On September 12, 2014, the Italian government enacted Law Decree no. 133, known as "Sblocca Italia" (the "Law Decree"), which introduced certain measures aimed at boosting, inter alia, the Italian real estate sector.

The Law Decree must be converted into law within 60 days from its publication in the Italian Official Gazette on September 12, 2014; otherwise it will cease to be effective and will be considered as never enacted. The Italian Parliament could carry out amendments to the Law Decree during the conversion process.

Italian Tenancy Law

Italian commercial property lease agreements are regulated by Law no. 392 of July 27, 1978 (the "Tenancy Law"). The Tenancy Law contains various mandatory provisions in favor of the tenant that may not be disregarded. Any departure from these provisions to the benefit of the landlord, if challenged by the tenant, can be declared null and void and automatically replaced by the relevant mandatory provision of the Tenancy Law.

Deregulation

The Law Decree allows the parties to a property lease agreement to depart from the mandatory provisions of the Tenancy Law in those agreements where the annual rent is greater than €150,000. As a result, large Italian property lease agreements now have the same type of flexibility seen in other European markets.

Some of the main provisions of the Tenancy Law that were previously mandatory and now can be departed from in large property lease agreements are:

  • Minimum Duration and Renewal. Minimum duration of six years, with automatic renewal for additional minimum six-year periods at each expiration.
  • Limitations to Landlord Exit Rights. Landlord is not entitled to withdraw from a lease outside of expiration. At the expiration of the first term, withdrawal is limited to where (i) landlord intends to occupy premises for its own use or (ii) it intends to renovate the leased premises.
  • Mandatory Tenant Exit Rights. Tenant is always entitled to withdraw from a lease in the case of "serious reasons" ("gravi motivi").
  • Rental Increases/Indexation. Cap at 75 percent of variation of National Institute for Statistics ("ISTAT") index for leases having the minimum duration (i.e., 6+6 years). Cap at 100 percent of variation of ISTAT index for leases that exceed the minimum duration.
  • Sublease and Assignment of Contract. Tenant has the right to sublease or to assign a contract within the scope of the lease or sale of relevant going concern.
  • Registration Costs. No more than 50 percent of contract registration costs are chargeable to tenant.

With respect to lease agreements where the tenant is a retailer—i.e., it carries out an activity that involves direct contact with clients and consumers ("contatti diretti con il pubblico degli utenti e dei consumatori")—the following additional previously mandatory provisions of the Tenancy Law may now be departed from in large Italian property lease agreements.

  • Goodwill Indemnity. Tenant has the right to a goodwill indemnity equal to 18 times the annual rent or 36 times the annual rent if the immediately subsequent re-letting (within 12 months) is to a tenant operating in same product category.
  • Preemption Rights. Tenant has preemption rights in the case of the sale of the property as well as re-letting of the property at the same terms and conditions of third-party purchasers or tenants.

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.