Property Traders - Clarification Of The Conditions Of Application Of The New Law

CP
CMS Pasquier Ciulla Marquet Pastor Svara & Gazo

Contributor

CMS Pasquier Ciulla Marquet Pastor Svara & Gazo joined the CMS network in April 2017. Since then, we have worked to combine a deep understanding of the local market with a global overview, collaborating with 80+ offices in 45+ countries, with over 5,000 lawyers worldwide. Our firm, founded by three members, has now grown to one of the largest in Monaco, with over sixty professionals, including six Avocats Associés Monégasques, almost 40 associates, experts in Monegasque law, and a support team. Our firm is structured around seven practice groups, each dedicated to a specific area of expertise: Banking & Finance, Business & Investments, Real Estate & Construction, Employment, Tax law, Private Clients and Criminal law.
Sovereign Order no. 10.745 of August 5, 2024, issued in application of law no. 1.560 of July 2, 2024 on the regulation of property dealers, was published in the Journal de Monaco on August 16, 2024.
Monaco Real Estate and Construction

Sovereign Order no. 10.745 of August 5, 2024, issued in application of law no. 1.560 of July 2, 2024 on the regulation of property dealers, was published in the Journal de Monaco on August 16, 2024.

For the record, it specifies the conditions of application of law no. 1.560 of July 2, 2024 on the regulation of property dealers (see our article of July 11, 2024 "Regulation of property dealers, the reform that kills three birds with one stone").

1. Specific details of the financial guarantees required of property dealers

If some were looking for answers in Law 1.252 of July 12, 2002 regulating the real estate agent profession and Sovereign Order 15.700 of February 26, 2003, it has to be said that the financial guarantee required of property dealers is quite different from that required of real estate agents.

The reason for this notable difference between real estate agents and property dealers is based on the distinction between the persons to be protected: while the financial guarantee for property dealers represents tangible protection for the State against the risk of non-payment (the latter being its sole creditor), the guarantee for real estate agents provides protection for the agent's customer in the event of non-return of funds collected, when they are intended to be repaid.

It should be remembered that property dealers differ from other real estate professionals in that they do not act as intermediaries and, as such, cannot hold any funds on behalf of their clients. This contrast between property dealers and other real estate professionals justifies the differences that emerge from the conditions specified by the Sovereign Order, particularly as regards the implementation of the guarantee.

The first notable difference is that the guarantee taken out by property dealers must be for the benefit of the Treasury, as specified by law no. 1.560.

In the event of default, the Sovereign Order stipulates that the financial guarantee imposed on property dealers may be enforced by the Direction des Services Fiscaux one month after the summons to pay has remained without effect, it being specified that the property dealer may under no circumstances impose on the State an exception or objection of any kind whatsoever relating to the guaranteed obligation, which is constituted on first demand.

In addition, if the property trader's financial guarantee is called, a new guarantee must be set up for the remaining period.

Real estate agents' financial guarantees are triggered by their creditors (generally their customers) when the latter are in default. To do so, creditors must prove the existence of a claim that is liquid, due and certain, and they can only activate the guarantee one month after receipt of a registered letter of summons.

Secondly, while the amount of the guarantee is set at 150,000 euros for estate agents (50,000 for the first two years only), the legislator requires a guarantee of 50,000 euros to be taken out for a period of 2 years (as opposed to 1 year for agents), to be renewed two months before its expiry.

Finally, when registering with the RCI, property dealers are required to provide a certificate stating the period of validity, the amount of the guarantee and the name of the institution that issued it, together with the address of its registered office.

2. Civil liability insurance

With regard to the obligation to take out civil liability insurance, only one clarification is provided by Sovereign Order 10.745 of August 5, 2024.

Like real estate agents, property dealers must take out the civil liability insurance stipulated in article 8 of the law with a general insurance agent or an approved broker.

However, the Sovereign Ordinance imposes an additional constraint on property dealers, namely the obligation to forward the insurance taken out to the Economic Development Department when registering with the RCI.

3. Proof that the property complies with current electrical and energy standards

As a reminder, in order to benefit from the partial exemption from registration duties, the law now requires property dealers to provide proof that the property complies with current standards, particularly electrical and energy standards.

This special requirement is justified by the specific nature of the property-dealer's activity, and is designed to limit the purely speculative aspect of certain transactions.

This requirement is also in line with the Principality's environmental commitments.

The ordinance stipulates that:

  • at the time of signing the deed of sale, the property trader must submit to the notary a certificate relating to electrical standards and a certificate relating to energy standards, dated less than one year and drawn up by an inspection body approved in the Principality.
  • In practice, these are the inspection bodies referred to in Ministerial Order no. 2015-420 of July 3, 2015. (Apave ; Bureau Veritas, Cabinet Kupiec & Debergh ; Groupe Cadet, Socotec, Dekra, Qualiconsult Exploitation)
  • The energy standards certificate must be accompanied by a duly completed form E from Annex III of the aforementioned ministerial order, relating to the current energy performance of the walls, whether or not the property is a single property unit. This form, which is available on the Monaco Government's official portal, must specify whether any work subject to an obligation to improve energy performance has been carried out, or more generally, for those not subject to obligation, whether any energy performance work has been carried out.

With regard to transitional provisions, it should be noted that property dealers already in business will have to comply with the new regulations (financial guarantee, insurance) as of October 27, 2024 (a period of 3 months from the entry into force of the law of July 2, 2024), and that the new tax measures apply to deeds of purchase registered since September 1, 2024.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More