A new law in Italy allows the parties to a lease agreement to avoid the onerous statutory provisions law no. 392/78 (the “Tenancy Law”).
Effective from 12 November 2014, the parties to a non-residential property lease agreement in Italy are allowed to contract out of the obligations of the Tenancy Law if the annual rent of the property is higher than €250,000. The obligations in the Tenancy Law are statutory and largely operate in favour of the tenant.
The Existing Law
The Tenancy Law has a number of obligations which operate in favour of the tenant:
- Of particular relevance to businesses in the retail sector, section 34 of the Tenancy Law provides that, with respect to activities carried on at the leased premises involving direct contact with the public (which includes all retail activities), the tenant is entitled to receive from the landlord, on termination of the lease agreement (for an event not attributable to the tenant) and as a condition for the eviction procedure by the landlord, an indemnity for the loss of goodwill equivalent to 18 months’ rent. This increases to 36 months’ rent in the event that the premises are subsequently let (within 12 months of the date of termination of the previous lease) to a third party carrying out exactly the same activity.
- The Tenancy Law expressly provides for limitations to the rent adjustment mechanism and to the measure of accessory charges attributable to the tenant and grants the tenant with a right of first refusal when the leased premises are sold, or when a new lease of the premises is proposed to be entered into at the expiration of the lease agreement.
- The minimum term of a commercial lease is 6 years (or 9 years for hotels). Section 79 of the Tenancy Law provides that any contractual clause purporting to limit the term of the lease or which grants to the landlord rights which are not in accordance with the Tenancy Law will be null and void. The tenant has a right to claim against the landlord (in the period of the lease and for six months after the surrender of the premises) for the reimbursement of any amount paid to the landlord under a clause of the lease which is void.
The New Law
Section 18 of Law 164 of 11 November 2014 introduces a new provision into section 79 of the Tenancy Law. Where the annual rent under the lease is higher than €250,000 the parties to it are able to waive “any provision of the Tenancy Law” in their lease.
This new provision, which represents the only major amendment of the Tenancy Law from the date of its introduction in 1978, is likely to lead to more protracted negotiations between the parties as landlords of high value properties seek to avoid exploit the ability to contract out of their obligations.
That said, tenants may also be able to use the new law to their advantage. The flexibility which the new law provides may enable tenants in a strong bargaining position to achieve better contractual arrangements than previously, and could enable them to more specifically tailor their leases to the specific requirements of their business.