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5 legal cases that will decide the future of Airbnb in Paris
Faced with a barrage of lawsuits, property owners are rigorously defending themselves in court alongside American platform Airbnb itself. Read on for an overview of the main proceedings in progress, courtesy of lavieimmo.com.
Paris City Hall has started a judicial guerrilla war against short-term rentals in the capital, whether by taking legal action against property owners or directly against Airbnb. It’s joined in its fight by tourism and real estate professionals, who criticize the platform for not respecting the same rules as they do all while performing similar duties. Although navigating these many legal proceedings can be difficult, lavieimmo.com has outlined everything you need to know about the 5 main cases related to Airbnb rentals in Paris and where each of them currently stands.
1. Ads without a registration number: the summary judgment
On May 7th, 2018, Paris City Hall issued an injunction against Airbnb for non-compliance with the law concerning registration numbers. Since December 1st, 2017, any lessor providing a furnished rental to tourists in the capital must have a registration number, as explained in Article L324-1-1-1 of the Tourism Code. As the law states, furnished premises rented out “repeatedly for short periods of time to temporary clients who do not elect domicile there,” are subject to prior declaration with a registration number.
However, many advertisements do not comply with this obligation. At the time, Ian Brossat, communist deputy mayor of Paris in charge of housing, estimated that 84% of the 50,000 ads on Airbnb in the capital were not properly registered. The City of Paris is therefore demanding that all rental ads not displaying their registration number be taken down.
Almost a year later, however, the City of Paris was sent back to the starting block. In a summary judgement dated March 5th, 2019, Le tribunal de grande instance de Paris (TGI), the High Court of Paris, dismissed the town hall, notably for lack of evidence.
In addition, the High Court of Paris ordered the city to pay Airbnb €10,000 for procedural costs. Paris City Hall has not appealed this decision. “An appeal was of little interest since another legal procedure had just been initiated (on February 8th, 2019) against Airbnb, for the same reason,” Paris City Hall told us.
Although this summary judgment is only provisional because it does not have “the authority of res judicata,” it nevertheless applies to the involved parties pending the decision of a trial judge.
2. Ads without a registration number: the declaratory judgement
Alongside the summary judgement detailed above, Paris City Hall initiated a legal procedure on February 8th, 2019. “Platforms such as Airbnb were already required to include the registration number obtained by landlords in advertisements for furnished tourist-targeted accommodation, but no sanctions were yet explicitly provided for,” explains the City of Paris. However, “in November 2018, the Elan law finally set a penalty, in the form of a civil fine of €12,500, for each ad without a registration number. Under these new terms, the City of Paris launched another procedure against Airbnb in February 2019, after having given Airbnb enough time to become aware of and comply with the new specifications introduced in the Tourism Code,” City Hall added.
On May 21st, 2019, a hearing was scheduled to take place, but the TGI postponed it to October. In the meantime, we await the European Court of Justice’s decision on the compatibility of French law with the Directive on electronic commerce (see below).
3. The Directive on services: procedures frozen in France pending the ECJ
On May 19th, 2017, two landlords were sentenced on appeal by the French justice system for having rented out (via civil real estate company Cali Apartments) accommodation in Paris on a full-time basis using Airbnb, without authorization and without prior declaration. According to French law, when residential rentals are converted into any sort of rental used for commercial purposes, including tourist rentals, office spaces, and shops, landlords have to have follow an administrative procedure for proper approval.
The landlords then filed an appeal, their lawyers considering in particular that the penalties under French legislation go against Directive 2006/123/EC of the “Directive on services in the internal market” (also called the Bolkestein Directive).
The Court of Cassation thus referred the matter to the Court of Justice of the European Union (ECJ) on November 15th, 2018. The issue here is whether the lessor is considered a service provider established in an EU Member State within the meaning of the “Directive on services”. If this is the case, it is important to know whether the requests for authorization and approval of the use of the premises comply with European law or not.
Pending the ECJ’s decision, the Court of Cassation implemented a stay of proceedings and postponed its ruling until December 10th, 2019. In the meantime, other French courts have also stayed proceedings on cases between property owners renting out an apartment on Airbnb and Paris City Hall. These cases are therefore “frozen”. As such, in an interim order dated January 17th, 2019, the TGI suspended its decision on a case (the City of Paris vs. SCI Panorama Immo) until the ECJ had ruled on these issues. In another case (the City of Paris vs. SARL Centre Paris), the Paris Court of Appeal also suspended its decision on February 14th, 2019, still pending the opinion of the ECJ.
4. Airbnb, a real estate agent or an electronic platform?
In this dispute, Airbnb defends itself against three real estate professionals: two companies, Hotelière Turenne and Valhotel, as well as Ahtop, the association for professional tourism and housing, one of the main federations in the sector. The latter believes that Airbnb operates like a real estate agent without complying with the regulations in force, and filed a complaint at the beginning of 2017. Said regulations fall under the Hoguet law of January 2nd, 1970, well-known to professionals in the sector. Under this French law, a real estate agent is considered to be any legal or natural person who engages in or assists, “even on an ancillary basis, in transactions relating to the property of others and relating to: the purchase, sale, search, exchange, rental or sublease, seasonal or otherwise, bare or furnished, of built or unbuilt buildings”. However, a real estate agent must also comply with certain obligations such as having a specific financial guarantee or obtaining a professional card.
But for Airbnb, this law does not apply. On June 13th, 2018, the investigating judge of the TGI referred the matter to the ECJ. The French judiciary wants to know whether or not Airbnb’s services fall within the scope of legislation as provided under the “Directive on electronic commerce”. The question is therefore whether the rules of the Hoguet Act are enforceable against Airbnb.
Although the verdict of the European courts is expected this summer or shortly after, the Advocate General of the ECJ, Maciej Szpunar, considers that the platform cannot be subject to the same rules governing real estate professionals in France, as communicated in a notice published on April 30th, 2019. According to Szpunar, these rules are simply incompatible with European law regarding “information society services” (on which Airbnb’s business depends) and therefore incompatible with the “Directive on electronic commerce”. The opinion of the Advocate General is not binding on the Judges of the ECJ, but in practice it is almost systematically followed by them.
“We’ll see whether the ECJ qualifies Airbnb as an ‘information society service,’” a qualification that had not been granted to Uber (in another similar case, NDLR). The City of Paris is confident that rules and regulations regarding registration numbers are absolutely necessary in order to maintain public order and protect the housing market.
5. The power of municipal officials: the Constitutional Council has decided
Is governmental control over the rentals on Airbnb constitutional? This case began on May 22nd, 2018 when the City of Paris summoned the owners of a residence located in the 16th arrondissement before the President of the High Court of Paris. The City claimed the property owners had converted their residential premises into commercial premises destined for tourists without the proper authentification from the city.
Under this procedure, the owners submitted several questions prioritaires de constitutionnalité or QPC to the President of the court, which allow them to claim that a legislative provision infringes on the rights and freedoms guaranteed by the Constitution. On October 11th, 2018, the President of the Paris High Court transferred one of these QPCs to the Court of Cassation. In a decision dated January 17th, 2019, the Court of Cassation in turn referred this infamous QPC to the Constitutional Council.
The homeowners had asked whether Articles L. 651-4, L. 651-6 and L. 651-7 of the Building and Housing Code are compatible with Article 66 of the Constitution and Articles 2, 4 and 16 of the 1789 Declaration of the Rights of Man and Citizen.
French law provides that “the occupant or guardian of the premises is required to allow a municipal agent that is authorized to carry out controls to visit the premises upon presentation of an official order”. The Act also specifies that “if the occupant or guardian of the premises fails to do so, the sworn officer of the municipal housing department may, if necessary, have the doors opened and the premises visited in the presence of the mayor or police commissioner.”
However, in regard to the Airbnb properties in question, this procedure was carried out without “prior judicial authorization” or “effective appeal against the decision to visit”. There is also no “judicial control mechanism”. For the lawyers of both property owners, this is contrary to the Constitution’s “principles guaranteeing personal freedoms and inviolability of private property”.
On April 5th, 2019, the Constitutional Council made their decision. Admittedly, the Council does recognize the right of municipal officials to investigate and collect evidence to find out how housing is being occupied. On the other hand, the fact that municipal officials may forcibly enter a dwelling without the consent of the occupant or owner (and without any supervision of this procedure by a judge) is not in accordance with the Constitution.
Thus, the part of article 651-6 of the Building and Housing Code (which provides that “in the event of failure by the occupant or guardian of the premises to act, the sworn officer of the municipal housing service may, if necessary, have the doors opened and the premises visited in the presence of the mayor or the police commissioner”) is considered unconstitutional.
N.B.: This article was updated after its initial publication with reactions and clarifications from the Paris City Hall
Cover photo: Pixabay