Law no. 1.554 of december 14th, 2023: information to the “conseil national” prior to the alienation of a property requiring its disaffection from the public domain
The public domain includes property assigned to public use, to a public service or to a service of public utility and, in general, all those parts of the Principality's territory that cannot be privately owned. The public domain is imprescriptible (the property does not lose its public status as a result of non-use by the administration or use by a third party) and inalterable (the property cannot be changed), unless it is disused. Disaffection is decreed by law, and therefore voted by the “Conseil National”; it results in the return of disaffected property to the private domain of the State or the Commune (article 1st of law no. 124 of January, 15th, 1930 on the delimitation of the domain), resulting in its declassification for the benefit of a private operator (generally a property developer), which is a prerequisite for any divestiture (transfer of ownership - constitution of real rights) of this property.
Given the scarcity of land, which covers an area of around 2 square kilometers, the conditions under which the Monegasque State plans to dispose of a parcel of its estate are a fundamental issue from an economic, urban planning and heritage point of view.
It was for this reason that the “Conseil National” tabled Bill no.1069 on November 30th, 2022, which was passed on December 7th, 2023, seeking to be informed "more effectively, particularly on aspects relating to the real impact of disaffecting bills, with a view to gaining a better understanding, over time, of the quid pro quos that may be demanded in the name of an imperative to enhance the value of the land that the State is disposing of, in the public interest".
Law no. 1.554 14 December 14th, 2023 has just enshrined this principle and the obligation for the Government to forward to the “Conseil National” certain technical, legal and economic information required to study a draft law disaffecting the public domain. The legislator has also taken care to protect "the State's financial interests over the long term, particularly in the case of large-scale property projects, by taking better account of the commercial development of the operation over time".
The law is based on three pillars:
- A list of the information made available to the “Conseil Nationa” by the Government relating to:
- forward planning information, in particular a plan showing the site of the planned property development and a forward programme for carrying out the work;
- legal, economic and financial forecasts, such as a presentation of the legal and financial arrangements adopted or the financial data needed to assess the operation's financial performance.
It should be noted that the business secrecy and confidentiality inherent in the negotiations conducted by the State or the Commune relating to the disposal project are guaranteed by the confidentiality system for working documents set out in the “Conseil National”'s Internal Regulations. Information is transmitted under conditions and according to a procedure that ensures compliance with the said secrecy or confidentiality.
- The obligation to include financial clauses in agreements with private operators in order to protect public finances:
- a profit-sharing clause in respect of any profits generated by the operation;
- a clause setting the amount of the financial consideration due to the State
- a clause determining the compensation, other than pecuniary, and the methods for determining their value.
These clauses introduce a profit-sharing mechanism for any additional profits made by the private operator that were not considered in the original project. This would enable the gains made by the private operator in excess of the initial forecast to be assessed fairly.
In many cases indeed, once the development has been marketed, it is found that the actual sale prices are much higher than those originally envisaged to define the value of the land. And given the very high price of land, the stakes are often considerable for public finances.
However, in order not to infringe property rights through this mechanism, the effects of the clause are limited to a period of seven years from the delivery of the property created by the operation to be shared between the State or the Commune and the chosen operator, which may not be less than 50% in favour of the State or the Commune.
- The Government's obligation to notify the “Conseil National” of any substantial modification to the real estate transaction as well as any agreement concluded by the State for the purposes of carrying out this transaction.
Law no. 1.554, which aims to protect the interests of the State and better safeguard public funds, will ensure the transparency of compensations and offsets through their inclusion in the budget. Subsequently, these compensations resulting from disaffecting will not only enable urban reparcelling, but also the acquisition of existing properties, either directly or through the right of pre-emption for the protected sector.
This optimised management of public finances, with no debts or budget deficits, thus ensuring political and financial stability, is one of Monaco's assets. It is one of the reasons, among many others, that attracts people and companies to settle here.
Valeri Agency is at your disposal to discuss your property projects, whether you are an owner or looking to buy in the Principality of Monaco and the surrounding area.
Do not hesitate to contact us!