Law Decree No. 59 dated 3 May 2016 introduced a new security
instrument for real estate financings which entails secured
creditors to satisfy their claims against the mortgaged assets
without the need of going through a proper foreclosure
Scope of the New Security Arrangement
The new tool is available for any real estate financings
provided to Italian companies by a bank or other entities
authorised to perform lending activities in Italy.
The parties can enter into an agreement providing for the
automatic transfer of real estate assets to the secured creditor or
any of its affiliates conditional upon the occurrence of a payment
default by the debtor. The security can be given by the principal
debtor or any third party security provider. The secured creditor
will be required to reimburse to the security provider any
difference between the certified value of the real estate assets
subject to transfer and the outstanding amount of the debt.
The transfer arrangement can be made in relation to new
financings but also financings which are already in place as at the
date on which the Law Decree was enacted. If the existing financing
is already secured by a mortgage, the transfer arrangement will
benefit of the same ranking of the existing mortgage and therefore
shall prevail against any subsequent prejudicial filings in the
land register (trascrizioni/iscrizioni
The transfer of the real estate assets to the secured creditor
will become effective upon a payment default by the debtor having
the following features:
for financings which contain a monthly amortisation plan, a
failure to pay of at least three instalments (even not consecutive)
remaining outstanding for more than 6 months;
for financings which contain an amortisation plan providing for
instalments longer than one month, a failure to pay of at least one
instalment remaining outstanding for more than 6 months;
for financings providing for a bullet repayment at maturity, a
failure to repay the relevant amount in accordance with the terms
set out under the facility agreement remaining outstanding for more
than 6 months.
Main Steps to Enforce the Security
The main steps to effect the transfer of the real estate assets
notification by the secured creditor to the debtor of its
intention to trigger the transfer;
appointment by the court of an expert to determine the value of
the real estate assets through a certified appraisal within 60 days
of such notice;
notification by the appointed expert of the value of the real
estate assets to the debtor;
possible challenge of the appraisal by the debtor. However,
such challenge will not prevent the transfer of the real estate
assets to the secured creditor but only require the secured
creditor to pay any higher amount resulting from any such
effectiveness of the transfer of the real estate assets upon
notification of the appraisal to the secured creditor or (if
applicable) payment of any higher amount ascertained as a result of
any challenge by the debtor. The satisfaction of the condition can
be declared unilaterally by the secured creditor.
procedure can be activated also in cases where the underlying real
estate assets are already subject to a foreclosure proceeding.
Improvement of existing security tools with the introduction of
a new kind of security for real estate financings.
Ability of the secured creditor to appropriate the real estate
assets without the need of going through a lengthy foreclosure
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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