Law 887, Law 1.235, Operational Framework and Patrimonial Impact

The Liberalised Regulated Sector - Law No. 887 of 25 June 1970

The so-called “Law 887 regime” applies to apartments governed by Law No. 887 of 25 June 1970, which restricts the scope of application of Ordinance-Law No. 669 of 17 September 1959 on the leasing of residential premises.

Buildings concerned generally fall within the following parameters:
- old buildings constructed before 1 September 1947,
- privately owned,
- not exclusively reserved for Monaco nationals, but subject to rent control and regulated re-letting conditions.


Access Conditions

Letting is authorised only for persons meeting one of the following criteria:
- ascendants or descendants of the landlord or of the landlord’s spouse, and their respective spouses,
- Monaco nationals,persons domiciled in Monaco for at least five years and carrying out a professional activity there for at least six months,
- persons working in Monaco for at least five years.

All letting conditions must be formally approved by the Housing Department (Direction de l’Habitat).


Administrative Classification of Dwellings

Dwellings are classified into three categories:
- Category A: Reserved for Monaco nationals and assimilated persons
Monaco nationals or persons having a particularly strong legal or personal link with the Principality.
- Category B: “Children of the country” and long-established residents
Persons born in Monaco or residing there for many years with stable economic ties.
- Category C: Open under conditions
Open to residents with lawful residence and professional activity in Monaco, while rents and renewals remain regulated.

A derogatory regime applies to Category 1 and 2 A–B premises that became vacant after 1 October 1970.


Lease Operation

The lease is concluded for a six-year term, with the possibility of annual termination at the sole initiative of the tenant.

Under this derogatory framework:
- no rent protection applies,
- the landlord may freely determine the rent,
- an indexation clause based on the applicable Monaco index may be included.

Each re-letting must be declared to the Housing Department. The grounds for termination are strictly limited, in particular:
- personal occupation by the landlord,
- reconstruction,
- non-payment of rent.

Certain buildings may also be subject to administrative declassification in the context of authorised demolition and reconstruction.


Practical Scope and Investment Implications

This regime potentially concerns all residents occupying old housing, regardless of nationality. Its primary objective remains the protection of Monaco nationals and “children of the country”, while still allowing stable foreign residents access to regulated housing.

From an investment perspective, a property subject to Law 887 does not constitute a genuine constraint on rental investment, as rent levels may be freely determined under the derogatory system and demand structurally exceeds supply.

However, verification of the applicable regime with the Housing Department remains essential prior to any transaction.


The Protected Sector -Law No. 1.235 of 28 December 2000

The protected sector concerns buildings constructed before 1947 whose allocation is primarily intended for Monaco nationals and “children of the country”.

It is governed by Law No. 1.235 of 28 December 2000, as amended notably by Law No. 1.291, on the conditions for leasing certain residential premises constructed or completed before 1 September 1947.

All letting conditions must be approved by the Housing Department. Dwellings may only be allocated to registered protected persons, subject to strict residence and income conditions.


Purpose of the Scheme

This legal framework pursues three key objectives:
- ensure a housing stock reserved for the Monaco population,
- strictly regulate rents, lease terms and eligible beneficiaries,
- preserve social balance in a territory characterised by extreme land scarcity.

Successive legislative amendments have refined:
- the scope of eligible properties,
- the eligibility criteria,
- the obligations imposed on private owners.


Criteria for Classification under Law 1.235

The classification of a property is based in particular on:
- the construction date of the building,
- the nature of the State’s rights over the property,
- the administrative allocation determined by the Housing Department,
- the legal status of the owner,
- the type and configuration of the dwelling.


The Three Main Administrative Categories

1. State-Owned Buildings
Owned by the Principality, managed by the Housing Department, reserved exclusively for Monaco nationals, allocated according to a priority ranking system.
2. Privately Owned Buildings
Subject to Law 1.235 Classified by ministerial decree. Rents and letting conditions are controlled. Letting is restricted to Monaco nationals or their eligible beneficiaries.
3. Conventional or Mixed Buildings
Buildings partially falling under Law 1.235, often resulting from agreements between the State and private developers.

The administration maintains the official register of protected-sector dwellings.


Order of Priority of Beneficiaries

Since Law No. 1.291 of 2004, the priority order is as follows:
1. Monaco nationals,
2. Persons born of a Monaco parent, spouses and former spouses with children,
3. Persons born in Monaco and resident there for a prolonged period,
4. Residents with more than 40 years of uninterrupted residence,
5. Former occupants under previous statutory regimes.


Practical Implications

For Property Owners
- strictly regulated rents,
- lease conditions fixed by ministerial decree,
- mandatory declaration of vacancies,
- mandatory notification of any transfer.

For Tenants
- access subject to very strict eligibility criteria,
- allocation through a State-managed priority system,
- substantial long-term security of tenure.


Recent Developments and Progressive Reduction of the Stock

Law No. 1.508 of 2 August 2021, aimed at safeguarding and reconstructing protected-sector housing, saw its main provisions annulled by a Supreme Court decision on 12 July 2022, certain constraints having been held incompatible with the right of property.

As a result, the protected housing stock is mechanically decreasing, as demolitions proceed, the Government attempting to compensate through the construction of new state-owned dwellings.


Patrimonial Impact and Asset Valuation

A property subject to the regulated regime generally shows a discount of approximately 10% to 20% compared with an equivalent asset in the free sector, due to:
- strict rent limitations,
- constrained letting conditions,
- restrictions on eligible tenants.

These properties nevertheless retain a defensive patrimonial profile, supported by Monaco’s structural housing scarcity.

It should be noted, however, that this discount is also attributable to the age of the buildings, their lack of modern amenities and the frequent need for substantial renovation works, the low rental profitability naturally discouraging heavy investment.


Pre-emption Right

The entire regulated sector is subject to a State right of pre-emption in the event of a sale, pursuant to Article 38 of Law 1.235.


Summary Comparison Table