Renting in Monaco: Reading and Understanding a Residential Lease

While Monaco offers several types of leases - commercial, office and residential under specific regimes - this text focuses on the common clauses of a residential lease governed by ordinary law, concerning a property built after 1947.

In Monaco, a residential lease is never a simple standard form. It depends on the housing sector in which the property falls, the applicable legal framework and often includes provisions that a tenant should review with particular care.


Applicable legal framework

Several layers of rules coexist. The first step is therefore to identify the legal regime applicable to the property. This determines how rights and obligations should be understood.

In this case, the primary framework is the Monaco Civil Code, particularly the provisions governing leases of property. These set out the general rules of the lease: delivery of the premises, payment of rent, proper use of the property and routine maintenance. They form the basis of contracts in the free sector and apply subsidiarily to certain regulated leases.

In a tight market, the temptation to sign quickly is strong. In Monaco, the opposite approach is advisable: each clause should be read and understood in detail.


Lease term and renewal

The duration of the lease is a key element, often underestimated by tenants, yet its consequences can be significant, particularly in the event of early termination.

In the free sector, lease terms most commonly range from one to three years and may or may not include automatic renewal. Shorter terms can also be proposed. By comparison, properties subject to specific statutory regimes may have mandatory six-year terms.

A one-year lease places the tenant in a structurally unstable position. While this format may suit temporary occupation prior to purchase, it exposes the tenant to a potential loss of occupancy after only one year in the event of a sale or repossession by the owner. The tenant may then be forced to re-enter a highly constrained rental market.

Renewal clauses must be reviewed carefully. Where tacit renewal is provided, termination by the landlord is often linked to a sale. Where no renewal clause exists, either the lease is explicitly limited to a fixed period from the outset, or the landlord may reserve the right to offer renewal subject to a rent renegotiation outside standard indexation mechanisms.

Longer lease terms can provide stability but also bind the tenant. If the tenant leaves early, rent and charges remain due until the end of the agreed term. The choice of duration should therefore be considered carefully.

It is also common for a property to be offered simultaneously for rent and for sale. In such cases, the tenant must be informed. The lease may include provisions allowing viewings and, in the event of a sale, a negotiated early departure. Such clauses may sometimes support rent negotiation or compensation.


Rent, indexation and charges

In the free sector, rent and indexation mechanisms are freely agreed. Rent is typically reviewed annually.

Tenants should verify that rent levels are consistent with market conditions. In Monaco’s constrained market, this assessment is essential.

Indexation clauses deserve particular attention. They are freely drafted and often operate in one direction. Most leases reference the construction cost index published by INSEE, in the absence of a Monaco-specific index. This index is generally more favorable to landlords than residential rent indices.

It is common for clauses to include a minimum annual increase, often around 3%, regardless of actual index movement. The wording must be examined carefully. Some clauses provide that only upward indexation applies. Over time, such provisions can significantly affect overall occupancy cost.

Service charges must correspond to expenses incurred by the landlord that benefit the tenant. They are recoverable only with proper justification. The landlord must provide annual accounts and supporting documents.

While Monaco does not provide a detailed statutory list comparable to France, practice clearly distinguishes recoverable charges from those that remain the landlord’s responsibility, including major works and management costs.

Charges may be paid as provisions subject to annual adjustment, which is the most common arrangement. A fixed charge structure may also be agreed, typically in the free sector. In that case, no adjustment occurs, but the amount must remain proportionate.

Claims relating to charges may be made within a five-year limitation period.


Security deposit, fees and inventory

The security deposit typically corresponds to three months - and in some cases four months - of rent and service charges. It is generally adjusted whenever rent increases, particularly where annual indexation or contractual revisions apply.

Agency fees correspond to the brokerage commission between the parties and typically amount to 10% excluding tax of the annual rent excluding charges for agencies belonging to the Monaco Real Estate Chamber. Registration fees payable to the Monaco administration represent 1% of the rent amount excluding charges over the lease term.

An inventory and condition report is not mandatory but strongly recommended. Without one, the tenant is presumed to have received the property in good condition. This may have significant consequences upon departure.

A detailed inventory, ideally with photographic or video documentation, provides essential protection.


Works, maintenance and access

This section of the lease is often a source of dispute. It is essential to distinguish between tenant maintenance obligations and works for which the landlord remains responsible.

The Monaco Civil Code sets out the scope of routine tenant repairs, unless otherwise agreed. However, the phrase “unless otherwise agreed” leaves room for contractual extension of tenant obligations. Such clauses must be reviewed carefully.

The tenant must return the property in the condition in which it was received, subject to wear and tear and force majeure. Wear and tear is not precisely defined in Monaco law but generally corresponds to normal aging and use.

Certain clauses may attempt to shift responsibility for wear-related deterioration to the tenant. Careful review is therefore necessary.

The landlord may generally carry out an annual inspection. Viewing arrangements may also be provided in case of sale or reletting, particularly toward the end of the lease, but must remain reasonable and structured.


Mixed use and subletting

Subject to building regulations and administrative approval, mixed use may sometimes be permitted, allowing limited professional activity from the residence. This must be explicitly authorized.

In most cases, the permitted use is strictly residential. Subletting is typically prohibited unless expressly authorized.


Unbalanced or problematic clauses

Although Monaco’s market is liberal, imbalances can arise. Attention should be paid to termination clauses favouring the landlord, unclear rent revision mechanisms, excessive transfer of maintenance obligations and disproportionate reinstatement demands.

Clauses that excessively restrict the enjoyment of the property should also be reviewed carefully.


Required documents

Tenants should ensure that key documents are annexed to the lease: entry inventory, furniture inventory where applicable, and relevant building regulations. An energy audit of the building must also be attached.


Practical approach

As a general principle, no lease should be signed unless duration, termination conditions, rent indexation and charge allocation are clearly defined. A draft lease should be reviewed in advance, ideally by a professional familiar with Monaco’s market.

In Monaco, careful reading of a lease is not optional. It is essential.