The Denormandie Law

Denormandie law: revitalizing old real estate

Attractive tax benefits: a major advantage for investors

Established in 2019, the Denormandie law aims to boost rental investment in old real estate located in priority renovation zones. This scheme offers attractive tax reductions for investors:

- 12% of the purchase price for a 6-year rental

- 18% for a 9-year rental

- 21% for a 12-year rental

These reductions apply to an investment amount capped at €300,000 per year per taxpayer.

Impact on real estate stock: enhancing old heritage

By encouraging the renovation of old housing, the Denormandie law improves the quality of the real estate stock. The work must meet high energy performance standards, contributing to the energy transition. Additionally, rehabilitating these properties revitalizes city centers and enhances the urban landscape.

Return on investment: a profitable real estate investment

Beyond the tax benefits, the Denormandie law offers interesting potential for capital gains in regions where rental demand is strong. Renovation allows for offering modern and comfortable housing that meets tenants' expectations, thereby increasing property value.

Investing with confidence under the Denormandie Law

Administrative steps: a guide for successful investment

To benefit from the tax advantages of the Denormandie law, it is crucial to follow these administrative steps:

1. Property and work eligibility:

- Check the eligibility of the property (zones A, A bis, B1, B2, or C).

- Ensure compliance with energy performance criteria before the work.

- Confirm the eligibility of the work (Decree No. 2019-1467 of December 27, 2019).

2. Property acquisition and rental commitment:

- Notarized deed of property acquisition.

- Signing a lease that respects rent caps.

- Rental commitment for 6, 9, or 12 years.

3. Work declaration and compliance certificate:

- Declaration of the work to the town hall.

- RGE compliance certificate issued upon completion of the work.

4. Tax declaration:

- Form 2044-EB to be filled out annually.

- Declaration of rental income on form 2042-C-ICI.

Roles of certified RGE professionals: essential expertise

The work must be carried out by a professional certified as RGE (Recognized Environmental Guarantor) to benefit from the Denormandie law. These professionals ensure quality work and provide the compliance certificate essential for the tax declaration.

Types of eligible work: comprehensive and efficient renovation

The Denormandie law covers a wide range of work:

- Insulation: external thermal insulation, attic insulation, wall, floor, and rafter insulation.

- Heating systems: high-performance boilers, heat pumps.

- Hot water production: solar thermal panels, thermodynamic boilers.

- Exterior joinery: replacement of windows, French windows.

- Sanitation: efficient non-collective sanitation systems.

Investment conditions: clear rules for success

To benefit from the tax advantages, certain conditions must be met:

1. Acquisition period: between January 1, 2019, and December 31, 2027.

2. Property location: in one of the 245 eligible French municipalities (zones A, A bis, B1, B2, C).

3. Rental commitment: unfurnished rental as a primary residence for 6, 9, or 12 years.

4. Rent caps: rents capped per square meter and by geographic zone.

5. Renovation work: representing at least 25% of the purchase price, completed within 24 months of acquisition.

6. RGE compliance certificate: work carried out by an RGE certified professional.

7. Energy performance: improvement of 30% for an individual property, 20% for a collective property.

8. Types of eligible work:

- Option 1: improve the energy performance according to thresholds.

- Option 2: perform at least two types of work (attic insulation, boiler replacement, etc.).

Current scheme vs. Pinel Law: in-depth comparison

The Pinel and Denormandie schemes encourage rental investment in France but target different types of properties:

- Pinel Law: for new or VEFA (Sale in Future State of Completion) properties.

- Denormandie Law: for old properties needing rehabilitation.

Advantages and constraints

- Purchase price: Denormandie properties can be cheaper.

- Notary fees: reduced for Pinel, higher for Denormandie.

- Insurance: mandatory in VEFA under Pinel, not required but potential renovation work under Denormandie.

- Decennial guarantee: coverage of construction defects for Pinel, not applicable for Denormandie.

Investment deadline

- Investments before April 11, 2024: tax benefits until December 31, 2026.

- Investments after April 11, 2024: tax benefits until December 31, 2027.

The Denormandie law offers interesting opportunities for investors wishing to renovate old properties while benefiting from significant tax advantages. To maximize these tax advantages, it is recommended to consult a professional to verify the eligibility and specific conditions of your real estate project.