Law Decree no. 59 of 3 May 2016, apart from introducing a new type of floating charge, namely “non-possessory pledge”, creates a fund for payment of compensation to bondholders of four Italian banks recently declared insolvent and introduces certain amendments to enforcement and insolvency procedures, provides and introduces the possibility for the lender to appropriate the property securing a loan in case of continuing default by the borrower.
Art. 3 of the Law Decree introduces the new article 48 bis to the Legislative Decree no. 385/1993 (Consolidated Banking Act), allowing banks and other entities entitled to grant loans, to obtain, in case of default by the borrower, the appropriation of the property given as security for the loan by the borrower (or a third party security provider).
The appropriation may be agreed for all loans entered into following to the approval of the Law Decree, and also for existing loans, by means of specific amendments to be made by notarial deed.
Default of the borrower entitling the appropriation of the property by the lender requires a default of payment which continues for more than six months; where the loan provides for monthly repayments, the six-month period runs from the expiry of at least three unpaid installments, even not consecutive; if the installments are due every two months or more, the six-month period runs as soon as even one single installment remains unpaid.
The provision under discussion may be agreed only for loans granted to companies and not where the property serves as home of the owner, his/her spouse or immediate family.
Upon breach of contract by the borrower, the lender must notify the latter (or the third party security provider) and other parties holding registered rights over the same property, with a declaration stating the intention to appropriate the property. Following 60 days from such notification, the president of the competent court shall be asked to appoint an expert to estimate the property.
Once the estimate value is communicated to the lender and the borrower (and the third party security provider, if any), the condition precedent to the appropriation is deemed automatically satisfied and the property will pass to the lender, who must pay to the borrower the difference, if any, between its credit and the estimated value of the property.
If the borrower (or the third party security provider) files opposition against the estimated value, the appropriation process is not suspended and the borrower could only be entitled to get a higher amount if the opposition is successful.
In the event that the property is subject to an enforcement procedure, the secured lender may in any case obtain the appropriation of the property, by filing an application in the enforcement procedure and paying the difference between the estimated value of the property and the amount of its claim, if any.