Commercial rent payments in Monaco

The classification of a commercial lease under Monegasque law must satisfy specific conditions (1.1). Although the rent is fixed by the lease, it may be subject to revision according to specific procedures provided for by law (1.2), the respect of which gives rise to a case law interpretation (2.).

Under Monegasque law, commercial leases are subject to Law n°490 of 24 November 1948 as amended by Law n°1287 of 15 July 2004 (hereinafter "Law n°490"), which is of a public policy nature.

According to Article 1 of this law, commercial ownership of a lease is acquired if certain conditions are met: 

• the subject must operate a business;
• in premises leased to the owner; 
• for at least 3 years.

The Monegasque judge is not bound by the terms of the contract concluded between the parties and can reclassify a lease contract as a commercial lease if the above conditions are met.

The rent is fixed by the lease concluded between the lessor and the lessee.

Law n°490 provides for the possibility of modifying the amount of rent fixed:

• Either in the context of a lease renewal procedure, if the price paid does not correspond to the rental value assessed according to specific criteria.
• Either during the course of the lease, if the price paid does not correspond to the rental value:
  • either as a result of a change in the general economic conditions of the Principality 
  • or as a result of a change in the specific conditions affecting the business.

The parties cannot request the modification of the rent on this double basis nor substitute one of these procedures for the other during the proceedings.

The application for revision of the rent must follow a specific procedure described by Law No. 490 and is preceded by an attempt at conciliation and, in the event of non-conciliation, by a report which determines the precise subject of the dispute. 

La Commission Arbitrale des Loyers Commerciaux (CALC) is the competent court to rule in this area. The judgments rendered by the CALC are subject to appeal.

The parties justify their request for revision of the rent based on specific procedures described by law n°490 and according to the circumstances. 

Due to the public order nature of this law and the specific procedure that the parties must follow to obtain a rent review, the requests are generally not based on ordinary contract law such as the exception of non-performance, good faith or even the notion of force majeure.

Thus, whether in the context of a lease renewal procedure or in the course of the lease, the party requesting a modification of the rent must establish that the amount of the rent no longer corresponds to the rental value of the premises (2.1). 

During the lease, it is up to the party requesting the change to demonstrate that the rent does not correspond to the rental value of the premises, either because of a change in the general economic conditions of the Principality (2.2) or because of a particular change in the conditions affecting the business (2.3).

In order to request a change in rent, it is up to the claimant to demonstrate that the rent set no longer corresponds to the rental value of the premises. 

According to the provisions of Law No. 490, the rental value of the premises is assessed based on "the extent, location, comfort, facilities and operating possibilities of the premises".

Requests for an upward or downward revision of the rent are mainly based on these criteria. 

To this end, the claimant generally makes a comparison with the neighbouring rental market for the same type of premises or produces an estimate made in the context of an amicable or judicial assessment.

Considering these elements, the CALC will assess whether there has been a change in the value of the premises in order to grant or deny the request for an increase or decrease in rent.

In absence of proof of a positive or negative change in the rental value of the premises operated according to the above-mentioned criteria, the request for a rent review is rejected.

Conversely, if the party making the request successfully proves that the rent fixed initially no longer corresponds to the rental value of the premises with regard to the above-mentioned criteria by providing evidence in the debate, the CALC shall fix a new rent.  

During the lease and in accordance with article 21 of law no. 490, it is possible to request the revision of the rent if the price paid no longer corresponds to the rental value following a modification of the general economic conditions of the Principality.

However, such a request cannot be made in the context of a lease renewal procedure.

During the course of the lease, in order for such request to be granted, it is up to the requesting party to establish:

• The existence of a change in the general economic conditions of the Principality;
• and that for this reason the rent fixed no longer corresponds to the rental value of the premises.

The CALC has already considered that the importance of the health crisis linked to COVID-19 has impacted a significant change to the general economic conditions of the Principality, given its duration and its undeniable repercussions on the world economy and more particularly on the Principality. 

Thus, the CALC accepted a request for a reduction in rent presented by a lessee who justified, by producing convincing estimates, the fact that due to the health crisis the rent fixed no longer corresponded to the rental value of the premises.

On the other hand, and after confirming that the health crisis constituted a modification of the general economic conditions of the Principality, the CALC rejected a request for reduction of the rent presented by a lessee who did not demonstrate sufficient evidence that the rent fixed no longer corresponded to the rental value of the premises. 

This position had already been adopted by the CALC during the global economic crisis in 2008.

In accordance with article 21 of law no. 490 the parties may request a revision of the rent if the price paid no longer corresponds to the rental value as a result of a change in the particular conditions affecting the business.

The judge will grant a request for a rent increase, especially when the lessor can establish the existence of a significant increase in the number of people visiting the area in which the premises are located. 

Conversely, it is common ground that reference to the rental values of other premises is inoperative in the context of a procedure aimed at revising the amount of rent during the course of a lease. 

Similarly, requests for rent increases are systematically rejected after it has been found that the improvements to the particular conditions affecting the premises may compensate for certain disturbances affecting the tenant's free enjoyment of the premises or if the works have been paid for by the lessee.

Finally, the request for a rent increase is systematically rejected if it is found that the indexation provided for in the lease contract has already led to an increase in rent that is likely to cover the rental value of the premises.