Legal status of seasonal tourist rentals: Civil or commercial?

In a recent decision dated January 25, 2024 (Civ 3ème 25 janvier 2024, n° 22- 21.455), the Third Civil Chamber of the French Supreme Court (Cour de cassation) reaffirmed its position on the legal classification of the activity of tourist seasonal rental, a subject that occupies a central place in debates linked to condominium law and real estate law in general.

This topic is also very topical, with the organization of the Olympic Games in France giving tenants and landlords new ideas for renting out their properties.

• LEGAL FRAMEWORK

The question of whether the tourist seasonal rental activity should be considered as civil or commercial is of crucial importance. In particular, because this distinction has a direct impact on the possibility of carrying out this activity in buildings intended primarily or exclusively for residential use. In fact, a commercial activity could be prohibited by the condominium bylaws in such buildings, while a civil activity could be authorized.

• COURT OF CASSATION RULING

In its ruling of January 25, 2024, the French Supreme Court (Cour de cassation) clarified this issue, ruling that a seasonal tourist rental activity, devoid of significant ancillary services, should be classified as civil and not commercial. This decision confirms the recent trend in case law towards a restrictive interpretation of the conditions for qualifying a seasonal rental activity as commercial.

• PRACTICAL IMPLICATIONS

This distinction is fundamental for owners and condominium corporations. This means that, unless there is proof of the provision of at least three of the four para-hotel services defined by article 261 D of the French General Tax Code (breakfast, regular cleaning of the premises, supply of household linen, and even non-personalized reception of customers), the tourist rental activity cannot be considered as commercial.

• THE LEGAL NATURE OF SEASONAL TOURIST RENTALS: CIVIL OR COMMERCIAL?

This case law has a significant impact on the drafting and interpretation of co-ownership by-laws. It invites drafters to clearly consider clauses relating to the destination of the building and the conditions of use of private and common areas.

The January 25, 2024 ruling makes an important contribution to clarifying the legal regime applicable to seasonal tourist rentals. It confirms that the civil nature of this activity prevails in the absence of significant para-hotel services, thus offering a degree of predictability to players in the real estate sector (BnB, Loveroom etc.).

The decision underscores the need for owners and co-owners’ associations to fully understand the implications of classifying a property as a tourist seasonal rental.