Changing the use of a premises: what are the rules and regulations?
Converting a residential property into a professional premises requires certain formal procedures to be completed in advance. In Lyon, such a change of use also requires compensation to be paid, particularly when it comes to renting out an apartment on Airbnb or converting a residential property into offices. But what are the rules and regulations and who do they apply to? Chartered Accountant Sandy Dalmas of Roche & Cie. sheds some light on the situation.
What is a change of use?
Sandy Dalmas: This is when a residential property is converted into a professional premises, permission for which must be obtained from the local council. In the case of Lyon, there is also ‘compensation’ to pay; in other words, any property owner looking to convert a residential property into a commercial premises must ‘compensate’ for this by converting a commercial premises of the same size into a residential property. The aim is to maintain a balanced housing offering and prevent town and city centres from becoming overly commercial and losing their residential nature.
What are the lessee’s rights?
This type of lease grants the lessee a long-term right in rem in immovable property that generally lasts for 99 years in the case of the HCL (Hospices Civils de Lyon). This right can be sold or mortgaged, which can make it possible to obtain funding in the form of a mortgage credit or lease. The construction lease, which differs primarily in that the lessee is then obliged to build, whereas this is merely an option with the emphyteutic lease, was later introduced by the legislator in 1964 based on the same model.
What sort of activities does this change of use apply to?
Any type of economic activity - offices, shops, furnished tourist accommodation, and so on.
Say I owned an apartment and wanted to rent it out seasonally on Airbnb or a similar platform. Would I have to apply to change the use of the premises?
Yes. In the case of Lyon, if your apartment is located right in the city centre and covers at least 60 sq.m. then it is compulsory. Since renting your apartment out seasonally on Airbnb would be considered a commercial activity, you would effectively be converting a residential property into a commercial property, so you’d have to complete the necessary change of use and compensation procedures.
And what if I were looking for an apartment to house offices, a showroom or a medical practice?
Again, this would constitute a change of use. That said, with regard to any activities other than furnished tourist accommodation, i.e. shops, offices, etc., you are only required to pay the compensation associated with the change of use if the property is at least 100 sq.m. and located right in the city centre. In the case of residential properties of less than 100 sq.m., permission to change the use of the property will be granted without the need to pay any form of compensation.
What is the easiest way to find a commercial premises to pay this compensation?
You can purchase a titre de commercialité commercial permit directly if you want to avoid any complicated property transactions. A number of companies specialise in commercial transfer transactions and are starting to open branches in Lyon, though these are still relatively few and far between and applications can take months to complete.
What are the risks involved in failing to adhere to these rules and regulations regarding change of use and the corresponding compensation?
The City of Lyon can carry out inspections to check that the relevant change of use procedures are being followed and the Mayor has the authority to bring anyone found to be contravening them directly before the high court. Anyone found to be in breach of the rules and regulations will incur a fine of up to €50,000 and have any deeds and agreements they have signed that contradict the registered use of the premises voided, including the cancellation of leases, contracts of sale, etc.
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