- Duration: the minimum lease duration is four years, unless the parties mention in the contract specific reasons in compliance with applicable laws regulating short rent options (for example, tourism, business, education).
- Rent: rent can be freely negotiated between the parties; however, the annual rent established in the lease agreement shall be the same for the entire duration of the lease. Therefore, if a lease agreement is for four years, the tenant shall pay the same rent throughout all the four years. The parties can agree in the lease agreement that annual cost of life adjustments are allowed.
- Contract formalities: landlord and tenant have to sign a written lease agreement; verbal lease agreements are not allowed. Legal representation is not required. Signatures do not need to be notarized by a notary.
- Renewal: the landlord has very few and limited options to deny four-year lease renewal after the first four-year period finishes. For example, the landlord can give notice if he/she has to move to the leased property because he/she does not have any other suitable property in the same Municipality. Unless the parties terminate the lease, it automatically renews for another four years at the same exact terms as the first four years, including same rent. Therefore landlords often get the same rent for eight years. If you agree to rent the house for more than four years, the renewal will be for the same period of time. For example, a six-year lease shall renew for six more years.
- Early termination: No early termination (before the four-year term) allowed for the landlord. Early termination by the tenant is allowed any time subject to the notice freely established in the contract between the parties.
- No Renewal Notice: a landlord who wants to deny renewal after the first four months shall give the tenant at lease a six-month notice (unless longer notice has been agreed in the lease agreement), effective at the end of the four-year term. The notice needs to be done in writing, better if via registered mail with signature upon delivery. The no-renewal notice shall clearly mention the reason that gives the landlord the right to to avoid automatic lease renewal.
- Lease transfer: If you sell the property, the sale does not affect the rights of the tenant. Therefore the lease contract will transfer to the new owner.
Absence of a written contract is illegal and might imply several consequences, including tax fines. With respect to the civil law, lack of written contract would typically imply the following default conditions by the law to apply to the lease relationship:
a) four-year duration and four-year renewal as detailed above;
b) only ordinary maintenance cost on the tenant;
c) no rent cost of living adjustments;
d) six-month notice required for early termination by the tenant and buyer.
Also, absence of signed agreement on how to manage certain typical situations might cause unpleasant arguments during the lease relationship.
Finally, find below some key duties on the landlord when letting an Italian property:
(i) the landlord shall register the lease agreement within 30 days subject to payment of registration tax, stamp duty and registration tax, unless the landlord opts fort short term or long term lease flat tax;
(ii) in case of multi annual lease contract, registration tax is due annually. Registration tax is 2% of annual rental, minimum of EUR 67;
(iii) stamp duty (marca da bollo) is EUR 32 for a contract that is not longer than four pages or 100 lines. Otherwise EUR 64 up to eight pages or 200 lines etc.;
(iv) the landlord shall inform the local police within 48 hours about the tenant’s personal information and lease start;
(v) rental income for an Italian property shall be included in an annual Italian income tax return.
If the landlord grants certain specific beneficial conditions to the tenant by means of a written contract, it might result in some tax benefits to apply in favour of the landlord, in terms of substantially lower income tax, municipal tax and registration tax.
Lease contracts based only on parties “word” might imply several issues on the landlord, in terms of property maintenance complications, limited property use, difficulties in case of sale, etc.
Similar and further restrictions and mandatory regulations apply to commercial lease (for example, minimum lease duration is six years).
A pre-assessment of case circumstances by an Italian legal expert is crucial to put in place the most appropriate lease contract in compliance with the applicable laws, landlord’s needs and expectations, for a conscious and profitable investment return.
We have a very extensive experience of residential and commercial lease agreements, early termination clauses in compliance with the law, short term options, etc.
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