On 22 September 2020, the Court of Justice (Grand Chamber) ruled in the joined cases C-724/18 and C-727/18 that a national legislation making the repeated short-term letting of accommodation to a transient clientele which does not take up residence there subject to authorisation, is consistent with EU law.
Cali Apartments and HX offered for rent, repeatedly and without prior authorisation, their apartments on a website for short periods to a transient clientele. According to the French Construction and Housing Code, such repeated letting of furnished accommodation in municipalities with more than 200,000 inhabitants and in Paris’ neighboring departments, requires prior authorisation. The Code also states that the authorisation may be subject to an offset requirement in the form of the concurrent conversion of non-residential premises into housing. Neither Cali Apartments nor HX obtained such authorisation. They were each ordered to pay a fine and to switch the proprieties in question back to residential.
The Court of cassation made a reference to the Court of Justice for a preliminary ruling, in order to ascertain the compatibility of the French Construction and Housing Code with Directive 2006/123 on services in the internal market.
The Court ruled that the activity consisting in the repeated short-term letting, for remuneration, whether on a professional or non-professional basis, of furnished accommodation to a transient clientele which does not take up residence there is a “service” and falls within the scope of Directive 2006/123. Furthermore, the French legislation does not apply indiscriminately in the field of the development or use of land or the field of country planning and thus, is not excluded from the scope of the Directive. The Court also noted that the legislation in question constitutes an “authorisation scheme” within the meaning of Article 4 (6) of Directive 2006/123 and not a “requirement”.
The Court then examined whether such an “authorisation scheme” complied with the requirements of Articles 9 (1) and Article 10 (2) of the Directive. Article 9 (1) states that an authorisation scheme must be (i) justified by an overriding reason relating to the public interest and (ii) proportionate to the objectives pursued. The Court noted that combating the long-term rental housing shortage is indeed an overriding reason relating to the public interest. A prior authorisation is the most effective way to reach this goal. Such objective cannot be attained by less restrictive means and posteriori inspections would take place too late to be effective. The French legislation is, thus, proportionate to the aim pursued.
Regarding the requirements set out by the Article 10 (2), the Court considered that an offset requirement in the form of the concurrent conversion of non-residential premises into housing, the quantum of which is to be defined by the municipal council, was a suitable instrument for pursuing the objectives of socially diverse housing, a sufficient supply of housing units, and maintaining rents at an affordable level. However, the Court leaves for the national courts to verify if this requirement is appropriate for the needs of the municipalities concerned.
In its previous Airbnb case (C-390/18), the Court ruled that national legislations could not impose restrictions on the platforms itself. This new ruling allows national legislations to impose requirements, not on the platforms, but on the owners renting their properties through the platforms. This case will have a huge impact for platforms like Airbnb.
Please contact Pierre de Bandt, Jeroen Dewispelaere, Raluca Gherghinaru or Karel Janssens for further information about this case and/or for general legal advice relating to the digital and platform economy.