Lease agreement of real estate in Italy
Laws and rules on rental of housing and properties
How is the discipline for renting houses, warehouses, buildings, shops, lands in Italy
The discipline on the rent of housing in Italy introduced by Law no. 431/1998 provides 2 basic types of agreements:
lease agreement of 4 years term with free rent
agreement with agreed rent stated by agreements at the national level with the participation of associations of owners and tenants for municipalities with high density population (Milan, Bari, Bologna, Catania, Naples, Genoa); the duration of the agreement is 3 years and allows the owner some tax advantages; the first deadline, if the parties cannot agree to renew this agreement is automatically extended for another 2 years.
The Law n. 431/1998 introduced any incentives for homeowners who agree to sign an agreement with agreed rent (with lower rents), incentives are of two types:
shorter duration of the agreement (3 years, during the previous regime it was 4 years old)
tax breaks for income tax purposes, TASI and registration tax.
The lease can be renewed by tacit agreement on the same terms as above, if none of the parties shall give at least 6 months before the deadline, by registered letter, that it will not renew it; otherwise, in the absence of a new agreement, it shall be considered expired on the date fixed.
After the first deadline (after 3 or 4 years), the landlord may claim the right to not renew the agreement (cancellation of the landlord) only when:
the landlord intends to use the property for: his own use, spouse, parents, children, or relatives (within the second degree of relationship)
the landlord (who carries on an activity with purposes on following sectors: social, charitable, cultural) intends to allocate the property for such purposes and offer the tenant another suitable property
the tenant has full access to another free and appropriate accommodation in the same municipality
the building in which the property is located is severely damaged insomuch it needs to be rebuilt and the presence of the tenant hinders the accomplishment of the works
the property is located on the top floor and the owner needs for technical reasons the eviction of accommodation because he needs to build another floor
the tenant does not occupy the property continuously without justification
the landlord intends to sell the property to a third party and has not the properties of other houses in addition to use as a home.
If the landlord has refused to renew the agreement before the expiry date (4 years for free rent, 3 years for agreed rent) and then he did not use it for 12 months in accordance with the purposes for which it has exercised the right of cancellation (see points above), the tenant is entitled to the restart the lease agreement under the same conditions or alternatively to an indemnity equal to 36 months of the last rent paid.
The termination of the lease by the tenant can take place at any time, by registered letter at least 6 months before the date on which the termination is to begin; the tenant must indicate in the notice the reasons which have caused the termination.
Article 11 of Law n. 392/1978 provides a security deposit not exceeding 3 monthly rent, it produces legal interest that must be paid to the tenant at the end of each year.
The payment of the rent may be in accordance with the contractual provisions chosen by the parties in each individual case; it can be a monthly rent in advance, but also a half-yearly or yearly amount in advance or even a single rent sum total of all the years of the lease term.
There is an yearly update of the rents which can reach 100% of the ISTAT (it is the national statistic institute) rate; or agreed rent is applicable a clause that limits the update to a maximum of 75% of the ISTAT.
The cases of termination of a lease agreement are:
end of lease agreement
breach of agreement by tenant
non-payment of the rent or charges, when the unpaid amount exceeds 2 monthly rent.
The arrears of the conductor can be amnestied before the courts for not more than 3 times over the course of 4 years.
The lease agreement must be registered with the Registrar's Office by payment of the relevant tax of 2% of the total rent (annual fee x number of years of the duration of the agreement) with a minimum amount of € 77,47; it is borne by both sides for 50% each; this tax can be paid annually (by calculating then the annual fee) or once at the beginning of the lease; in this case, the taxpayer may deduct an amount equal to 1,25% multiplied by the number of years of the agreement (eg. for the registration fee of 4 years, the discount is 1,25% for 4 years = 5% on the total).
The lease agreement of less than 30 days a year is not subject to registration.
The owners who sign agreements with rent agreed are entitled to tax relief.
Municipalities can reduce the rates of local property tax or increase them for commercial real estate premises which are vacant for at least 2 years; the increase cannot be more than 2 per thousand over the legal limit: so that the maximum rate is 9 per thousand (7 + 2).
Facilities are offered with regard to the personal income tax (IRPEF): the taxable income of the buildings leased according to conventions is further reduced by 30% (eg. if your taxable income is currently 85% of the rent, the new income is 59,5% of the rent (85% x 70%)).
Even for the registration tax the reduction is of 30%: so that the due tax payable will be 1,4% instead of 2%.