Bare ownership in Monaco: the investment opportunity

Monaco's real estate market is one of the most exclusive and dynamic in the world, with record prices defying all competition. In 2024, the average resale price reached around €51,418 per square metre in the Principality according to the Monegasque Institute of Statistics and Economic Studies (IMSEE).

In this context, where acquiring a property can be an obstacle course for investors, interest is growing in alternative forms of real estate investment. Occupied life annuities, free life annuities, forward sales or even bare ownership Monaco (sale in bare ownership) are all asset arrangements that allow you to invest strategically in this ultra-premium market.

While the life annuity in Monaco has long been the best-known solution – offering the possibility of buying at a discounted price by paying the seller an initial lump sum and then an annuity for life – bare ownership is increasingly becoming the most suitable option for the Monegasque context. Indeed, bare ownership makes it possible to overcome several constraints specific to traditional life annuities or forward sales, while meeting the requirements of an international public of wealthy investors (UHNWIs) looking for a stable, flexible and advantageous investment over the long term. In the following sections, we will define bare ownership in Monaco and explain why it is a unique strategic opportunity, before comparing it to occupied, free life and forward sale arrangements, and discussing the best strategies to take advantage of them.

What is bare ownership in Monaco ? Definition and legal framework

Bare ownership is a scheme based on the dismemberment of ownership, a well-known mechanism in Monegasque civil law (inspired by French law). In concrete terms, it is a sale where the owner transfers the bare ownership of his property while retaining the usufruct – i.e. the right to occupy the property or to collect rent – generally for life. The buyer immediately becomes the bare owner, then automatically the full owner of the property when the usufruct expires (on the death of the seller or at the end of a fixed period if the usufruct is temporary). Throughout the dismemberment period, the seller (usufructuary) can therefore continue to enjoy the property, while the buyer waits patiently as a future owner.

This formula is clearly different from the classic life annuity from a financial point of view. Unlike the life annuity, the bare ownership transaction does not include a life annuity or a staggered package: the seller receives the entire sale price as soon as it is signed, and no subsequent payment is due. In other words, the buyer pays a single and discounted price at the time of purchase, without having to assume a monthly annuity. The calculation of this price takes into account the value of the usufruct retained by the seller. Actuarial scales based on life expectancy (such as the commonly used TGF05/TGH05 tables) make it possible to estimate the share of value corresponding to the usufruct according to the age of the seller. The older the seller, the smaller the usufruct he retains is worth a small share of the property, and therefore the higher the share of bare ownership (what the buyer pays). Conversely, a seller who is still relatively young retains a usufruct of significant value, which translates into a very reduced acquisition price for the buyer.

An apartment with an estimated freehold value of €10 million could be acquired in bare ownership with a significant discount, determined according to the age of the seller and the value of his usufruct, calculated according to the usual actuarial scales based on the TGF05/TGH05 mortality tables.

The values used for the usufruct are as follows:

• At the age of 70, the usufruct is estimated at 40% of the value of the property

• At the age of 85, the usufruct is estimated at 20% of the value of the property

By applying these coefficients to a property valued at €10 million:

• At the age of 70, bare ownership is worth €6 million (60% of the value of the property).

• At the age of 85, the bare ownership is worth 8 million euros (80% of the value of the property).

Why this difference? The younger the seller, the more valuable his usufruct is, because he is supposed to occupy or rent the property for longer. This means that the buyer benefits from a larger discount, but must wait longer before obtaining full ownership.

Conversely, the older the seller, the more the value of his usufruct decreases, and therefore the share of bare ownership increases, which reduces the advantage of the discount.

Thanks to this mechanism, bare ownership allows an investor to acquire a prestigious property in Monaco with a significant reduction on its market price, while avoiding the payment of a bouquet or a life annuity, unlike the life annuity.

Why choose bare ownership in Monaco ? Financial, tax and asset benefits

Opting for a bare ownership acquisition in Monaco has a series of unique advantages that make it a popular strategy for savvy investors. Here are the main advantages :

• Heavily discounted purchase price – This is the number one attraction of bare ownership. The buyer only pays the value of the property occupied, i.e. its value, taking into account the right of use retained by the seller. This discount on the market price can be very significant, in the order of 20% to 50% (or even more) depending on the age of the seller and the expected duration of the usufruct. In a market as expensive as Monaco, saving millions of euros on the purchase is a decisive advantage. For example, as mentioned above, an investor could acquire a property of €10 million for only ~€6 million if the seller is ~70 years old. This allows you to enter the Monegasque market with a significantly reduced entry ticket compared to a traditional freehold sale. In addition, the notary and agency registration fees are calculated on this discounted value (occupied value), which reduces the acquisition tax by the same amount compared to a traditional purchase

• No life annuity and " bouquet " – Unlike the life annuity, bare ownership does not require the seller to pay a large initial bouquet or monthly annuity. The investment is simple and clear : a fixed price is paid at the outset, with no subsequent financial charges for the buyer. This immediate financial visibility is very valuable for an international investor who wants to control his commitment. In a classic occupied life annuity, if the annuitant (seller) lives well beyond his statistical life expectancy, the final bill for the buyer may exceed the initial value of the property. As Monaco has one of the longest life spans in the world (about 89 years on average), this uncertainty is not negligible.

• Long-term asset investment and optimised transmission – Buying in bare ownership is by nature part of a long-term vision, which perfectly corresponds to the profile of a UHNWI investor looking to structure his or her assets for the future. It is a question of acquiring a tangible asset in Monaco today by anticipating its full enjoyment in the future, a bit like investing part of one's capital in a safe asset with a deferred maturity. During the dismemberment period, the value of the property is likely to increase given the rarity and attractiveness of the Monegasque market (which sees a continuous valuation of properties over the long term). At maturity, the investor recovers full ownership of a property that has potentially increased in value, without having to pay the initial high price or bear rental tax during the interim. From the point of view of inheritance and transmission of assets, bare ownership is also advantageous. Monaco offers an exceptional tax framework, with 0% inheritance tax between parents and children and very reduced rates between close non-relatives.

• Reduced charges and reduced management during usufruct – During the period when the seller occupies the property (as a usufructuary or holder of a right of use and residence), the bare owner buyer has almost no day-to-day management to be insured. In an occupied life annuity or a classic rental, an owner often has to take on expenses, work and tenant management. In bare ownership, it is the occupant (seller) who continues to cover the current maintenance expenses.

In summary, bare ownership in Monaco offers a winning triptych for the buyer : immediate discount, peace of mind during the dismemberment period, and long-term asset valuation. It is a smart investment lever that meets both the financial objectives and estate considerations of wealthy families.

Bare ownership vs life annuity vs forward sale: which is the most suitable in Monaco ?

Several real estate transfer formulas coexist on the Monegasque market, each with its own specificities : occupied life annuity, free life annuity, forward sale (occupied or free), and bare ownership. All of them allow you to buy a property on a deferred or discounted basis, but their mechanisms differ significantly. Here is a comparison highlighting why bare ownership stands out as the most flexible and advantageous option in Monaco:

• Occupied life annuity: This is the most common formula historically. The seller (annuitant) sells his property while retaining a life right of use and habitation (DUH), i.e. he continues to live in the property until his death. The buyer (annuitant) generally pays an initial lump sum in cash and then a monthly life annuity to the seller for the rest of his life. The interest for the buyer is the discount on the price due to the seller's occupation : the value of the DUH is deducted from the market value, which reduces the purchase price. However, the occupied life annuity involves a major hazard: the duration of the annuity payment is unknown in advance. The longer the seller lives, the higher the total cost to the buyer, which can erode the benefit of the initial discount. Conversely, the premature death of the seller makes the life annuity a very advantageous operation for the buyer, who becomes the full owner for a cost much lower than the market. Monaco, with its exceptional longevity (many sellers can live to 90 years and beyond), amplifies this risk for the buyer. In practice, this makes the occupied life annuity less attractive to investors in Monaco : on very luxury properties, the life annuities to be paid would be so high that few buyers find it to their advantage. The experts note that wealthy investors clearly prefer bare ownership (sale with reservation of usufruct or DUH) rather than life annuities occupied in the Principality. Bare ownership offers the same discount on the price without having to assume an annuity, which makes it much more flexible for the buyer.

• Free life annuity: In a free life annuity, the seller does not retain any right of occupation after the sale ; The buyer can therefore take possession of the property immediately or rent it as soon as the deed is signed. In return for this immediate enjoyment, the price to be paid by the buyer is higher : generally a substantial bouquet and a larger life annuity than in an occupied life annuity, since the seller gives up the use of the property. This arrangement is especially suitable for sellers who have the possibility of leaving their home (for example to go to a retirement home or to another residence). In Monaco, the free life annuity is extremely rare (as in France where it represents less than 5% of life annuities), because few owners agree to give up the enjoyment of their property in a life annuity framework. As such, bare ownership is better suited to their strategy : it allows them to enter the Monegasque market at a lower cost today, with a view to deferred use of the property, without the financial constraints of a free life annuity.

• Forward sale: A forward sale is an intermediate alternative, often described as a seller's credit. Instead of a life annuity with an unknown term, a limited payment period is set in advance (e.g. 10, 15 or 20 years). The buyer pays an initial lump sum and then monthly instalments for the agreed number of years, at the end of which the property is paid for in full. The contract can be concluded as an occupied forward sale (the seller retains a right of use for the period, often for life or at least until the end of the payments) or as a free forward sale (the seller releases the property from the start, and the buyer can occupy it, but continues to pay the instalments until the defined term). The advantage for the buyer is to know the total cost and duration of the payments from the beginning – there is no longevity hazard as in a pure life annuity. In addition, if the seller dies before the end of the term, the remaining monthly payments are paid to his heirs, which secures the transfer for the selling party. However, from the point of view of the wealthy buyer in Monaco, the forward sale remains less attractive than the bare ownership. On the one hand, if the forward sale is occupied, the buyer finds himself in a situation quite close to bare ownership (he waits to use the property), without benefiting from the simplicity of the single payment. He has to manage instalment payments for years, which makes the operation more cumbersome and complex. On the other hand, if the forward sale is free (buyer occupying immediately), then it is similar to a traditional acquisition financed by the seller ; however, a UHNWI will often have the means to make a cash payment or bank financing at a lower cost, without resorting to this mechanism. In addition, the forward sale does not provide any discount on the price (since the property is free of occupation), unlike bare ownership.

Winning strategies for investing in bare ownership in Monaco

To get the most out of an investment in bare ownership in the Principality, a few good practices and asset strategies can be highlighted :

1. Choose the right seller profile and the duration of the usufruct – The discount obtained and the investment horizon depend closely on the age and situation of the seller. An older seller (e.g. 80-85 years old) will allow the buyer to obtain full ownership more quickly, but at a slightly lower discount (since the usufruct is worth little, the price paid is close to 70-80% of the value of the property). Conversely, a younger seller (e.g. 65-70 years old) will offer a very steep discount (40-50% of the price) but will imply a longer wait before getting the property back. The investor must therefore calibrate his operation according to his objectives : if he wishes above all to maximize the capital gain and is not in a hurry, a longer dismemberment with a younger seller may be appropriate. If he plans to personally use the property in the medium term (for example for his retirement in 10-15 years), he will prefer a seller of an advanced age in the hope of getting the keys back at the right time. In some cases, it is possible to negotiate a temporary usufruct rather than a life usufruct (for example a fixed term of 15 years), which immediately sets the expiry date for the buyer. This flexibility can be a win-win situation if both parties benefit from it, and it removes any uncertainty about the duration of the dismemberment.

2. Analyze the property and its long-term potential – Investing in bare ownership means betting on the future value of the property. It is therefore crucial to select a first-class real estate asset: prestigious location, quality of the building, views, rare features, etc. As the Monegasque market is very heterogeneous, the informed investor will look for a property whose value is likely to appreciate significantly over the market. long-term (popular area, rarity of the type of property, etc.). For example, a "trophy" address in Monte-Carlo, Larvotto or Carré d'Or is likely to be worth much more in 15 years than it is today, given the inelastic demand for these locations. In addition, it is necessary to assess the condition of the property and the co-ownership : even if the bare owner will in principle only assume major works, it is preferable to anticipate the possible investments to be planned (renovation, interior renovation once the property has been recovered, etc.). Integrating these parameters from the time of purchase makes it possible to better project the final profitability of the operation.

3. Surround yourself with real estate and legal experts – Bare ownership is a sophisticated arrangement that involves actuarial calculations, detailed negotiation of conditions (usufruct vs. DUH, distribution of charges, possible clauses) and a perfect understanding of the legal implications. For an international investor who is new to this type of operation, it is essential to be accompanied by competent professionals familiar with the Monegasque market. Petrini Exclusive Real Estate Monaco, which specialises in life annuities and dismemberment, will be able to identify off-market opportunities that meet the investor's criteria.

In a real estate market as closed and coveted as Monaco, bare ownership is an innovative and strategic investment solution for the most demanding international investors. By combining a discount on purchase, financial security (no annuity, no unexpected additional costs) and tailor-made wealth prospects, bare ownership perfectly meets the needs of UHNWIs looking for smart investments. It outperforms the occupied life annuity by offering more visibility and flexibility, without the burden of life annuities. It avoids the compromises of the free life annuity and the forward sale by simplifying the payment structure and maximizing the tax and inheritance advantages.

By opting for bare ownership in Monaco, an investor can establish himself in one of the most stable and valued markets in the world over the long term, while minimising his initial investment and management constraints. It is an opportunity to acquire today the cornerstone of a family patrimony that will be made to bear fruit for future generations