Monaco commercial leases – Rent payment obligations under COVID-19

By April 9, 2020 Monaco News

Following its decision to close “non-essential” stores, the Monaco Government has recently announced rent cancellation in State-owned premises (“Domaines”) and incited private lessors to be flexible with tenants in commercial leases faced with store closure since 16 March 2020.  

Depending on the terms of the commercial leases, tenants undergoing total closure may invoke COVID-19 epidemic “force majeure” conditions in order to be exempted from their rent payment obligations. Alternatively, in particular, if force majeure is excluded, tenants may allege the breach of the obligation of delivery and quiet enjoyment of the premises by the landlord in order to suspend rent payment obligations during shop closure and loss of sales.

Because of the particular situation in Monaco and difficulty to find prime premises, it is strongly recommended to first notify and open discussions with landlords prior to suspending rent payments. A unilateral and abrupt rent payment suspension may cause the lease to be terminated by the landlord and put the location at risk. The current climate in Monaco is to favor commercial negotiations, failing which the Monaco Government threatened to legislate on the subject. A review of insurance coverage is also recommended.