Commercial Leases in Italy
Commercial leases in Italy are regulated by the Civil Code, by Law 392/78, Part II and subsequent revisions and court judgements. There have been commercial and legal changes since 1978 which have introduced greater flexibility, largely to the benefit of landlords.
The typical key lease terms are as follows;
| Clause | Article | Summary of Consequence |
|---|---|---|
| Minimum Term | 27 | 6 years (or 9 years for hospitality) |
| Early tenant break rights | 27 | The tenant may at any time terminate the lease at any time for “serious reasons”, typically interpretated as reasons not known or foreseen when the lease was sign, are outside the control of tenant and would otherwise threaten the viability of the tenant business. |
| "Gravi motivi" | 27 | The tenant may at any time terminate the lease at any time for “serious reasons”, typically interpretated as reasons not known or foreseen when the lease was sign, are outside the control of tenant and would otherwise threaten the viability of the tenant business. |
| Tenant Renewal | 28 | 6 years (or 9 years for hospitality) |
| Notice period to terminate at expiry | 28 | 12 months or 18 months for hotels |
| Landlord’s right to refuse renewal | 29 | Own occupation or in order to undertake substantial refurbishment or redevelopment |
| Rent increase | 32 | Annually, to a maximum of 75% of the change in CPI. However, a legislative decree of 2009 permitted the application of 100% indexation for commercial leases longer than 6 years. |
| Tenant compensation for termination | 34 | Where the tenant had contact with the public (e.g retail premises, hospitality etc), the tenant is entitled to compensation for goodwill, equal to 18 months (or 21 months in case of hotel), and doubled if a new occupier takes possession within 12 months |
| Subletting and alienation | 36 | Landlord's consent required |
| Tenant right of first refusal (sale) | 38 | Tenants with contact with the public have a right of first refusal in event of a sale to a third party |
| Tenant right of first refusal (lease) | 40 | Tenants with contact with the public have a right of first refusal to lease at the end of term, in the event that LL seeks to rent to a third party. |
| Repair | Governed by the Italian Civil Code art. 1576. Usually, the tenant is responsible for ordinary repair and the landlord is responsible for capital items. Any vagueness or uncertainty in a lease is likely to be interpreted in the tenant’s favour | |
| Reinstatement | CC. 1590 – to be returned in the same condition, subject to fair wear and tear |
“Grandi Locazioni”
In 2014, the Italian government introduced legislative Decree DL 133/2014, which effectively allows for the parties to a lease to expressly deviate from the limitations of law 392/78, where the annual rent is in excess of €250,000, the for so-called “grandi locazioni”.
One of the effects of this decree is that triple net leases are now possible in Italy, albeit usually resisted fiercely by tenants.
Affito di ramo d’azienda / business lease
A particular feature of the retail property market, especially shopping centres, are business leases, or “affito di ramo d’azienda”. In this instance, the landlord holds the necessary trading licence and leases the business or going concern to the occupier.
The benefit to both parties is that the leases are therefore completely outside the provisions of law 392/78 and so can, for example, include shorter lease terms, rents linked to sales performance and of interest to landlords, the exclusion of any tenant rights to compensation for loss of goodwill, rights of first refusal and pre-emption rights. Indeed it is important that business leases do not reflect standard leases and so will be for terms other than 6 years.