Housing: a new law to rebalance landlords’ rights

Last July, law no. 2023-668 aimed at protecting housing against illegal occupation[1] was enacted and came into force the day after its publication, i.e. on 29 July 2023. It amends the law of 6 July 1989 governing residential lease contracts. This new law is part of a drive to rebalance the rights of landlords in relation to tenants, whose situation, whether in the case of squats or unpaid rent, was proving difficult to regularise in view of the length of the procedures and the position of the courts, which are often protective of the "weaker party". The legislator's intention, as described by the Constitutional Council in its decision of 26 July 2023[2], was as follows: ". by adopting these provisions, the legislature intended to speed up the procedure for terminating a tenancy in the event of non-payment of rent or service charges or non-payment of the security deposit, as well as the legal procedure for eviction. In so doing, it sought to protect the right of ownership (...) these provisions do not deprive the person concerned of the possibility of defending himself or of exercising the remedies available to him under the conditions of ordinary law[3].. "The Constitutional Council has declared this law to be consistent with the Constitution. We offer a summary of the changes brought about by this law, followed by a more practical analysis of its first applications. I. WHAT CHANGES HAS THIS LAW MADE?   Two sets of provisions have been included in this law to deal with two different situations: rental arrears (non-payment of rent under a lease) and squatting (occupation without right or title). 1. Tougher crackdown on squatting Previously, squatting was only defined by article 226-4 of the French Criminal Code as "entering another person's home by means of manoeuvres, threats, assault or coercion". A number of measures have been introduced in this law to broaden this concept:

• Creation of a new offence of "fraudulent occupation of premises used for residential, commercial, agricultural or professional purposes": to punish squatting on premises other than a home. This offence is punishable by 2 years' imprisonment and a €30,000 fine.
• Extension of the scope of the offence of unlawful entry to all residential premises, whether or not the person lives there and whether or not it is their main residence;
• The penalty for squatting is increased to 3 years' imprisonment and a €45,000 fine (previously: 1 year / €15,000) ;
• Crackdown on the instigators of squats, who claim to own the accommodation: the penalty is 3 years' imprisonment and a €45,000 fine;
• Propaganda or advertising that facilitates or incites squatting is punishable by a €3,750 fine.

  2. Security for landlords in the event of rent arrears A number of major changes have been introduced to shorten the procedure for dealing with unpaid rent, whether it involves a request for eviction or a simple request for payment of rent:  

• Systematic inclusion in rental contracts of a resolutory clause in the event of unpaid rent: this is a clause stating that in the event of non-payment of a single rent instalment, the landlord may initiate eviction proceedings by first sending a summons to pay the rent. Although most residential leases already contained this type of clause, without it the procedure was longer and the outcome less certain. Today, in most courts in high pressure areas, "ACR" hearings, an acronym for "acquisition of the resolutory clause", are organised to deal quickly with these proceedings, particularly in summary proceedings. This is the case if the order is not discharged within the reduced deadline.
• Reduction to 6 weeks of the deadline for the resolutory clause in the contract to take effect (previously it only took effect 2 months after an unsuccessful summons to pay); the judge can then only declare that the resolutory clause has been acquired. However, the effects of this clause can be suspended under two cumulative conditions, which is also a new feature of the law.
• The tenant must not only be in a position to settle his rental debt but must also have resumed full payment of the current rent before the date of the hearing.

  Other procedural formalities have been simplified in order to speed up the process between the start of arrears and the date of the hearing (reduction to two months or twice the amount of the monthly rent excluding charges of the amount above which referral to the CCAPEX is mandatory and reduction to 6 weeks of the minimum 2-month period between the issue of the summons and the date of the hearing when referral to the CCAPEX is not mandatory.   Lastly, measures have been adopted to reduce the possibility of obtaining time to leave the premises when an eviction has been ordered:

• Reduction in the period during which the judge may grant time to vacate the premises: the judge will now be able to grant payment periods of between one month and one year (compared with 3 months and 3 years previously).
• Removal of the two-month deadline for eviction when the occupant is acting in bad faith or has entered the premises by deception, threat, assault or coercion.

To summarise, Here is a diagram of the modified procedure:   * according to the resolutory clause in the lease contract ** Referral to the CCAPEX is only compulsory in the case of consecutive arrears of 2 months or more, or if the debt is at least equal to 2 times the rent (article 24 § I). *** "au moins" : le jour même de l'expiration du délai est possible (jurisprudence sur la computation des délais en mois : Cour d'appel de Paris, 11 février 2020[4]. The law of 27 July 2023 does not provide any clarification, but case law suggests that it is possible to equate periods expressed in weeks with periods expressed in days: Cour de cassation, 14 February 2002[5]. See if this new deadline expressed in weeks is applicable? We'll have to wait and see what the judges have to say on this point.)   II. WHAT ARE THE INITIAL RESULTS OF ITS APPLICATION BY THE COURTS?   September brings a busy schedule of hearings for NMCG, enabling us to draw up an initial assessment of the application of this law by the courts. 1. Does the new law apply to existing contracts? "The law provides only for the future; it has no retroactive effect"... As there is no implementing decree, this law of 27 July 2023 applies immediately. The Court of Cassation has consistently held that "a new law immediately governs the effects of legal situations that arose before it came into force and that have not been definitively settled"[6]. In an opinion dated 16 February 2015[7], it stated, with regard to the ALUR Act, that ". since the new law immediately governs the legal effects of legal situations that arose before it came into force and have not been definitively resolved, it follows that Article 24 of the Law of 6 July 1989, as amended by the Law of 24 March 2014, insofar as it gives the judge the option of granting a period of up to three years to a tenant in a position to settle his rental debt, applies to leases in progress on the date on which the Law of 24 March 2014 came into force. ". In the explanatory note to this opinion, the Court stated that this was because Article 24 was "a legal effect of the lease, not being a provision subject to the contractual freedom of the parties, but a power granted to the court by the law". By analogy, the new provisions of the Act of 27 July 2023 amending article 24 of the Act of 6 July 1989 would therefore apply to all contracts. This is also the position of all the courts before which the first hearings conducted by NMCG were held: from now on, the granting of payment deadlines is conditional on the resumption of full payment of the rent before the hearing, regardless of the date on which the lease contract was signed. Similarly, before the JEX (enforcement judge), a tenant can now only obtain a time limit of one year to vacate the premises, even if he or she applied to the judge before the law came into force, requesting the maximum period of 3 years in force at the time. 2. Can payment terms be granted without resumption of payment? It would appear not, given the new provisions of the law, which require full payment of the rent to be resumed before the hearing, even if the landlord agrees. However, some judges have opted for another solution: deferring the case to a later hearing, encouraging tenants to pay even one month's rent before the hearing, so that they can be granted deferred payment. This position is open to criticism, as it ultimately lengthens the procedural deadlines whereas the new system aims to shorten them, but it is in line with a desire to balance the rights of the parties and promotes the presence of defendants at the hearing. These new provisions will need to be reviewed in a year's time. [1] Full text available at: https://www.legifrance.gouv.fr/jorf/id/JORFTEXT000047897040 [2] Decision no. 2023-853 DC of 26 July 2023 [3] Id, § 88 and 89. [4] CA Paris, 11 February 2020, RG N°17/20927. [5] Civ. 2^ème, 14 February 2002, Crédit mutuel c/ Pinto-Rodigues, RG n°99-13.000. [6] Cass. 3rd civ. 1987: Gaz. Pal. 1988, 1, 84, 3rd civ, 8 February 1989 i n° 87-18.046, 3rd civ. 15 March 1989 n°87-19.942, 3rd Civ. 13 December 1989 n° 88-11.056, see also the 2014 annual report of the Court of Cassation. [7] Opinion of the Court of Cassation no. 14-70.011.