Due to its concentration of ultra-high-net-worth individuals and its touristic attractiveness, the Principality of Monaco is home to a large number of luxury brands.
Most of these brands can be found in the highly sought-after Carré d'Or district (which includes Place du Casino, the beginning of Boulevard des Moulins, Avenue des Spélugues, Les Allées Lumières in Park Palace, One Monte-Carlo, 26 Carré d'Or, Métropole shopping mall, etc.).
Logically, the Carré d'Or district is one of the most sought-after in the Principality, with a purchase price per square meter of around €60,000. Most luxury brands do not own but rent their premises, which are generally located in exceptional buildings.
During their set-up or test phase, luxury brands, or even their distributors or franchisees, tend to enter into precarious agreements of less than three years in order to limit their investment in premises.
In the long term, however, luxury brands tend to enter into commercial leases with the payment of a key money deposit, which generally represents a significant investment. These agreements can be signed privately but must be registered with the Monegasque tax authorities.
The status of commercial leases offered by law no. 490 of 24 November 1948 concerning leases for industrial or craft commercial use then allows them to benefit from commercial ownership if the conditions of this law are met.
In such a situation, the tenants of a commercial lease will enjoy a number of advantages under the commercial leases statute, including :
- In the event of disagreement between the parties, the rent will ultimately be set by the Commission arbitrale des loyers commerciaux, an exceptional court made up of commercial landlords and tenants, which has sole jurisdiction in this area at first instance.
With regard to the amount of the rent, it should be noted that the luxury positioning of the brand, the sales achieved or the profitability of the tenant are not among the criteria that may be used by the commission to set the fair rental value of the premises;
- the right to renew their lease, or failing that, to payment of an eviction indemnity to compensate for the damage caused by the notice to leave;
- the free transferability of their lease subject to compliance with the destination clause; it should be noted that in order to control the standing of the brands operating their premises, lessors tend to draft fairly restrictive destination clauses, the validity of which may sometimes be questioned.
In addition to the public policy clauses set out in the aforementioned law no. 490, lessors have a fair amount of freedom when it comes to drafting their leases. However, these negotiations need to be conducted in the context of the Principality's customs, as some customs are fairly well-established and others are more easily negotiable.
To avoid unpleasant surprises, retailers will need to take into account certain timeframes, particularly administrative ones, when setting up shop and planning the opening date:
- Firstly, there are the deadlines for obtaining authorization to carry on the desired activity on the premises, which also apply to the opening of secondary premises;
- Brands generally set up a Monegasque entity when they open for a number of reasons (either because the lessor requires it, to hire employees or to open a bank account in the Principality), and the time needed to set up this company should also be anticipated;
- If refurbishment work is planned (which is often the case with luxury brands, which adhere to a certain design harmony between their points of sale), the brands will have to take into account the time required to apply to the Monegasque authorities for authorization to carry out the work, to apply to the building's co-owners' meeting for authorization if necessary, or more simply, to apply to the lessor for authorisation to carry out the work if the lease provides for this (which is quite common). To carry out the work, it may be necessary to use a Monegasque architect and/or certain approved companies, and in any event the shop cannot be operated until permission to occupy the premises has been obtained.
