In a judgment which has only been published in French, the court ruled that French laws requiring landlords to seek authorisation from the local authorities before offering properties for short-term let in certain municipalities are compatible with the EU single market.

The case arose from a dispute concerning Cali Apartments SCI and HX, who each own a studio apartment in Paris which had been offered for rent on a website and repeatedly been let for short periods without the required authorisation.

A regional court and subsequently an appeal court ordered both landlords to pay a fine for breach of the French Construction and Housing Code and ordered that the use of the properties in question be changed back to residential.

The code provides that, in municipalities with more than 200,000 inhabitants and in the municipalities in Paris’ three neighbouring departments, the repeated short-term letting of furnished accommodation to a transient clientele which does not take up residence there constitutes change of use and is subject to prior authorisation.

It also provides that that authorisation, granted by the mayor of the municipality in which the property is located, may be subject to an offset requirement in the form of the concurrent conversion of non-residential premises into housing.

A decision adopted by the municipal council sets the conditions for granting authorisations and determining the offset requirements by quartier (neighbourhood) and, where appropriate, by arrondissement (district), in the light of social diversity objectives, according to factors including the characteristics of the markets for residential premises and the need to avoid exacerbating the housing shortage.

In the context of appeals brought by the two owners against the judgments delivered by the appeal court, the Court of Cassation made a reference to the CJEU for a preliminary ruling to ascertain the compatibility of the national legislation in question with Directive 2006/123 on services in the internal market.

In its judgment, the Grand Chamber held that the authorisation scheme meets the requirements set out in Section 1 of Chapter III of Directive 2006/123, and in particular in Article 9(1) and Article 10(2) of that directive, which requires an assessment, first, of whether the very principle of establishing such a scheme is justified, in light of Article 9 of that directive, and, then, of the criteria for granting the authorisations provided for by that scheme, in the light of Article 10.

The court noted that the legislation in question is intended to establish a mechanism for combating the long-term rental housing shortage, the objective of which is to deal with the worsening conditions for access to housing and the exacerbation of tensions on the property markets, which constitutes an overriding reason relating to the public interest.

It further found that the national legislation concerned is proportionate to the objective pursued. Its material scope is limited to a specific letting activity, it excludes from its scope housing which constitutes the lessor’s main residence, and the authorisation scheme which it establishes is of limited geographical scope.

In addition, the objective pursued cannot be attained by means of a less restrictive measure, in particular because an a posteriori inspection, for example by way of a declaratory system accompanied by penalties, would not enable authorities to put an immediate and effective end to the rapid conversion trend which is creating a long-term rental housing shortage.