In Monaco, the rent-controlled sector is related to most apartments located in buildings constructed or completed before September 1st, 1947. Protected tenants, mainly Monegasques and “Enfants du Pays”, are allowed to benefit from dwelling with moderate rents set by the State and lower than those set in the non-regulated sector. These dwellings are subject to law no. 1.235 of December 58th, 2000, as amended, which also aims to protect their rights.
However, by its very nature, this housing stock is diminishing over time, as old buildings are demolished by developers. Indeed, new buildings do not contain housing subject to this law since no measure had imposed it until now. The rent-controlled sector is also decreasing, as the majority of landlords get back their controlled rent properties for their own use or that of their children for obvious economic reasons.
That’s why, in order to stop the disappearance of this rent-controlled sector and to create a new one allowing eligible people to live in more comfortable accommodation, a legislative mechanism has been drawn up, the subject of law no. 1.508 of August 2nd, 2021 relating to the safeguarding and reconstruction of residential premises under the provisions of law no. 1.235.
The principle is the recovery by the State of one or two floors, as applicable, in a new building at the cost of construction, according to the rent-controlled dwelling areas destroyed. However, to ensure that this operation is in compliance with the owners’ interest concerned, the law provides to grant them a number of compensatory measures to protect their interests and to compensate the effort they are required to make, which essentially consists in accepting the existence of a co-ownership with the State.
We explain hereby how the new legal mechanisms make it possible to achieve these objectives while preserving the interest of property development operations, which are necessary for the Principality own’s development, having a major role in the local economy.
It should be noted that the text redefines the dwellings subject to law no.1.235 (article 1st of law no. 1.508 modifying article 1st of law no. 1.235) which no longer refers only to dwellings for residential use built or completed before September 1st, 1947 but also to those built or completed after this date when they:
- replace, in compliance with the new article 39-1 of law no. 1.235, dwellings built or completed before September 1st, 1947 subject to the provisions of law no. 1.235 and which have been the subject of duly authorised complete demolition work;
- compensate, in compliance with this article, for the lack of construction of the substituted dwellings referred hereabove.
Thus, provided that a number of apartments equivalent to those destroyed and subject of this law are built and given to the State within the newly constructed building or in another one, the owner duly authorised to demolish the entire building will be able to freely dispose of and enjoy the additional reconstructed areas. Indeed, before any demolition, it will be necessary for the owner and the State to reach a prior agreement on the terms and conditions of the operation and for certain modalities to be cumulatively fulfilled.
It should be specified that the provisions of this new article do not apply to:
- buildings subject to the provisions of articles 21 and 23 of the General Provisions of the Urban Planning Regulations in the appendix to Sovereign Order no. 4.482 of September 13th, 2013, as amended: remarkable built elements and landscape elements (cliff, plinth, garden, etc.);
- the reserved area whose current characteristics must be preserved, which includes the Monaco-Ville district and the Sainte-Dévote ravine (article 12.1 A of Sovereign Order no. 3.647 dated September 9th, 1966, as amended, concerning urban planning, construction and roads.
In addition to the payment by the State of a price for the transfer of the so-called substitution or compensation premises calculated on the basis of the cost of construction, the owner must benefit by law from the granting of an increase in the buildable volume in relation to that occupied by the destroyed building and which he will be able to enjoy freely without the restrictions provided for by law n°1.235.
It is important to state that the implementation of the increase in the buildable volume excludes the possibility of benefiting from the general provisions of article 12.6 in the Annex of Sovereign Order no. 4. 482 of September 13th, 2013, as amended, relating to the delimitation and urban planning regulations of the ordered districts sector ("...in the event that the minimum height of the open air between the finished ground of level N and the underside of the slab of level N+1 of the main rooms, of a floor essentially composed of living quarters is increased from 2.70 metres to 3 metres or more, the height of the upper level of a building authorised by the regulations may be increased by a maximum of 30 centimetres. This provision is cumulative within the limit of 11 levels").
Finally, the construction project may, by way of derogation and subject to the agreement of the State, not plan the construction of substitute residential dwellings within the reconstructed building, which will be replaced by other dwellings under the conditions specified in this Article 39-1. In this case, the State is offered another compensation solution in the non-regulated sector.
In addition, landlords benefit from other compensations, such as being relieved of the task of rehousing tenants evicted as a result of the residential dwellings’ complete demolition, since this task is now the responsibility of the state. In compensation, the landlords will have to pay an allowance to the State for each tenant entitled to rehousing. However, these protected tenants do not benefit from the same rehousing conditions depending on the category to which they belong:
- regarding a tenant of Monegasque nationality, the State must make an offer of permanent rehousing in a State-owned apartment, off-classic procedure for allocating a State-owned dwelling;
- regarding a tenant who has a personal link with a Monegasque or who is an "Enfant du Pays", the State must make an offer of permanent rehousing in an apartment subject to the provisions of law no. 1.235, without applying the traditional procedure for renting out provided for by the said law.
Where, in the lack of available dwelling, permanent rehousing proves impossible, the evicted tenant may be temporarily rehoused by the State in an apartment with qualities at least comparable to those of the original dwelling.
The normal removal costs are, in all cases, borne by the State.
Beforehand, when the building is occupied, the landlord who intends to give notice to his/her tenant must inform him/her of this within one month following the submission of the application for demolition and construction permits, and then notify him/her before these permits become final, respecting a notice period of six months from the sending of the registered letter.
The new text describes these protected persons in a very precise manner (Article 2 of Law no.1.508 amending Article 3 of Law no.1.235), in terms of conditions of birth, residence and links with Monegasques.
Foreign nationality is now clearly indicated, and the “Enfants du Pays” are expressly referred to.
Apart from the case of persons with a Monegasque nationality (category 1), the priority ranks defined in this text are based on:
- on personal or family ties with Monegasques for category 2 (persons of foreign nationality). These are persons of foreign nationality:
– born by a Monegasque parent or adopted by a person of Monegasque nationality and who can prove at least ten years' residence in the Principality;
– surviving spouses of a Monegasque nationality person who have not get married again;
– surviving partners of a Monegasque nationality person who have lived in the Principality for at least ten years and who have not concluded a new cohabitation contract or get married or remarried;
– father or mother who is responsible for the care and education of a child of Monegasque nationality and whose home is the child's usual or occasional residence;
– father or mother who have been effectively responsible for a child of Monegasque nationality for at least ten years and who can prove at least ten years of residence in the Principality
New criteria have been integrated and it should be specified that there is no creation of a priority rank within this category of persons.
- on birth and presence in the Principality for categories 3 and 4 (Enfants du Pays). These are:
- persons of foreign nationality defined as "Enfants du Pays" by the sole article of law no.1.506 of July 2nd, 2021 recognising the "Enfants du Pays" and their contribution to the development of the Principality of Monaco and one of whose authors or adopters was also born in Monaco and resided there at the time of such birth or adoption;
- persons of foreign nationality defined as "Enfants du Pays" by the sole article of law no 1.506 of 2 July 2021 recognising the "Enfants du Pays" and their contribution to the development of the Principality of Monaco.
Category 5 concerns persons of foreign nationality who have resided in Monaco for at least 40 years without interruption.
Finally, the law now offers the possibility for the tenant to partially assign dwellings subject to law no. 1.235 to the exercise of a professional or commercial activity (article 9 of law no.1.508 modifying article 2 of law no.1.235), in addition to an associative activity (which was already authorised), under the following cumulative conditions, subject of course to obtaining the necessary administrative authorisations:
- the prior agreement of the landlord must be obtained;
- the exercise of the activity must not be prohibited by the co-ownership regulations;
- the activity must be carried out in personal name only, to the exclusion of any form of civil or commercial company (consequently, no reception of customers, no hiring of employees, no storage or exhibition of goods).
These conditions do not apply to dwellings in the rent-controlled sector owned by the State when the tenant is a Monegasque national or one of the persons referred to in law no.1.490 of June 23th, 2020 relating to the domiciliation of a professional activity in a residential dwellings owned by the State. The more favourable conditions of law no.1.490 are applicable to them.
Finally, it should be noted that the partial use of the dwellings for the exercise of an associative, professional or commercial activity may not lead to:
- a change of the dwellings’ use,
- the application of the status of leases governed by law no. 490 of November 24th, 1948 related to lease agreements for commercial, industrial or craft use, as amended,
- nor the application of the special rules for office lease agreements provided for by law no. 1.433 of November 8th, 2016 (5-year lease contracts).
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We just noticed that the new legislation reconciles the general interest, by enabling the State to keep on fulfilling its social role with regard to Monegasques and people with strong ties to the Principality, and the economic interest of private owners, while absolving them of the social responsibility they bear. In this way, these owners will eventually be freed from the constraints due to law no.1.235.
Valeri Agency also does its best to reconcile your wishes with your economic and patrimonial interests: whether it is related to the old or the new real estate sector, for sale or for rent, our agency offers you great opportunities consistent with your real estate project.
Do not hesitate to contact us!
September 2021
