Rental: The differences between furnished lease and empty lease
When deciding to rent a property, the choice between an unfurnished or furnished rental is crucial. Each option has significant differences that influence the type of contract, the obligations of the parties, the duration of the rental, and many other aspects. In this article, DECORDIER immobilier gives you an overview of the main differences between renting an unfurnished property and renting a furnished property and explores for you the benefits of each option to guide you in an informed manner in your decision-making.
Advantages of an unfurnished rental lease
1. Personalization of the space:
A vacant apartment does not have furniture. It is rented without comfort equipment (except those necessary, such as the equipped kitchen in some cases). One of the main advantages of an unfurnished rental is the possibility for the tenant to personalize the space according to his tastes and needs. This allows to create an environment that reflects his own identity and lifestyle. For the owner, renting unfurnished avoids the initial costs of purchasing furniture and equipment, which can represent a substantial saving.
2. Stability and Security:
Unfurnished rental leases are generally for a minimum period of three years, renewable for unfurnished rentals (1989 law in France), compared to one year for furnished rentals. This offers greater stability and security for tenants who wish to settle in for an extended period, but also for owners by reducing the turnover of occupants. If the owner is a natural person, this period can be reduced to one year if professional or family reasons justify taking back the accommodation. The tenant must give three months' notice to terminate the lease. This period can be reduced to one month in certain cases (tense area, professional transfers, job loss, etc.). The notice period is six months for the owner.
3. Possibility of better-quality furniture:
By renting an unfurnished accommodation, the tenant has the possibility of choosing quality furniture, which corresponds to his standards of comfort and durability, unlike the sometimes-lower quality furniture provided in furnished rentals.
4. Rental costs:
Rents for unfurnished properties are often slightly lower than those for furnished properties. This can represent a substantial saving in the long term, especially for tenants who already have their own furniture. Charges are generally separate and may include building maintenance, water, central heating, etc.
Regular maintenance and minor repairs are the responsibility of the tenant. By renting an unfurnished property, the owner does not have to worry about maintaining the furniture and equipment. Maintenance responsibilities are limited to the basic structures of the property (plumbing, electricity, etc.).
5. Taxation:
The landlord has a choice of two tax declaration regimes:
- Micro-foncier: This regime applies in 2023 to landlords whose rental income does not exceed €15,000. They will be entitled to a 30% reduction. This regime presents advantages for the lessor of a property, without work or significant management costs, trustees, etc. a flat rate without justification of €3,600 is reduced. He can leave this regime each year.
- The actual regime: The lessor must adhere to it for 3 years, then the regime is renewable for periods of one year. This regime is mandatory if the lessor exceeds €15,000. He has the possibility of deducting from the income of the year: all the charges incurred for their real and justified amount, all maintenance expenses, improvements, insurance premiums, management costs, co-ownership charges, property tax, interest and loan costs. If the lessor notes a deficit, he can deduct a ceiling of €10,700 and carry forward this deficit deductible from income for the following 10 years. If he has opted for a special tax regime (Robien, Borloo, etc.), the lessor will be able to deduct the planned depreciation as long as he complies with the rules (obligation to rent for 9 years, for example)
Advantages of a furnished rental lease
1. Practicality and time saving:
A furnished apartment must include a certain number of pieces of furniture and equipment to be habitable immediately. In France, the law stipulates a minimum list of items, such as:
- Bedding with duvet or blanket (box spring / mattress / pillows)
- Shutters or curtains in the bedrooms
- Hotplates
- Oven or microwave
- Refrigerator
- Freezer or freezer compartment of the refrigerator with a maximum temperature of -6 °
- Sufficient dishes for the occupants to eat (cutlery / plates / cups / glasses, ...)
- Kitchen utensils (pots / pans / dishes / spatulas, ...)
- Table and seats
- Storage shelves
- Light fixtures
- Household cleaning equipment adapted to the characteristics of the accommodation (vacuum cleaner if there is carpet, broom and mop for tiles, lawnmower and tools if there is an exterior ...)
A furnished rental is particularly advantageous for people looking for a quick and hassle-free housing solution. All the necessary furniture and equipment are already present, allowing immediate installation.
Please note: the judge has the possibility of transforming the lease of a furnished accommodation into a lease of an unfurnished accommodation, if the list of furnished items is not respected. And all the tax advantages linked to furnished rentals can be called into question.
2. Flexibility:
Furnished leases generally offer more flexibility in terms of contract duration. With contracts that are often shorter (minimum of one year), they are ideal for students, professionals on temporary assignments or people in transition. This is called a mobility lease. For students, the duration can be reduced to nine months without tacit renewal. The notice period for the tenant is only one month, which offers more flexibility for rapid changes in situation. The owner has a notice period of three months.
3. Less initial expenses:
For tenants who do not already have furniture, a furnished rental allows them to avoid significant initial expenses related to the purchase of furniture. This can be particularly advantageous for young professionals or students. However, the tenant must maintain the furniture and equipment provided. In case of deterioration, he can be held responsible. The owner must ensure that the accommodation and furniture remain in good working order. The rents for furnished accommodation are slightly higher than those for unfurnished accommodation. For the owner, this can increase rental profitability in the short term.
4. Ease of moving:
Moving is simplified with furnished rentals, because there is no need to transport bulky furniture. This reduces the stress and costs associated with moving.
5. Taxation:
Income from furnished rentals is subject to the industrial and commercial profits regime (BIC). This regime can be more advantageous from a tax point of view, in particular with the status of Non-Professional Furnished Rental (LMNP) which allows for depreciation.
The lessor also has two tax regimes:
- LMNP (non-professional furnished rental): Annual income from furnished rentals is less than €23,000 (or more than €23,000 but less than 50% of the other income of the tax household). This income is taxed at 15% (CSG, CRPS). Regarding the declaration of "actual" income (BIC), there is no reduction on the rents received. When there is a deficit, it is possible to carry forward for 10 years (in the case of depreciation of the property). The micro-BIC applies automatically if the income is less than €72,600 or €176,200 for guest rooms. A flat-rate reduction is applied to rents: 50%. The reduction is 71% for classified furnished accommodation and guest rooms. It cannot be less than €305. A new tax reduction is granted to LMNP, equal to 11% of the cost price of housing for investments made in residences for the elderly, disabled, students, and tourist residences with classification. The reduction is capped at €33,000. Properties rented by the LMNP are subject to the IFL.
- LMP (professional furnished rental): Registration with the RCS is no longer mandatory since February 8, 2018. It is taxed at the BIC (real). Rental income exceeds €23,000 and must be higher than the other income from the tax household.
Expenses (work, loan interest, etc.) can be deducted from the rents received. Deficits can be attributed to the investor's overall taxable income. LMP income is distributed as part of social security contributions.
Bottom line
The choice between an unfurnished rental and a furnished rental largely depends on the specific needs of the tenant and the objectives of the landlord. Unfurnished rentals offer more stability and full customization of the property, which is suitable for tenants looking for a long-term home. On the other hand, furnished rentals offer increased flexibility and convenience, making them ideal for tenants who need to settle in quickly or for shorter periods. For landlords, the choice can also be influenced by tax considerations and the type of tenants they want to attract. Understanding these differences can help everyone make an informed choice that is suited to their situation.
DECORDIER immobilier agencies can help you with your real estate project:
- Thonon +33 (0) 4 50 72 31 95 / e-mail : thonon@decordier-immobilier.com
- Evian +33 (0) 4 50 75 15 15 / e-mail : evian@decordier-immobilier.com
- Grand-Baie : +230 268 2828 / e-mail : contact@decordier-immobilier.mu
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