Property “Protected sector”: annulment by the Supreme Court of the regime for issuing demolition and reconstruction authorizations in case of complete demolition of residential premises

Decision TS 2022-01 and 2022-02 Hoirs M. et Association des propriétaires de Monaco c/ Etat de Monaco (action for annulment on the basis of 2°) of A of article 90 of the Constitution) [1]

The Supreme Court annulled for excessive infringement of the right to property guaranteed by Article 24 of the Constitution, the legislative provision conditioning the issue of authorisations to demolish and rebuild when premises for residential use in the “protected sector” (“secteur protégé”) are subject to complete demolition, namely Article 8 (and the inseparable provisions of Articles 1, 3 and 10) of Law no. 1. 508 of 2 August 2021 on the preservation and reconstruction of residential premises, which had inserted Article 39-1 into Law no. 1.235 of 28 December 2000 on the rental conditions of certain residential premises built or completed before 1 September 1947, as amended.

Following the partial annulment of the provisions of Law no. 1.508, a new law should be submitted to the Parliament, in order to pursue the general interest objective of preserving housing in the protected sector (for the benefit of Monegasques, persons protected by virtue of their personal or family ties with Monegasques, and “children of the country” because of their length of attachment to Monaco).

The three other parts of the reform carried by Law no. 1.508 are not in question (redefinition of the persons protected under Law no. 1.235; possibility for the tenant to partially allocate a dwelling subject to Law no. 1.235 to the exercise of a commercial activity; two regimes of rehousing of the evicted tenant, one at the expense of the State in the presence of integral demolition works, the other at the expense of the landlord in the presence of works other than those of integral demolition).

Excessive interference with the right of ownership which justified the partial annulment of the provisions of Law No. 1.508:

• Obligation of owners to assign accessory premises and outbuildings (car parking space and cellar) to the substitute residential premises transferred to the State (following complete destruction). Law no. 1.508 provided for the transfer of accessory premises and outbuildings to the State for a fee, but did not provide for compensation in terms of volume for these accessory premises and outbuildings. The Supreme Court deduced that this lack of compensation in volume was likely, given the characteristics of the building (housing the substitute premises), to call into question the availability of part of these accessory premises and outbuildings for the owner(s) of the building.
• Demolition and reconstruction of buildings comprising residential premises governed by Law No. 1.235 of 28 December 2000 of 28 December 2000 conditional on compliance with the provisions of Law No. 1.235. The Supreme Court considered that making the demolition and reconstruction of buildings containing residential premises governed by Law no. 1.235 conditional on compliance with its provisions had the effect, in the case of co-ownership, of restricting the exercise of the right of ownership of both the owners of residential premises covered by Law no. 1.235 and the owners of residential premises not governed by Law no. 1.235.
• Condition of location of the specific floors assigned to the alternative living quarters within the building, and granting in return by the State of an increase of the building volume. The Supreme Court considered that Law no. 1.508 did not guarantee that the location of the specific floors within the building and the increase of the building volume would not have a negative impact on the situation and the market value of the flats of the owners of residential premises not covered by Law no. 1.235.
• Right to demolish and rebuild conditional on entering into co-ownership with the State. The Supreme Court ruled that Law no. 1.508 also infringed excessively on the right to property by making the right to demolish and rebuild one’s property conditional on the owners entering into co-ownership with the State for an indefinite period.
• More generally. Finally, the Supreme Court considered that it did not appear from the documents in the case file that the objectives pursued by the legislator could not have been met by provisions that would have had a lesser impact on the free exercise of the right to property.

[1] Art. 90 Monaco Constitution:

” A. In constitutional matters, the Supreme Court shall rule sovereignly: (…)

2°) on action for annulment, for assessment of validity and for compensation, which have as their object an infringement of the freedoms and rights enshrined in Title III of the Constitution, and which are not covered by paragraph B of this article.”