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Characteristics of Apartments under Law 887

Apartments governed by Law 887 have several distinctive features:

 

1. Lease Duration: Leases for these apartments have a minimum term of six years, automatically renewable. Tenants benefit from strong security, as only they can terminate the lease during this period, except in exceptional cases defined by law. After six years, the owner may choose to re-rent the property, occupy it, leave it vacant, or sell it.
2. Rental Conditions: These apartments can only be rented to individuals meeting specific criteria. This includes Monegasque nationals, residents who have lived in Monaco for at least five years and have been working there for over six months, as well as the property owner’s ascendants or descendants.
3. Rent Determination: The rent amount can be freely set by the property owner.
4. Right of First Refusal: In case of sale, the State has a right of first refusal for four weeks following the signing of a preliminary sales agreement. If the State does not exercise this right, the tenant is then granted a preemptive right, allowing them to purchase the apartment under the same conditions as the prospective buyer.

Who Can Rent an Apartment Under Law 887?

To be eligible for a lease under Law 887, the tenant must meet one of the following criteria:

• Be an ascendant, descendant, or spouse of the property owner
  • Be of Monegasque nationality
  • Have worked in Monaco for at least five years
  • Have lived in Monaco for over five years and been professionally active for more than six months

 

This system promotes housing access for long-term residents and Monegasques. Renting an apartment under Law 887 provides valuable security and stability for tenants. With a minimum lease term of six years, residents enjoy long-term stability without the risk of unexpected eviction.

How to rent out an apartment under Law 887?

To rent out an apartment under Law 887, several steps must be followed. The owner must first submit a rental offer to the Housing Department, along with a certificate from an inspection body issued within the last year. Once a tenant is found, the owner must complete a rental declaration form, indicating the selected candidate. This form must then be submitted to the Housing Department. Finally, the lease agreement must comply with the provisions of Law 887, particularly regarding the minimum six-year duration and termination conditions.

Acquiring an apartment under Law 887: an opportunity to seize

Acquiring an apartment under Law 887 in Monaco presents a unique opportunity for savvy investors. While subject to certain legal constraints, this type of property offers significant advantages, starting with a purchase price often several hundred thousand euros lower than the free market. In a market where real estate prices are soaring, this alternative provides access to charming properties, often located in historic buildings with spacious rooms, high ceilings, and even private gardens – a rare luxury in the heart of the Principality!

 

Before finalizing a purchase, it is essential to fully understand Monaco’s legal framework. Law 887 properties are reserved for eligible tenants based on strict criteria, which limits the owner’s freedom in terms of renting and setting rental prices. However, if you plan to live there with your spouse, no rental restrictions will apply to you: you can fully enjoy your property without any leasing constraints.

 

From an investment perspective, these apartments benefit from high rental demand due to the scarcity of protected housing, and their long-term appreciation is promising, with minimal risk since Monaco’s real estate market consistently retains its value. Additionally, strict rental regulations minimize disputes and simplify property management.

 

Finally, property selection is key: a terrace with a view, parking, a spacious kitchen, or renovated bedrooms are all factors that can make a difference. Law 887 buildings, often located in Monaco’s most iconic neighborhoods, can hold excellent surprises. Knowing where to look and having the right guidance can turn this legal constraint into a genuine asset for your real estate portfolio.

 

Miells Christie’s International Real Estate is at your service to help you rent or acquire a property under Law 887, with the support of our expert legal team, offering personalized advice tailored to your specific situation.

Sales Reaching New Heights

The year 2024 saw a spectacular surge in the real estate sales market. For the first time, the total value of sales surpassed 3.5 billion euros. More than half of the transactions involved properties sold for more than 22 million euros. This ultra-luxury segment continues to attract wealthy clients in search of exceptional properties.

Among the most notable sales of the year, some properties exceeded the 100 million euro mark, confirming the appeal for exceptional residences with ultra-high-end features. The market for spacious family apartments also remains dynamic, due to strong demand from residents seeking properties offering comfort and prestige.

A Contrasting Resale Market

Unlike sales, the resale market continued its decline for the second consecutive year. With 365 transactions recorded, representing a decrease of 5.9% compared to 2023, it reached its lowest level since 2012. However, despite this decrease in the number of transactions, the average resale price reached a new record at 6 million euros, an increase of 5.7%. The median price, meanwhile, rose by 2.9% to 3.6 million euros.

The decline in the number of resales is partly due to the scarcity of supply and the retention of properties by owners who prefer to hold onto their properties in a context of continuously rising prices. However, some areas, such as Monte-Carlo and Larvotto, still register a higher volume of resales than others, thanks to their unmatched attractiveness.

Square Meter Prices Still Rising

The average price per square meter also reached a historic high in 2024, reaching 51,967 €. This figure marks an increase of 1.1% year-on-year and 44.3% over ten years. The Larvotto area saw the strongest increase, with an average price of 97,563 €/m², but this figure should be interpreted with caution due to the limited number of recorded transactions. Meanwhile, Monte-Carlo, La Condamine, and Fontvieille show prices exceeding 53,000 €/m².

The high level of prices per square meter confirms that Monaco remains a prestige market where supply remains limited and demand strong. New property developments, although rare, contribute to this continued rise in prices. The quality of services and infrastructure, as well as the privileged location of these properties, justify these record values.

In conclusion, despite a decline in resales, the Monaco real estate market remains particularly attractive with rising prices and sustained demand for luxury properties. The Principality continues to position itself as a safe-haven market for wealthy investors seeking exclusivity and stability.

With records achieved in 2024 and still positive appreciation prospects, Monaco remains a must-see destination for high-end real estate investment. Whether for a primary residence, a second home, or a wealth investment, Monaco’s real estate continues to appeal to an international clientele seeking prestige and security.

 

Credits and infographic : Imsee.mc

A Significant Impact on Agencies’ Daily Operations

The new rules impose heavier obligations on information collection and transaction monitoring, significantly increasing the administrative burden for real estate agencies. Brokers must perform rigorous checks as soon as a client shows serious interest in a property. This includes collecting and analyzing identification documents, proof of address, as well as information on the source of funds and the client’s socio-economic background to verify the legitimacy of the economic transaction.

 

While banks have significant human and financial resources to handle these procedures, smaller agencies—constituting the majority of the real estate sector in Monaco—struggle to meet these obligations. Without dedicated compliance staff, they often rely on specialized firms to ensure regulatory compliance.

 

At Miells-Christie’s, one of Monaco’s leading agencies, we have established an internal compliance team and provided extensive training for all employees. To ensure strict compliance, we also collaborated for several months with a specialized law consulting firm.

 

Outsourcing, even partially, does not relieve agencies of their legal responsibility. The agent remains on the front line for collecting information, while respecting confidentiality.

A More Understanding Clientele

 

The increased administrative procedures might seem off-putting to some clients, but the reality is more nuanced. With the standardization of procedures between real estate agents, banks, and notaries, these requirements are now perceived as an essential norm. Monegasque banks, subject to the same obligations, have gradually familiarized their clients with providing and updating the necessary confidential information, making these processes more accepted and integrated.

 

For more complex transactions, such as those involving companies, administrative procedures sometimes require additional investigations. However, real estate agents can rely on local tax experts to ensure compliance with the processes. This ensures optimal support, even in more technical situations, without disrupting the transaction process.

 

Many clients, particularly local residents, are now well-versed in these procedures. They understand that these requirements are not driven by intrusive curiosity, but by a legal obligation to prevent money laundering. Thus, business relationships are established on new foundations, strengthened by greater transparency and a clearer socio-economic context. This process allows clients to demonstrate their reliability, significantly reducing reluctance.

 

Despite some variations in client responsiveness, refusals to cooperate remain rare. This shift in mindset greatly facilitates the work of real estate agents, allowing them to establish strong relationships of trust while respecting their legal and ethical obligations.

 

A Clear Goal: Exiting the GAFI Grey List

 

Monaco’s efforts to strengthen its regulatory framework and compliance aim to improve its international reputation. The primary goal is to exit the Financial Action Task Force (FATF) grey list by January 2026, a strategic priority for the country. This process includes intermediate evaluations scheduled for May and September 2025 to measure progress and adjust actions if necessary. These steps will not only track the progress of reforms but also reassure international partners of Monaco’s commitment to transparency and anti-money laundering standards.

 

Finding a Balance

 

Compliance represents a significant challenge for real estate agencies in Monaco. Between increasing requirements and the need to maintain smooth client relationships, professionals must strike a balance. Adequate training, collaboration with external experts, and transparent communication with clients are key to successfully navigating this transition while maintaining service quality.

Areas for improvement identified by the FATF

The FATF identified six areas needing improvements:

1. Understanding of risks related to money laundering and foreign-origin tax evasion
2. Increased confiscation of criminal assets internationally
3. More effective sanctions for anti-money laundering violations
4. Increased judicial resources and improved efficiency
5. Optimization of suspicious activity reports
6. Increased seizure of assets from criminal activities

These recommendations aim to strengthen Monaco’s resilience against financial threats and align its practices with global standards. Strengthening sanction mechanisms and training key personnel are crucial to ensuring the effectiveness of anti-money laundering measures.

Monaco’s Reaction and Action Plan

Monaco is committed to complying with international standards. The government has already implemented several significant measures:

• Adoption of nine new laws within sixteen months to strengthen the Monégasque Financial Security Authority (AMSF) and the anti-money laundering legal framework
• Development of an action plan with a reform schedule extending to January 2026
• Creation of a new financial intelligence and surveillance authority
• Strengthening measures against terrorist financing

The FATF has acknowledged these advancements. Pierre-André Chiappori, finance and economy minister advisor, estimates that “80% of the work is done”. However, additional efforts are needed to be removed from the grey list. In response to the recommendations, Monaco has also intensified its collaborations with other jurisdictions to exchange crucial information and strengthen cross-border controls.

Repercussions on Monaco’s Economy

Despite the challenges, Monaco remains optimistic about its growth. In the short term, the budgetary impact would be limited, but certain sectors could be more affected: Financial Sector: Monégasque financial institutions might face increased scrutiny and higher compliance costs. This could affect their short-term competitiveness. Real Estate: The real estate sector seems to maintain its robustness. The attractiveness of the local real estate market, characterized by the rarity and luxury of properties, continues to draw wealthy investors. In this complex regulatory context, Miells-Christie’s expertise will be essential in guiding wealthy investors towards investment opportunities in the principality. Foreign Investments: While some investors might be more cautious, the overall impact will depend on how quickly Monaco can implement the necessary reforms and reassure stakeholders.

In the short term, the grey listing could influence international perceptions of Monaco, prompting some investors to reconsider their commitments. However, a study conducted by the Center for Global Development in 2016 offers a different perspective. Even though being included on the FATF grey list may lead to a reduction of up to 10% in the volume of payments received by a country, the study indicates that this list does not tend to isolate these nations from the international financial system.

This argument is also supported by the finance and economy minister advisor Pierre-André Chiappori: “As an economist, I believe that being placed on the grey list, in the short term, will not have direct consequences on growth, especially for a state that does not borrow. Monaco has negative debt and a constitutional reserve fund. If we were to remain for five years, the impact would be possible, but not over a period of a year and a half,” he explained during a press conference in early July 2024.

In the long term, these reforms could improve the transparency and attractiveness of the Monégasque market.

Challenges and Opportunities

Monaco’s inclusion on the grey list presents both unique challenges and opportunities. On one hand, Monaco must strengthen its financial control systems and manage the risk of negative perceptions from some investors. On the other hand, this situation offers Monaco the opportunity to modernize its financial regulatory framework, which could, in the long term, improve its reputation as a transparent financial center compliant with international standards.

This period of reforms can also serve as a catalyst for a broader transformation of Monaco’s financial sector, integrating advanced technologies for monitoring and compliance. The use of artificial intelligence and big data could, for example, improve the detection of suspicious transactions and enhance analytical capabilities.

Future Outlook

Monaco aims to be removed from the grey list by 2026. To achieve this goal, the Principality will have to overcome several major challenges. Firstly, it will need to effectively implement the planned reforms to meet international requirements. Secondly, it will be crucial to strengthen international cooperation in combating money laundering by establishing strong partnerships with other jurisdictions. Additionally, it is necessary to improve the training of relevant personnel and increase the resources allocated to judicial and financial authorities to ensure rigorous enforcement of the new regulations. Finally, Monaco will need to demonstrate concrete results in terms of prosecutions and confiscations of illicit assets to prove its commitment and ability to combat illicit financial activities effectively and transparently.

Although Monaco’s inclusion on the FATF grey list in 2024 is a challenge, it can also be an opportunity for strengthening and modernization. By effectively implementing the necessary reforms, this period could mark a positive turning point in Monaco’s financial history, consolidating its position as a safe, transparent financial center compliant with international standards. The Principality’s ability to adapt quickly and demonstrate tangible results will be crucial in restoring investor and international partner confidence.