The Principality of Monaco remains an outstanding place which benefits from an unequalled quality of life enjoying an image of security, serenity, economic prosperity and favorable tax system. For all these reasons and many more, the demand for the acquisition or the rental of real estate in order to obtain either a residence or simple to invest, remain sustained.  

But before starting into any research, it is important to know that housing in the Principality is divided into different sectors: the free sector, the state-owned sector and, the one we are interested in here, the regulated sector, which many people wonder what are the specific features of the so-called "under law" apartments that make it up. These latter are subjected to laws that apply only when renting but not to buyers who plan to live in there.

The regulated sector concerns old buildings

The regulated sector concerns most apartments located in "old" buildings constructed or completed before September 1st, 1947 and subject since the post-war period to regulations meant to protect the rights of tenants. According to an IMSEE study published in 2013, it appears that 2,500 old apartments are part of this sector but, by its nature, this housing stock is diminishing over time with progressive destruction.

The applicable legislation

The current applicable legislation to this type of properties is divided into 2 different subsectors: the regulated sector governed by Law No. 1235 of 28/12/2000 (modified by Law No.1291 of 21/12/2004) and the liberalised sector governed by Law No. 887 of 25/06/1970, both subject to a state right of pre-emption in the context of a sale (pre-emption period of 4 weeks maximum after the signature of a preliminary sales agreement), then if the State does not exercise its right, it will be submitted to the tenant's right of pre-emption.

• The rent-controlled housing of private tenure

This text has a social purpose intended to enable Monegasque people and locals to find accomodation in the Principality. Landlords choose their tenants amongst the highest rank of interested persons (see eligibility conditions below) and cannot fix the rent on their own, rates will be defined by the State at much lower price. However, an indexation clause can be included in the lease, following the consumer price index (excluding tobacco) published by INSEE.

In all cases, the rental conditions must be approved by the « Direction de l’Habitat ».

Property in the protected area may only be rented to persons registered as protected persons, divided into the following categories and in the order of priority indicated:

1. persons of Monegasque nationality; 
2. persons born of a Monegasque parent; the spouse, widower or widow of a Monegasque national; persons divorced from a Monegasque national and the father or mother of a child from this union;  
3. persons born in Monaco, who have resided in Monaco continuously since birth, provided that one of their parents has also been resident in Monaco at the time of the birth; however, persons can be exempted from the requirement to be born in Monaco if, while fulfilling the other conditions, they were born outside Monaco for medical reasons or emergency; 
4. persons who live in Monaco for at least fourty consecutive years.

It should be specified that the status of protected person cannot be granted to foreign persons whose resources exceed a cap, the amount of which is set each year by Sovereign Order.

The lease contract offers better protection to the tenant, in particular because it is concluded for a period of 6 years. It can be terminated by the tenant during the term of the lease or at the end of the lease, with three months' notice, and the tenant is responsible for paying the rent until the end of the notice period.

For his part, the landlord may terminate the lease contract by giving at least six months' notice if he intends to exercise his right of taking back the accommodation:

• either to occupy it himself or have it occupied by his ascendants or descendants or his spouse, by his brothers or sisters or their descendants, or by the ascendants or descendants of his spouse, under the conditions provided by the law;
• or if he intends to demolish in order to rebuild, or to raise, or to modify in order to create new living surfaces, or to repair and improve the building, when in the latter three cases the totality of the premises occupied by the lessee is unusable by the execution of the works.

The tenant must then be relocated, for the period of the lease remaining to run, in premises in a good state of habitability in Monaco, without the amount of the rent exceeding the previous lease.

The landlord may also gives his notice to the tenant if he is regularly authorized to carry out works other than that referred hereabove, when the property occupied by the tenant is therefore unhabitable due to the execution of the works.

The evicted lessee is temporarily rehoused under the same conditions as those mentioned above and, within one month after completion of the works, the lessee is rehoused in the premises he used to occupy.

However, the law provides that when the tenant is handicapped or over 65 years of age, the right of taking back the accomodation cannot be exercised during the first six months of the lease.

In all cases where the landlord terminates the lease, the tenant may leave at any time during the six-month notice period and the rent stops to be due as soon as he leaves.

In case of vacancy of the accomodation, a declaration must be made by the owner to the « Direction de l'Habitat » within the month following the release of the accommodation (if no declaration has been made within 3 months, a fine of 50.000€ could be charged). Unless there is a legitimate reason (works, proposed for rent again, personal use), the accomodation must be effectively occupied before the expiry of a period of three months from the date of declaration, unless there is a particular need to restore it to its original state or to meet standards. At the same time, or when the accomodation is occupied again, a declaration of rental or occupation free of charge must be made.

Finally, these accomodations may be partially assigned to the exercise of a non-commercial associative or professional activity, the exercise of which is subjected to the prior agreement of the owner and must not be prohibited by the co-ownership regulations. The rental contract must then specify the designation, and when appropriate, the rooms dedicated to the said activity.

The liberalised sector

Law No. 887 is the first text liberalizing the old housing sector. It covers premises of better quality or premises that have always been occupied by their owners. By requiring six-year renewable leases, it liberalizes rents, abolishes the obligation to post vacancy notices and extends the possibility of renting to persons other than the one “protected”.

Apartments belonging to this sector are intended to be rented, in addition to “protected” persons described hereabove, to the following persons:

• ascendants or descendants, or their spouse, of the owner or his or her spouse ;
• persons of Monegasque nationality ;
• persons who live in Monaco for at least five consecutive years and who have been working there for more than six months ;
• persons working in Monaco for at least five consecutive years.

The landlord must then provides the « Direction de l’Habitat » with proof of the tenant's eligibility for this rental and obtain its prior agreement. However, the landlord remains free to set the amount of the rent and to insert a indexation clause in the lease.

The landlord will have the obligation to grant the tenant a six-year lease, renewable for periods of six years, terminable annually at the sole discretion of the tenant. The landlord may terminate it only at the end of the term and without having to justify the reason, contrary to the regime of Law No. 1.235. The owner can either put the accomodation back on the market, or live in it, or leave it empty, which, in the latter case, is different from the regime of Law No. 1235.

In the event of vacancy of the accommodation, a declaration must be made by the owner within 8 days. At the same time or when the dwelling is occupied again, a declaration of rental or occupation free of charge must be made.

It is also possible to domicile in these apartments a professional activity of a non-commercial nature but only in mixed use, i.e. with the need to establish a residency at the same time, and provided no staff is hired. It is not conceivable to domicile only an administrative office, with a few rare exceptions. However, it is allowed to domicile a liberal profession without establishing a residency.

Because the rental market in the regulated sector is really specific, Valeri Agency provides you with its experience and knowledge to help in your research for a property said to be "under law", or to help you manage it if you own it.

Synthesis