and for properties requiring energy upgrades. Stay informed to navigate rent changes effectively and avoid any surprises.
Annual Rent Revisions by Landlord
Each year, landlords (or rental agencies) have the option to increase the rent once a year, if a clause in the rental agreement provides for it.
- This revision of rent must be based on the Rent Reference Index (L’indice de référence des loyers – IRL), which is published quarterly by INSEE.
- The IRL is calculated as the average change in consumer prices (excluding tobacco and rent) over the past 12 months.
- The date of the IRL to be taken into account is the date indicated in the Rental contract. This may be the annual end date of the Rental contract or another date agreed between the landlord and tenant.
- If the date of the IRL to be taken into account is not indicated in the Rental contract, it is necessary to take the date of the last IRL published by the INSEE (Institut national de la statistique et des études économiques) at the time of signing the Rental contract.
- For a furnished rental, if the charges are payable in lump sum, this amount may be revised each year according to the same rules as those of the rent revision.
- For the revision to take effect, the landlord must formally notify it. The increase in rent only applies from the month of notification. A template for the notification letter to tenants is available.
The ANIL simulation Tool makes calculating rent adjustments simple: Use the ANIL Calculator.
The maximum permitted IRL variation is:
- 3.5% in mainland France,
- 2% in Corsica,
- 2.5% in Overseas French Territories.
Did you know?: Since August 24, 2022, landlords are prohibited from increasing rents for properties classified F or G in their Energy Performance Certificate issued after an evaluation known as Diagnostic de performance énergétique (DPE). These rules apply to all rental contracts signed after August 24, 2022, and will progressively affect existing contracts upon renewal. For Overseas Territories (Outre-mer), this measure takes effect July 1, 2024.
Rent increase for Improvement Work by Landlord
The Rental contract may include a work clause, allowing for rent increases during the year if the landlord carries out any improvement works. This increase must be mutually agreed upon and clearly specified in the rental contract.
Additionally, if the landlord performs any energy-saving renovations in the apartment or in the common areas of the building, they may request a financial contribution from the tenant (in addition to rent and charges). But, it must be negotiated and agreed upon. This is known as the energy savings sharing contribution (contribution au partage des économies d’énergie).
Rent Control based on property location
Most rental contracts automatically renew after the initial term (3 or 6 years for unfurnished rentals, 1 year for furnished rentals). However, landlords may request a rent increase at renewal, provided they notify tenants at least six months in advance.
The allowable rent increase depends on the property’s location:
- Outside Zone Tendue: If the rent is underpriced compared to similar properties nearby, landlords may do a gradual rent increase.
- Inside Zone Tendue: Two types of rent control measures are applicable:
- Rent Evolution Control (encadrement de l’évolution des loyers): Limits increase during renewals.
- Rent Level Control (encadrement du niveau des loyers): Sets a cap on the maximum rent amount.
- An online simulation can be done to know about the zones and the applicable rent limits.
Zone Tendue: Areas where the number of units offered for rent is much lower than the number of people who want to become tenants of a unit, to make it their main residence.
Did you know?: Landlords must justify the proposed rent increase, and it does not apply automatically. If tenants contest the increase, the landlord must refer the matter to the Departmental Conciliation Commission (Commission départementale de conciliation) for mediation. If no agreement is reached, the landlord must file a case with the judicial court before the Rental contract ends. Otherwise, the rent increase will not apply.
How to Calculate Rent Revision?
The Rental Reference Index (IRL) is used as the basis for calculating rent adjustments. The annual increase in rent is capped at the year-on-year change in the IRL.
To calculate the monthly rent adjustment, the landlord (or real estate agency) needs the following three elements:
- Current monthly rent amount.
- IRL for the reference quarter (specified in the Rental contract agreement or published by INSEE, at the time the Rental contract was signed).
- IRL for the same quarter in the previous year.
The formula for the calculation is as follows: New Rent = Current Rent × (New IRL for the Reference Quarter ÷ IRL for the Same Quarter in the Previous Year).
Example: A rental contract is signed in mainland France on October 10, 2023, sets the monthly rent at €1000. This rent can be adjusted on October 10, 2024.
- The IRL for the 3rd quarter of 2023 (the latest published index at the time of the Rental contract signing) is 141.03.
- The IRL for the 3rd quarter of 2024 (the latest published index at the time of adjustment) is 144.51.
- On October 10, 2024 (the first rent adjustment date), the new rent is calculated as follows: €1000 × (144.51 ÷ 141.03) = €1024.65.
- The new monthly rent will be €1024.65.
Key Things to Keep in Mind
- Not Automatic: Landlords must notify tenants about the rent increase.
- Not Retroactive: The increase in rent only applies from the month of notification.
- Capped Increase: The adjustment cannot exceed the IRL’s variation and Zone Tendue regulations.
- Exceptions: Since August 2022, no rent increase is allowed for properties classified F or G in energy efficiency (based on DPE).
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DISCLAIMER
Any finance-related information shared is not professional legal, tax, or investment advice. The information provided is of an educational and general nature and is not investment advice within the meaning of Articles L. 321-1 and D. 321-1 of the French Monetary and Financial Code. Investment carries risks of loss and past performance does not guarantee future performance. Please consult a financial advisor for any professional advice.