Rent increases: what are the rules?

The inflationary context is increasing the cost of living for everyone, including landlords faced with rising costs. The natural reaction is to consider raising the rent, but be aware that simply informing your tenant of a new monthly amount is not sufficient.

Strict rules govern rent increases, whether they occur during the tenancy or even before the next tenant arrives. Let us revisit all the possibilities afforded by law and everything you need to know to remain within the legal framework.

When can you proceed with a rent increase?

Like the initial rent amount, revisions are not unrestricted. Tenant rights are protected by two pieces of legislation: the Act of 6 July 1989 and the Alur Act of 2014, which set out the moments when it is possible to proceed with a rent increase.

Reviewing the rent during the tenancy

It is possible to proceed with a rent increase during the tenancy once per year, on the express condition that the lease explicitly provides for this through a specific clause. An annual revision date must then be indicated, and by signing the lease, the tenant agrees to abide by it.

The increase is not left to the landlord’s discretion: the rent reference index (IRL), published by INSEE quarterly and calculated based on the evolution of consumer prices, sets a ceiling to be observed.

The procedure requires sending an information letter to the tenant within the year following the revision date, stating the amount of the increase and the effective date. Without this step, the tenant is entitled to ignore the rent increase. Furthermore, the landlord cannot claim to have missed out on a possible increase for one year to proceed with a larger increase subsequently.

Finally, a special case allows for exceptional rent increases when improvement works to the property are carried out at the landlord’s expense. An amendment to the lease must specify the details.

Increasing the rent at the start of a tenancy

A second possibility: taking advantage of a tenant’s departure to set a higher rent for the next tenant. In this case, setting the rent, outside areas with regulated rents, is unrestricted: the landlord will not be limited by the previous rent or by the reference index. They are free to set the rent at which they think they can find a tenant. Their assessment of the market will therefore serve as the limit.

Acting at the time of lease renewal

Finally, taking this step at the time of lease renewal comes with certain constraints. The landlord must demonstrate that the rent is undervalued in relation to the rental market, using a list of prices charged for comparable properties in the vicinity.

Regarding procedure, a letter must be sent to the tenant six months before the lease renewal, accompanied by this list and stating the new rent level that will be applied. The tenant has two months to accept or oppose the increase and plan their departure from the property. If there is no response or refusal to accept the increase, the landlord may refer the matter to the Departmental Conciliation Commission and, if this fails, to a court.

The special case of so-called “tight” areas

The designation “tight area” refers to urban spaces with more than 50,000 inhabitants, where the imbalance between supply and demand can lead to (or encourage) landlords inflating their rental expectations. Approximately 1,500 cities are affected in France, including Lille, Lyon, Marseille and Bordeaux. Paris represents an even more special case, which we will return to in detail.

Within all tight areas

Since the Alur Act, a prefectural order sets an annual rent ceiling each year, in the form of a majorated reference rent, within these areas. Any rent increase, even legitimate, cannot therefore result in rent exceeding the ceiling, in relation to the rent reference index already mentioned.

Note that for a first letting, the rent can be set freely if the letting is unprecedented. This rule also applies when the property has been unoccupied for more than 18 months. But in the case of reletting to a new tenant or lease renewal with the same person, the capping applies: both that of the annual permitted increase and that of the maximum permitted rent.

Two exceptions, already mentioned, apply to this principle:

• Carrying out works allows for a rent increase, limited to 15% of the actual cost of works (including VAT);
• If proof is provided that the rent is undervalued, an increase above the IRL is possible but remains limited to half the difference between the reference rent and the previous rent.

The specific rules for Paris

Within our capital city, rent revision may be subject to a majorated or minorated reference rent:

• The majorated reference rent represents the maximum rent that can be requested for a property subject to rent controls. This is the median reference rent plus 20%.
• The minorated reference rent, for its part, corresponds to the reference rent minus 30%.

For a first letting, the base rent (excluding charges or top-up) must not exceed the majorated reference rent in force at the time of lease signing. If it is a renewal, the new rent must not exceed the minorated reference rent applied at the time the landlord informs their tenant. These rules apply to all tenancy agreements signed or renewed after 30 June 2019.

A rent “shield” in effect

To conclude, the government has established, since the passage of the Purchasing Power Act passed by Parliament during summer 2022, a shield targeting rents. In order to protect the population from high inflation, which would have allowed the rent reference index to permit a considerable rent increase this year, a cap is in place until 30 June 2023.

Rent increases are thus capped at 3.5% in mainland France, 2% in Corsica and 2.5% in Overseas territories. Note that without this measure, the IRL would currently stand at 137.96, representing an authorised rent increase of 4.78% over one year.

The IRL is modified each semester by INSEE: in Q2 2022, the increase was 3.60% but in October, the new increase is limited to 3.49%. A measure no doubt appreciated by the most modest households!

Increasing the rent is a legitimate claim from landlords, who are also subject to inflation and must preserve the profitability of their investment. However, through the measures recently taken, the government intends to make them participate in the collective effort, given the economic difficulties we are facing. Housing being the largest household expenditure item, it represents an important lever of action for purchasing power. If in doubt about your right to proceed with a rent review, contact a property professional in your area, or even your local council.