The Carrez Law: a Law to Fight Against the Round Numbers?

The Carrez law, came into force at the beginning of the second half of 1997, binds you to precise the surface for each sale contract about joint ownership goods (for instance, a flat). As the seller usually has more accurate information about the state and the size of the apartment, a significant fall in the average surface of the housing has been observed since the second half of 1997. The fact that private housing is not subject to the Carrez law, enables us to study the influence of the law on the declared surface as a natural experience. For the block of flats in the Paris area, we estimate an average over-evaluation of 2.3m2. This implies a bias in the hedonic index estimation before the Carrez law which arises from the fact the sellers rounded the surfaces. The sellers used to round the surface to the superior multiple of 5. This accounts for the figure of 2.3% is nearly half of the difference between two successive multiple of 5. Therefore, the over-evaluation doesnít depend much on the number of rooms. However, we underline that the effect is directly linked to the age of the building. 25% of the flats were above the level of fraud of 5%. The one room flats account for half of the frauds.