European Court of Justice upholds French law that requires prior local authorisation for short-term property rentals on Airbnb

NEWS

28 Sep 2020

It started in 2017 with two judgments by the Paris Court of Appeal ordering separate owners of studio apartments in Paris to pay a fine of €15,000 each for renting out apartments through the Airbnb website without authorisation from Paris authorities.

The Court cited the French Construction and Housing Code that requires prior authorisation for any change of use of residential premises in municipalities with more than 200,000 inhabitants and in the municipalities of Hauts-de-Seine, Seine-Saint-Denis and Val-de-Marne. The French court also ordered the defendants to restore their properties to their residential use, which use had changed due to their repeated short-term letting of furnished accommodation to a transient clientele. 

As one might expect, the defendants filed appeals in front of the French Court of Cassation on a point of law, namely, that the objective pursued by the law which the Parisian Court was upholding, could be attained by means of a less restrictive measure, as required by Article 9(1)(b) and (c) of Directive 2006/123. Furthermore, it was argued that the implementation of that restriction does not satisfy the criteria found in Article 10 of the Directive.

In the context of the appeals brought by the two owners against the judgments delivered by the Court of Appeal, the Court of Cassation made a reference to the Court of Justice for a preliminary ruling, in order to ascertain the compatibility of the national legislation under examination, with Directive 2006/123.

A reference for a preliminary ruling allows the courts and tribunals of the Member States, in disputes which have been brought before them, to refer questions to the Court of Justice about the interpretation of European Union law or the validity of a European Union Act.

Article 9 of Directive 2006/123 of the European Parliament and the Council on services in the internal market, precludes Member States from making access to a service activity or the exercise thereof subject to an authorisation scheme unless a number of conditions are satisfied.

Article 4(6) of the Directive defines an authorisation scheme as any procedure under which a provider or recipient is in effect required to take steps in order to obtain from a competent authority a formal decision, or an implied decision, concerning access to a service activity or the exercise thereof.

Article 10 of the same Directive precludes the competent authorities from exercising their power of assessment in an arbitrary manner by subjecting authorisation schemes to several criteria. In furtherance of the foregoing, the authorisation schemes must be a) non-discriminatory; (b) justified by an overriding reason relating to the public interest; (c) proportionate to that public interest objective; (d) clear and unambiguous; (e) objective; (f) made public in advance; and (g) transparent and accessible.

In its judgement, the ECJ determined that:

  • it is apparent from Article 4(1) of the Directive 2006/123 that, for the purposes of that directive, ‘service’ means any self-employed economic activity, normally provided for remuneration, as referred to in Article 57 TFEU, whereas in the instance under examination, the activity consisting in the letting of immovable property to a transient clientele and therefore covered by the concept of ‘service’ within the meaning of Article 4(1) of Directive 2006/123;
  • national legislation which makes the exercise of certain activities consisting in the letting of residential premises subject to prior authorisation is covered by the concept of ‘authorisation scheme’ within the meaning of Article 4(6) of Directive 2006/123, and not by the concept of ‘requirement’ within the meaning of Article 4(7) thereof. An ‘authorisation scheme’ is distinct from a ‘requirement’ inasmuch as it involves steps being taken by the service provider and a formal decision whereby the competent authorities authorise that service provider’s activity, which is the case for the legislation in question;
  • ‘authorisation scheme’, such as that established by the legislation in question, must comply with the requirements set out 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 thereof;
  • as regards the conditions laid down by Article 9(1), in particular the conditions that the authorisation scheme must be justified by an overriding reason relating to the public interest and that the objective pursued by that scheme cannot be attained by means of a less restrictive measure, 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 explained above, which constitutes an overriding reason relating to the public interest;
  • 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.

Reactions to this judgement were mixed, but the mayor of the municipality subject of the proceedings took to Twitter saying that  "this victory, awaited by many cities, marks a turning point for the supervision of seasonal rentals and constitutes a step forward for the right to housing for all". What do you think of the ECJ’s decision?