Rent indexation in Monaco
What is rent indexation for?
Indexation allows a rent to be adjusted over time without renegotiating the lease at each term. It protects the landlord's purchasing power against inflation, while giving the tenant a rule known in advance rather than an open-ended negotiation.
In Monaco there is no single regime: the applicable law depends on the nature of the property and the use of the premises. Free-sector residential property, Law no. 887, protected-sector Law no. 1.235, commercial premises or offices: each status has its own indexation rules, sometimes regulated by law, sometimes entirely free.
The Free Residential Sector in Monaco
Buildings that fall under no special law (built after 1947, outside Law no. 887) belong to the “free sector” (secteur libre). The rent and its indexation are freely negotiated between landlord and tenant, including at lease renewal.
Contractual indexation generally takes one of three forms:
- An economic index, most often one of those published by the French National Institute of Statistics and Economic Studies (INSEE): the construction cost index (ICC), the all-trades building index (BT01), or the consumer price index excluding tobacco.
- A lump sum, set as a percentage per year
- A hybrid formula: an economic index with a minimum flat-rate floor applicable no matter what.
Please note that at the end of the lease, the landlord may unilaterally revise the terms of the lease, or decline to renew it, without having to give reasons.
Residential Property Under a Speacial Law in Monaco
This regime concerns some housing built or completed before 1 September 1947. It includes 2 separate laws
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Law no. 887
These are residential leases concluded for a fixed term of six years, and the tenant must meet certain conditions to be eligible for this type of housing. The rent, its indexation and any increase at expiry are freely set by the parties, as in the free sector; tacit renewal may be provided for in the contract.
Termination conditions are regulated:
- The tenant can terminate each year, with 3 months' notice.
- The landlord may act at the end of the six-year term, and may oppose a contractual tacit renewal by giving three months' notice.
Please note that at the end of the lease, the landlord may unilaterally revise the terms of the lease, or decline to renew it, without having to give reasons.
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Law No. 1.235 (as amended by Law No. 1.291)
These are residential leases concluded for a fixed term of six years, and the tenant must meet certain conditions to be eligible for this type of housing. The State must also approve the tenant's application according to priority criteria. This is the only status in Monaco where indexation is fully regulated by law, with a single reference index and numerical caps that depend on the stage of the lease.
- During the lease: annual review, capped at 1× the change in the four-quarter average of the consumer price index excluding tobacco (France as a whole, INSEE). This calculation is available on the Monegasque Government's website.
- At renewal, i.e. at the end of the 6 years: the increase may not exceed three times that same change.
In the event of a disagreement over the indexation, the arbitration commission (Commission arbitrale) may be asked to decide the matter.
The tenant may terminate during the lease or at its expiry by giving the landlord three months' notice. The owner may also terminate during the lease where they intend to exercise their right of repossession (droit de reprise) under the conditions laid down by law.
Please note that at the end of the lease, it is renewed as of right on the same terms, except for the rent, where the landlord notifies the tenant of a proposed increase in accordance with article 19 of the law at least six months before the lease expires.
Commercial leases in Monaco (Law No. 490 of 24 November 1948)
Unlike in France, where the commercial rent index (ILC) is required, the choice of indexation in Monaco is free, but case law holds that it must reflect an economic reality.
It should be noted that at the end of the lease, the landlord is obliged to offer a renewal or he must compensate his tenant. The landlord or the tenant may also, during the course of the lease, request an increase in the rent price if it no longer corresponds to the rental value of the market, in particular as a result of a change in the general economic conditions of the Principality or the particular economic conditions affecting the property.
In the event of disagreement between the parties, the dispute is decided by the Commercial Rent Arbitration Commission (CALC).
Office Leases in Monaco (Law No. 1.433, articles 1616-1 to 1616-7 of the Civil Code)
Created in 2016, this status is a Monegasque speciality: it applies only if the parties choose by contract to submit to it (otherwise the general rules of the Civil Code apply and indexation is free), for premises used for intellectual work and the related administrative services. It sits outside the constraints of Law no. 490: no automatic right to renewal, no eviction compensation, and key money (pas-de-porte) is prohibited.
On indexation, article 1616-5 of the Civil Code lays down a clear default rule: the rent, which is freely set, may be revised annually in line with the change in the construction cost index (ICC) published by INSEE, unless otherwise agreed. The parties may therefore provide for a different mechanism, but failing that, this rule applies.
Please note that at the end of the lease, the landlord may unilaterally revise the terms of the lease, or decline to renew it, without having to give reasons.
Rent indexation in Monaco: key takeaways and our rental management service
In Monaco there is no single indexation rule, but as many rules as there are statuses. The free sector, Law no. 887 and office leases leave considerable contractual freedom as to the choice of index and how it is applied, unlike Law no. 1.235 or Law no. 490, which are far more tightly regulated.
A poorly drafted clause, a missed term or a notice sent too late can therefore prove costly for an owner. This is where the support of BARNES | Valeri Agency makes the difference. Thanks to our multidisciplinary rental management team, we identify the regime that applies to your property, secure the drafting of the lease and its indexation clause, and then monitor it on your behalf.
If you own a property in Monaco that you wish to let, please get in touch: we would be delighted to present our rental management service and the full range of tasks it can carry out on your behalf, to safeguard your assets and maximise their profitability.
Discover our property management services: https://www.valeri-agency.com/en/management-monaco.html