Commercial real estate in Italy: overview

A Q&A guide to corporate real estate law in Italy.

The Q&A gives a high level overview of the corporate real estate market trends; real estate investment structures, including REITs; legislation; title and public registers of title; confidential information; state guarantee of title; tenure; sale of real estate; seller's liability; due diligence; warranties; cost; taxes and mitigation, including VAT and stamp duty/transfer tax; climate change targets; third party outsourcing; restrictions on foreign ownership or occupation; finance; leases; planning law and consents; and proposals for reform.

To compare answers across multiple jurisdictions, visit the Corporate Real Estate Country Q&A tool.

This Q&A is part of the global guide to corporate real estate law. For a full list of jurisdictional Q&As visit

Luigi Croce, Giovanni de' Capitani and Federico Trutalli, NCTM Studio Legale Associato

The corporate real estate market

1. What have been the main trends in the real estate market in your jurisdiction over the last 12 months? What have been the most significant deals?

At the end of 2014, the main highlight in the real estate market was an increase in the volume of transactions of around 10% compared to 2013, with a gross value equal to EUR5.3 billion.

Among the major deals of 2014 are the purchase by Blackstone of Palazzo del Corriere della Sera in the centre of Milan, for a par value of EUR120 million, and the purchase of the St Regis Grand Hotel in Rome for a par value of EUR110 million.

This trend is likely to be confirmed through 2015. In this respect, the Milan Porta Nuova deal (for a par value of EUR2 billion) played a key role. Qatar Holding LLC, a wholly owned subsidiary of Qatar Investment Authority (QIA), in February 2015 purchased a 100% stake in the Porta Nuova project in Milan. Porta Nuova is one of the most prestigious mixed use urban developments in Europe and the project aims at transforming the city, creating a new neighbourhood in the heart of Milan.

In relation to trends, retail is still the most attractive asset class (the amount of investment here is equal to 45% to 50% of the overall real estate investment in Italy) in the sale and purchase market.

Investments in offices, as well as in logistics, reflect a positive trend, even though the margins of growth are wider.

The continuous decrease of leases (-12.5%) over the last five years seemed to slow down in 2014. Law Decree 133/2014 (Sblocca Italia) may have a positive impact on lease agreements. The new rules for non-residential use leases may balance the roles of the tenant and the landlord in order to create a market that is more landlord-friendly, and this may revitalise the lease market.


Real estate investment

2. What structures do investors typically use for real estate investment in your jurisdiction and what are the main advantages and disadvantages of each (for example, flexibility and tax transparency)?

With structures, the most relevant distinction is between asset deals and share deals, which includes transactions implemented via real estate funds.

Transactions implemented via a share deal may be more tax efficient depending on the tax regime applicable. However, see Questions 18 and 19.

Real estate funds are regulated entities that are managed by an asset management company (Società Gestione Risparmio) (SGR) and controlled by the authorities. The main advantages in using such vehicles are:

  • The reduction of investment risk by diversification of portfolios.

  • Easier monetisation of the investment despite the complexity of property management.

  • Tax advantages.

Additionally, Law Decree 133/2014 (Sblocca Italia) now regulates real estate investment trusts (società di investimento immobiliare quotate) (SIIQs) making this instrument more flexible and attractive for investors.

A SIIQ adopts the model of a company limited by shares (società per azioni) that is resident for tax purposes in Italy (or is in a state of the EU or a state member of the White List) whose activities are mainly focused (at least 80%) on the real estate lease market and whose shares are listed on the market. There are currently only two SIIQs in Italy, but the introduction of this regulation may see an increased use of this instrument.

3. What are the main sources of finance and types of investors for real estate investment in your jurisdiction? Does your government encourage overseas investment into real estate in your jurisdiction, for example through real estate investment legislation?

The main type of finance is bank lending (even though in recent years banks have been less inclined to grant loans).

The Italian Government has tried to encourage overseas investments in the real estate market through law reform Law Decree 133/2014 (Sblocca Italia), which affects the regulation of real estate investment trusts (società di investimento immobiliare quotate) (SIIQs) and on the regulation of lease agreements for commercial purposes (see Question 2).

The main changes introduced for SIIQs are:

  • For an individual shareholder, there has been an increase in the maximum share capital that can be held by a controlling shareholder from 51% to 60%.

  • A decrease in the percentage of mandatory annual profits to be distributed to the shareholders from 85% to 70%.

  • A decrease in the percentage of shares held by shareholders whose voting rights and rights to dividends is 2% or less from 35% to 25%.

  • A better connection with the legislation for real estate funds.

In lease agreements for commercial purposes that have an annual rent higher than EUR250,000, parties can deviate from Law 392/1978 (for real estate with commercial and hotel use), which is more tenant-friendly, and provides for:

  • A shorter term of agreement, rather than the minimum six or nine years provided for under Law 392/1978.

  • A possible increase in the rent of the agreement during the course of performance.

  • A request by the lessor of a further amount from the rent or the deposit.

  • A previous waiver by the tenant to:

    • automatic renewal of the agreement at first expiry;

    • a goodwill indemnity.


Restrictions on foreign ownership or occupation

4. Are there restrictions on foreign ownership or occupation of real estate (including foreign ownership of shares in companies holding real estate)? Are there restrictions on foreign guarantees or security for ownership or occupation and on lending for the purchase of real estate?

There are no restrictions on foreign ownership or occupation of real estate.


Title to real estate

5. What constitutes real estate in your jurisdiction? Is land and any buildings on it (owned by the same entity) registered together in the same title, or do they have separate titles set out in different registers?

Real estate is anything that has a stable connection or link to the land.

Land and any buildings on it that are owned by the same entity are registered together in the Land Registry (registri immobiliari), which provides evidence to third parties of both property and other in rem rights over the real estate.

6. How is title to real estate evidenced? What is the name of the public register of title and the authorities responsible for managing it? Is electronic access and electronic conveyancing available?

Real estate properties are registered in:

  • The Land Registry (registri immobiliari) to provide evidence to third parties of both property and other in rem rights over the real estate.

  • Cadastral registers (catasto terreni and catasto fabbricati) for tax purposes.

Transfer of real estate property or creation of any in rem rights over such property must be implemented under a written deed according to the Civil Code (CC) (Article 1350, CC). The required changes in relation to the property or any in rem rights then take place under such a deed. To give evidence of the transfer, including to third parties (and to protect the purchaser against third parties claims), the necessary written deed must be included in a specific register (registro immobiliare) (Article 2643 and following, CC).

The main public offices involved are the:

  • Municipal Technical Office (ufficio tecnico comunale), which must be informed about properties of the municipality.

  • Cadastral Registry Office (ufficio del catasto), which, generally, are situated in every provincial capital.

  • Property Registry Office (conservatoria dei registri immobiliari).

Electronic access is available at:

Electronic conveyancing is not available.

7. What are the main information and documents registered in the public register of title? Can confidential information or documents be protected from disclosure in the public register of title?

The Cadastral Register contains documents and maps indicating:

  • Places and boundaries.

  • Names of owners.

  • Cadastral income for fiscal purposes.

The Land Register contains information on:

  • Property.

  • In rem rights on the real estate.

  • Generalities of lease agreements lasting more than nine years.

Under current legislation, anyone can access the online system to check the cadastral database. All the information contained in the above registers is publicly available.

8. Is there a state guarantee of title? Is the authority that manages the public register liable to pay compensation for any errors it makes in relation to title registration? Is title insurance available and is it commonly used?

There is no state guarantee of title.

Public officers of the Property Registry Office (conservatoria dei registri immobiliari) are liable for damages caused to private citizens or to companies where there is an unlawful refusal to register or where there is a delay or omissions in registration.

There is no title insurance available in Italy.

9. How can real estate be held (that is, what types of tenure and other main ownership rights exist over land)?

The most relevant right over real estate is ownership.

Ownership can be limited by different life estate rights (diritti reali di godimento), expressly provided by law:

  • A surface right (diritto di superificie) is the right to build up and maintain a building above land owned by someone else.

  • An emphyteusis right (diritto d'enfiteusi) is the right to enjoy the property with the duty to improve it and to pay the owner a ground rent (rendita enfiteutica) with a sum of money or an amount of natural products.

  • A usufruct (diritto d'usufrutto) is the right to enjoy the property, limited to compliance with its intended use (destinazione d'uso) determined by the owner, and the restraint to alienation over the property. It is a temporary right because its term is for the life of the tenant or for 30 years if the tenant is a legal entity.

  • A right of use (diritto d'uso) is a limited type of usufruct giving the right to use the property and get the fruits from the ground (limited to their own, or their family's, needs).

  • A right of housing (diritto d'abitazione) is the right to live in a house (limited to their own, or their family's, needs).

  • A land easement (servitù prediale) is a burden imposed over land in favour of neighbouring land. The requirements here are the proximity of the two areas of land and the use of the dominant land.

Real estate can have a mortgage (ipoteca) over it. In this case, there is a guarantee over the property covering the obligations that should be performed by the owner and it does not determine loss of possession. Mortgages can be voluntary or mandatory and must be registered in the same Land Register as the property.


Sale of real estate

Preliminary agreements

10. What types of preliminary agreements are typically used in the sale of real estate? Are they legally binding?

The use of letters of intent and preliminary binding agreements is quite common in the sale of real estate assets. Letters of intent are not binding (except for exclusivity periods, confidentiality and jurisdiction, if and when these are provided) and they summarise the common intents of the parties involved in carrying on possible future negotiations.

Conversely, a preliminary agreement sets out the terms of parties' mutual obligations according to the understandings already reached, which will be inserted in the final agreement. This is to allow the parties to set, in a definitive and binding way, the terms that will be inserted into the final deed.

Under the Civil Code (CC), if one party breaches the agreement and does not continue with the execution of the final agreement, the fulfilling party may request the enforcement of the sale and purchase agreement, obtaining a judgment having the same effect as the final agreement (Article 2932, CC).

Preliminary agreements are not binding on third parties. The envisaged purchaser can safeguard himself against any possible claims from third parties by registering the preliminary agreement at the Land Registry.


Sale contract

11. Briefly outline the typical main provisions of a corporate real estate sale contract and main real estate provisions of a typical share purchase agreement.

A real estate sale and purchase transaction is usually carried out through a preliminary agreement and a final sale and purchase agreement. In the preliminary agreement, parties usually provide for a standard set of representations and warranties to be inserted in the pre-closing fulfilments of the final sale and purchase deed. Representations and warranties usually cover:

  • Capacity to enter into the agreement.

  • Title and ownership.

  • Lack of burdens or liens.

  • Compliance with applicable laws or regulations.

For the main real estate provisions of a typical share purchase agreement, reference must be made to the nature of such a deal that relates:

  • Directly to the transfer of the ownership of a company's share capital.

  • Indirectly to the company's underlying assets.

In the representations and warranties section of an agreement, the seller usually has to guarantee the following:

  • Title and ownership of the assets.

  • Compliance with all the regulations.

  • The property is free and clear of any encumbrances and/or burdens or liens.


Due diligence

12. What real estate due diligence is typically carried out before an acquisition and what key areas does it cover? Which documents are typically reviewed? Which specialist advisers are usually involved and which reports do they typically produce?

In a real estate deal, due diligence is usually the analysis of the property in relation to the applicable provisions from both a legal and technical standpoint. Therefore, urban, planning and environmental topics must be examined. Analysis should cover all documentation relating to:

  • Title, property and use of the same (for example, sale and purchase deeds, lease agreements and deeds creating in rem rights).

  • Available planning documentation (for example, any planning use class certificate, technical provisions of implementation of the town plan in force and technical provisions of implementation of executive plans).

  • Building documentation (for example, building permits, retrospective building permits, notices of commencement of works and certificates of fitness for use).

Conversely, technical due diligence is aimed at verifying whether a property complies with any applicable technical laws and regulations. Technical due diligence is conducted through examination of:

  • Cadastral registry documents.

  • Documentation concerning plants and machinery (that is, conformity statements for the plants and fire prevention certificates).

  • Documentation relating to environmental protection requirements (for example, wastewater discharge permits and waste storage).


Sellers' warranties

13. What real estate warranties are typically given by a seller to a buyer in the sale of corporate real estate and what areas do they cover? What are the main limitations on warranties, for example are they typically qualified by disclosure?

Certain warranties that are typically given by a seller are directly provided for by law, for example, the warranties concerning:

  • Title of property (Article 1483, Civil Code (CC)).

  • Defects of the sold good (Article 1490, CC).

Warranties can be introduced by the parties (for example, existence of fit for use certificate, compliance with urban planning and building permits) or limited or excluded. Excluding warranties will not be valid if the seller, in bad faith, does not disclose the defects of the property to the buyer.

The seller is not liable for the defects of the property if they are easily recognisable or if the buyer is aware of them (Article 1491, CC).



14. Does a seller have any statutory or other liability to the buyer in a disposal of real estate?

A seller's statutory obligations to the purchaser in a disposal of real estate, as well as in a sale and purchase agreement, are regulated under the Civil Code (CC), according to which, the seller must, among other things (Article 1476 and following, CC):

  • Deliver ownership of the goods to the buyer.

  • Grant the buyer title over the goods in the absence of any defect in the goods.

15. Briefly outline the environmental legislation and potential liability for a buyer in a purchase of real estate. Is it common to carry out environmental surveys and searches and to obtain environmental insurance? How is environmental liability typically dealt with in the sale contract?

The main environmental legislation is Legislative Decree 3 April 2006 n.152, as amended and integrated (Environmental Code), which sets out (among other things) the rules applicable to waste management, including the prohibition of waste dumping or interring and to the remediation of contaminated sites and compensation of environmental damage.

The Environmental Code is generally based on, and applies, the "polluter pays" principle. Under this principle whoever caused the contamination by dumping or interring waste or releasing hazardous substances on the soil and subsoil, or into superficial or groundwater, must restore the site's environmental viability and compliance. They must put in place the appropriate remediation and clean-up activities and, under specific circumstances, compensate the environmental damage caused to species and natural habitats.

In any event, prior contamination may affect the purchaser of real estate, even if not responsible for the contamination and unrelated to the polluter. Under the Environmental Code, a site owner that detects a possible contamination (that is the presence of certain contaminants in excess of legal limits) must notify the authorities and take emergency containment measures if necessary (Articles 242, 242bis and 245, Environmental Code). Additionally, where the polluter is not identified (as is often the case for historical contamination) or cannot bear the cost of remediation, a lien is created on the site, which allows the authorities to recoup from the site owner the cost of any remedial activities carried out by them. To avoid such a lien, the site owner can (and usually does) volunteer to directly undertake remediation at its own cost.

The legal limits applicable to soil contamination are different depending on the permitted use of the land (that is the use contemplated in the Cadastral Registers). It follows that the same parcel of land that is not considered as contaminated if registered for "industrial" use may require remediation on change of its registration to "residential". This is not expressly contemplated under the Environmental Code, but it is reasonable to maintain that remediation should be carried out by the party that requested the change or has an interest in the change of registration.

Alternatively, even if the seller is not required to investigate the environmental condition of the land, and so had no knowledge of the actual contamination, the contaminated real estate could be deemed to be "defective" or lacking the expected qualities. This could lead to the buyer's claim that the contract be terminated for cause or the price reduced, and, depending on the circumstances, that the seller pays damages. Very few court rulings have been issued and published on this matter, and so it is impossible to predict the outcome of any such judicial actions.

For due diligence purposes, a phase I (or in special cases a phase II) environmental audit is fairly common, especially if the real estate has been used for industrial operations. Depending (among other things) on the outcome of the audit, insurance can be obtained covering undetected past contamination or, more easily, accidental future contamination.

The content of sale contracts varies depending on the circumstances. Professional operators tend to obtain a full set of representations and warranties covering the seller's compliance with environmental laws in general and real estate environmental conditions in particular, with an extended statute of limitation. For the sale of land formerly used for industrial operations, it is not unusual for the parties to enter into an environmental agreement that specifically allocates the environmental responsibilities and liabilities and defines the terms and conditions of remedial actions.

16. Can an owner or occupier inherit liability for other matters relating to the real estate even if they occurred before it bought or occupied it? Can a seller or occupier retain any other liability relating to the real estate after it has disposed of it?

Under the Civil Code (CC) an owner or occupier can inherit liability for other matters relating to real estate even if they occurred before they bought or occupied it. For example, the current owner of an asset is jointly liable with the former owner of the same asset for the payment of all costs and expenses not paid by the previous owner (Article 63, implementing provisions, CC).


Completion arrangements

17. What are the typical arrangements and main documents required for completion of the sale? When does title transfer and what are the formal legal requirements to execute the sale documents, transfer the real estate and register the change of title? Is notarisation required?

The main documents that are required to validly transfer a real estate asset are:

  • Cadastral plan of the asset.

  • Energy performance certificate.

  • Destination of use certificate (if the asset is land or an appurtenances of a premises exceeding 5,000 square metres).

  • The sale and purchase agreement must be notarised for registration of the deed in the real estate property register.


Real estate tax

18. Is stamp duty/transfer tax (or equivalent) payable on the purchase of real estate? Who pays, what are the rates and are there any exemptions? Does it apply to the transfer of shares in a company holding real estate and at what rate?

The purchase of real estate property triggers the levy of registration tax (or, alternatively, VAT) and mortgage or cadastral taxes depending on the nature of the seller and of the property sold. Stamp duties may apply on the transfer deed at a fixed rate of EUR230.

Registration tax is applicable at a rate of 9% if the seller is an individual (or a company that is different from that carrying out construction activities) and the real estate qualifies as residential. Mortgage and cadastral taxes apply at a fixed rate of EUR50 each. The registration tax rate is reduced to 2% provided that the purchaser is an individual buying his first house and that certain other conditions are met.

Alternatively, if the seller is an Italian company and the property sold is a commercial building (Fabbricato strumentale), then the sale is:

  • Either exempt or subject to VAT, depending on the date of construction or renovation of the building and, subsequently, if the building was constructed or renovated more than five years previously, depending on the option of the seller (see Question 20).

  • Subject to registration tax at a fixed rate (EUR200).

  • Subject to mortgage (3%) or cadastral (1%) taxes.

According to tax law, the seller and the purchaser are jointly liable for the payment of registration, mortgage and cadastral taxes. However, typically the purchaser pays these taxes.

The sale of shares in a company holding real estate is subject to registration tax at a fixed rate of EUR200, and to Tobin tax (provided that shares, and not quotas, are transferred) equal to 0.2%. Capital gains realised by Italian companies on the sale of shares in pure real estate companies do not benefit in principle from the "participation exemption" regime, that in general grants 95% exemption for corporate income tax purposes (the conditions for the application of the regime are set out by Article 87 of Presidential Decree 917/1986).

19. Are any methods commonly used to mitigate real estate tax liability on acquisitions of large real estate portfolios? What is the general approach of the tax authorities in your jurisdiction to such schemes?

According to anti-avoidance provisions, the tax authorities may disregard transactions aimed mainly, or essentially, at tax savings without sound business reasons.

For example, with an "indirect" transfer of property there can be an acquisition of real estate by a company (or a real estate investment fund) followed by the transfer of the shares or quotas. If that is carried out without sound business reasons and merely aimed at reducing the tax burden of the transfer, it may be challenged, at least in theory, by the tax authorities on the basis of a "substance over form" approach.

20. Is value added tax (VAT) (or equivalent) payable on the sale or purchase of real estate? Who pays? What are the rates? Are there any exemptions?

Real estate transactions are generally exempt from VAT.

However, where the seller is an Italian company and the property sold is a commercial building, the sale is subject to VAT (ordinary rate of 22% or 10% in some specific cases), paid by the purchaser, if the real estate was built or renewed within the last five years. Registration tax (EUR200), mortgage (3%) and cadastral (1%) taxes apply as described above (see Question 18).

On the other hand, where the real estate was built more than five years previously, VAT applies only if the seller opts for it (transfer taxes apply as above). VAT is applied according to the reverse charge method (in principle without any cash impact for the buying company).

21. Are municipal taxes paid on the occupation of business premises? Are there any exemptions?

Real estate property, including business premises, is subject to a unified municipal tax (imposta unica comunale) (IUC). The following annual property and service taxes are levied on the property by the municipality where the property is located:

  • IMU (municipal tax on property) chargeable on all real estate properties other than those qualifying as a main house, which are generally exempted from taxation (except for luxury properties).

  • TASI (service tax for lighting, road maintenance, maintenance and other municipal services), is applied on all real estate properties including main houses and is due by the owner and in a certain share, by tenants and other taxpayers who enjoy their possession or have rented them.

  • TARI (waste collection and recycling tax), which is calculated on the square metre of the real estate units and on the number of residents. It is due by the persons with possession or that rent the property and produce waste. Tenants are not subject to TARI where the tenancy is shorter than six months in the year.

There are exemptions from IMU and TASI (for example, for real estate properties owned by the state, regions or municipality) and each municipality can introduce exemptions or reductions in TARI.

Tax rates vary from municipality to municipality, but the maximum aggregate rate for IMU and TASI, as claimed, must not exceed 10.6 per thousand of the property cadastral value.

Each municipality can also introduce other exemptions or reductions.


Climate change issues

22. Are there targets or incentives to reduce greenhouse gas emissions from buildings in your jurisdiction? Is there legislation requiring buildings to meet certain minimum energy efficiency criteria?

Legislation provides for fiscal incentives for refurbishment works to enhance energy efficiency of buildings.

Law Decree 63/2013 (as successively amended and integrated) created the energy performance certificate (Attestazione di prestazione energetic) (APE), which is a document that describes the energy characteristics of a building and assigns to the premises a value from a scale from A to G. This results in different market values for properties (higher for buildings allocated letter A) and the benefit of tax deductions.

23. Are provisions relating to the energy efficiency of buildings commonly included in contracts for the sale of real estate or in leases (for example, green leases)?

Specific provisions relating to energy performance certificates were introduced with Law Decree 63/2013 (converted in Law 90/2013 as successively integrated and amended). In particular, sale agreements are null and void if there is a lack of the relevant certificate (Attestazione di prestazione energetica) (APE). Administrative penalties are also given for lease agreements that do not mention the relevant certificate.


Real estate finance

Secured lending involving real estate

24. Briefly outline the typical security package required by lenders in relation to real estate lending. How are the most common forms of security interest relating to real estate created and perfected (that is, made valid and enforceable)?

A typical security package includes:

  • A mortgage.

  • Assignment by way of security of receivables. Rentals, but also other receivables may be assigned, such as those that may arise vis-à-vis the vendor of the real estate from the relevant acquisition agreement, those that may arise vis-à-vis the contractor in construction and development projects, or any hedging receivables.

  • Pledge over bank accounts (rental account, tenant deposit account, insurance and other proceeds account).

  • Endorsement of the insurance policies.

  • Where the real estate is owned by a special purpose vehicle (SPV), it is also common to have a pledge over the entire corporate capital.

Other agreements, not expressly amounting to the security package but still intended to protect the interest of the lender, are subordination agreements under which other creditors of the company (typically, the shareholders) agree to subordinate their credits to the prior satisfaction of the lender.

The security package is made valid and enforceable in the following ways:

  • Mortgages must be registered with the relevant Land Register. Where the loan is granted under Articles 38 and following of the Consolidated Act on Banking (Italian credito fondiario regulation) the relevant mortgage benefits from a shorter period (ten days after registration) for claw-back actions.

  • Pledges over SPVs involve registration with the Register of Commerce for a limited liability company (società a responsabilità limitata) and endorsement of the shares and registration with the members' ledger for a joint stock company (società per azioni).

  • Assignments by way of security must be notified to (usually by court bailiff or by a specific form of registered mail) or accepted (by executing a document bearing a date certain at law) by the assigned debtor. In certain circumstances (for example, assignment of rental income for a period exceeding three years), further perfection formalities may be required.

  • Pledges over bank accounts must be notified to (usually by court bailiff or by a specific form of registered mail) or accepted (by executing a document bearing a date certain at law) by the depositary bank.

  • Endorsement of insurance policies are perfected with the loss payee clause being signed by the insurer and delivered to the lender.

It is not possible for a security agent to hold the security in trust for the lenders and so they must be a party to the security documents. Alternative structures, such as parallel debt that is available in other jurisdictions, are also not viable options. However, lenders may authorise the security agent to exercise all their rights (for example, the power to exercise all rights and discretions, execute all documents and take all actions under or in connection with the security documents) in their name and on their behalf.

As a general rule, on registration of the mortgage (iscrizione) a mortgage tax is levied at a proportional rate of 2% on the amount of the credit guaranteed and is paid by the subjects who applied for the registration. However, loans that are for more than 18 months may benefit from substitute tax, levied at a proportional rate of 0.25% on the amount of the loan. When this tax is paid all other finance documents (security and ancillary documentation) related to the loan are exempted from any registration taxes.

25. What other real estate related measures do lenders typically take to protect themselves against default by the borrower?

Standard practice tends to adhere to the best international practice, and therefore envisages provisions in the loan agreement such as:

  • Conditions precedent (for example, a notarial report regarding the ownership of the real estate and the absence of mortgages or charges on it).

  • Real estate covenants.

  • Financial covenants (especially loan to value).

  • Recourse against guarantors, if any.

  • Additional credit enhancement, deposits, cash reserves and valuations.

26. Can lenders incur environmental liability? What measures do lenders typically take to manage potential environmental liability?

Generally, lenders do not incur environmental liability except where the same lenders participate in the conduct of the borrower causing environmental liability.

27. Briefly outline the main remedies for lenders in relation to the secured real estate if the borrower defaults on the loan. What is the effect of the borrower's insolvency on the lender's remedies?

A lender can enforce a security if the secured obligations become due and payable and are not performed by the borrower. Where the loan is granted under Articles 38 and following of the Italian Consolidated Act on Banking (Italian credito fondiario regulation), the borrower benefits from a mandatory cure period, as a credito fondiario lender can terminate a credito fondiario loan if the borrower delayed a due payment at least seven times, whether consecutively or not. A payment is considered delayed if it is made between 30 and 180 days after the due date of payment. The rule, therefore, only applies to delays in payments; it does not apply to non-payments.

Procedures for enforcing security generally depend on the type of security, but for certain types of security also the fact that they are created pursuant to Law Decree 170/2004 (the Italian law implementing the Collateral Directive), which provides that subject to certain conditions the assets may be assigned in out-of-court proceedings.

Generally, lenders can enforce the security by having the assets sold through the relevant procedures (directly with the mortgage or indirectly with the pledge over participation in the SPV) and appropriating of all cash-flows available to the borrower (rentals and other proceeds).

Enforcement of a mortgage occurs through the seizure (pignoramento) and forced sale of the real estate property (Sections 555 and following, Civil Procedure Code).

The enforcement procedure relating to mortgages on real estate properties follows mandatory procedural rules, which makes the process extremely time-consuming. Therefore, banks normally prefer to enforce other types of security, if available.

The existence of a security package related to the loan does not prevent the lenders from trying to fulfil their credit with other general remedies provided occasionally by the law.

Under insolvency law, a secured party can enforce its security interest over an asset belonging to an insolvent borrower only where certain circumstances are met. In particular, following commencement of the bankruptcy proceeding, the debtor is protected from actions commenced by the creditors to enforce their claims and no payment to individual creditors is allowed. Creditors must file a petition with the court to prove their debts at least 30 days before the hearing reviewing the debtor's liabilities. Other limitations also apply where the borrower elects to resort to certain remedies in order to cure insolvency, as an alternative to filing for bankruptcy liquidation, such as a restructuring plan under Article 67 of the Bankruptcy Law and the restructuring agreement of debts under Article 182bis of the Bankruptcy Law and concordato preventivo (a bankruptcy procedure providing for a composition with creditors similar to that under US Chapter 11).

With a mortgage (as it is the primary security for real estate loans), the secured creditor cannot continue with any foreclosure proceeding pending at the time that the debtor is declared bankrupt and the receiver will intervene in the pending foreclosure proceeding and exercise any related right in the interest of all the creditors. The proceeds of the sale of the foreclosure proceeding will be used to pay the mortgagee first. However, with a credito fondiario loan, the secured creditor can begin and continue the enforcement proceedings against a bankrupt borrower in relation to the mortgaged properties after the declaration of bankruptcy.

In principle, lenders may not realise real estate outside of court proceedings. However, it is not unusual for the parties to agree to enter into a sale mandate triggering a private sale process when certain circumstances occur (such as defaults).

28. Briefly outline key additional issues for lenders in relation to construction and development projects.

Financing of construction and development projects usually see further due diligence activities because of the need of authorisations for the project. As the value of the real estate mainly depends on completion of the project, step-in rights are usually provided in the finance documents.


Other real estate financing techniques

29. Are other real estate finance techniques commonly used in your jurisdiction? For example, real estate securitisation and sale and leasebacks.

Real estate securitisation, and sale and leasebacks are the alternative finance techniques most commonly used.


Real estate leases

Negotiation and execution of leases

30. Are contractual lease provisions regulated or freely negotiable? Which legislation applies?

Generally, lease agreements regulated by the Civil Code (CC) are freely negotiable.

However, leases are mainly subject to Law 392/1978. This details the limits in parties' negotiation such as the duration of the lease, renewal and withdrawal and the execution methods. These provisions are mandatory due to the first paragraph of Article 79 of the Law 392/1978. Agreements that derogate from Law 392/1978, which are not favourable to the tenant, are null and void, other than the exceptions introduced by Article 18 of the Law Decree Sblocca Italia, which allows the free negotiation of the lease agreements in relation to non-residential properties with an annual rent of more than EUR250,000.

31. What are the formal legal requirements to execute a lease? Does the lease have to be executed by certain parties or as a deed? How do the formalities differ for a company, partnership and for individuals?

Law 392/1978, which regulates real estate leases for commercial purposes, does not provide any legal formal requirements. However, the lease agreements are usually executed as a deed in writing even if just to permit registration to the tax authority. Under the Civil Code (CC), lease agreements for more than nine years, where there are extraordinary administration acts, must be in writing (without this the agreement is null and void) and must be registered in the public register.


Rent payments

32. How are rent levels usually reviewed and are there restrictions on this? Is stamp duty and VAT (or equivalent) payable on rent? Is a rent security deposit required and does it have to be managed in a certain way?

Except for lease agreements with an annual rent of more than EUR250,000 under which a party may derogate provisions of Law 392/1978, the rent level cannot be increased, except for annual updates required by the lessor as a consequence of variation of the consumer price index (ISTAT-FOI).

The deposit is the sum of money that the landlord requires on executing a lease to prevent possible damages caused by the tenant to the property during lease agreement. It can never exceed three months' rent.

The rent of a real estate property triggers the levy of the registration tax and VAT depending on the nature of the lessor and of the property rented. Stamp duty may apply on the rent deed at a fixed rate of EUR45.

For example, where an Italian company rents a commercial property, then that rent is subject to VAT at 22% on the option of the lessor and to registration tax at 1%.

Conversely, the rent of residential property is subject to VAT (at the reduced rate of 10%) on the option of the lessor, if the lessor is the construction company, and to registration tax at fixed rate of EUR67. In all other cases, the rent of residential property is subject to registration tax at the rate of 2%.


Length of term and security of occupation

33. Is there a typical length of lease term and are there restrictions on it? Do tenants of business premises have security of occupation or rights to renew the lease at the end of the contractual lease term?

The typical term of a lease agreement is not less than four years for residential assets and not less than six years for commercial assets. A minimum nine-year term is provided for hotels. Parties could set a shorter term if the property or the activity is characterised by temporary use.

The maximum duration limit of a lease agreement is 30 years, and if the parties establish a longer term, the expiration date is fixed at 30 years.

After the first period, the agreement is automatically renewed for an equal period unless each party gives six months' notice to the other one of its intention not to renew in writing via registered letter.

The first time that the lease expires, the lessor can only refuse the renewal of the lease in particular cases (Article 29, Law 392/1978).

Parties can mutually agree to an ad nutum withdrawal right for the tenant, who will be able to withdraw from the agreement by giving at least six months' notice before the date that the withdrawal will take place. A tenant can terminate the agreement if critical reasons (gravi motivi) exist and provided that the lessor is given at least six months' notice by registered letter.

Parties can derogate from the rules concerning duration for a lease that has an annual rent higher than EUR250,000 (Law Decree 133/2014).



34. What restrictions typically apply to the disposal of the lease by the tenant? Can the tenant assign or sublet the lease with the landlord's consent? Can tenants share their premises with companies in the same group? What is the effect of a legal reorganisation or transfer/sale of the tenant on the lease and on a guarantee of the lease?

Generally, the consent of the landlord is needed for assignment or subletting. However, a tenant may sublet the property or assign the lease without the landlord's prior consent, provided that the relevant business will be sublet or sold jointly where notice is given to the landlord by registered letter. The landlord may object, for critical reasons, within 30 days from receiving notice (Article 36, Law 392/1978).

A tenant can assign a lease to companies of the same group, with the previous consent of the landlord, unless the parties do not provide otherwise in the lease agreement.

The subtenant or the cessionary takes over tenancy obligations of the agreement, and the tenant is jointly liable with the subtenant in relation to the landlord.

35. Does a landlord or tenant retain any liability under the lease after the lease is assigned?

The landlord is liable for defects that occur during the agreement (Article 1581, Civil Code). The tenant can request the termination of the agreement or a price reduction if the defects significantly affect the suitability for use.

For the assignment of the lease or for subletting, the tenant is liable for the rent payment and for other obligations of the assignee or subtenant, unless he declares expressly to free him.


Repair and insurance

36. Who is usually responsible for keeping the leased premises in good repair and for insuring the leased premises? Are there provisions for the ownership of lease improvements?

The tenant must perform, at its own costs and liability, the ordinary maintenance of the asset and of the plants, while the lessor must perform the extraordinary maintenance (Article 1576, Civil Code (CC)).

The insurance on the property is usually borne by the lessor, while the tenant bears the insurance concerning activities performed in the property and the damages caused to third-parties.

The tenant is not entitled to an indemnity for the improvements (miglioramenti) made to the property, except if otherwise agreed by the parties. If improvements are made with the landlord's prior consent, the landlord must pay an indemnity equal to the lesser amount of the borne costs and the value of improvements at the time of the handing back (Article 1592, CC).

Tenants that made improvements (addizioni) to the property can remove those improvements at the end of the lease agreement if the removal does not cause damage to the property, or if the landlord decides not to retain them. In this case, the landlord must pay an indemnity equal to the lesser sum of the amount of borne costs and the value of improvements at the time of the handing back (Article 1593, CC).


Landlord's remedies and termination

37. What remedies are available to a landlord for a breach of the lease by the tenant? On what grounds can the landlord usually terminate the lease and what restrictions and procedures apply? What is the effect of the tenant's insolvency under general contract terms and insolvency legislation?

For breaches by the tenant, the landlord can terminate the agreement and claim for damages.

Lease agreements usually provide that non-fulfilment by the tenant occurs where there is non-payment of one monthly-rent within a term of 20 days, or non-payment of service charges when the unpaid amount exceeds two months' rent. The Civil Procedure Code provides for special procedures (sfratto per morosità and sfratto per finita locazione) that may permit the landlord to get back the premises within a shorter time period than through the ordinary proceedings.

With tenant insolvency, the receiver can withdraw from the agreement at any time, giving the landlord fair compensation for early termination, which is quantified by a judge if the parties do not reach an agreement (Article 80, Insolvency Law).

38. Can the tenant withhold rent payments in certain circumstances, for example for serious damage to the leased premises? Can the tenant terminate the lease in certain circumstances?

Tenants can request rent reductions where there are defects that significantly decrease the suitability for use of the property, except for what is provided for under Article 1462 of the Civil Code (CC) (solve et repete). A solve et repete clause is usually requested by the landlord.

A tenant can withdraw from the agreement (regardless of contractual provisions) for critical reasons by giving at least six months' notice before the date that the withdrawal will take place. Critical reasons must be events that occurred after the signature of the lease, not dependant on the tenant, and unforeseeable. The tenant can terminate the lease agreement if the property is affected by serious defects that do not allow the agreed use or that create a danger to health.


Planning and development controls

39. In what circumstances can local or state authorities purchase business premises compulsorily? Is the purchase price market value?

The Civil Code (CC) regulates the eminent domain and gives the public authorities the power to take possession of private properties, provided that the relevant compulsory transfer is carried out for public interest and that the entity suffering from the expropriation obtains a fair compensation for the loss incurred (Article 834, CC). The criteria for calculating the compensation, other than the purchase price market value, is regulated by law. Any landowner that agrees to voluntarily transfer the property and consequently avoids expropriation will receive double the compensation, which will be tripled for owner-farmers. The compensation for developable lands is calculated at market value, with a 10% incentive if owners agree to voluntarily transfer their land, avoiding expropriation. A market value based compensation is also paid for buildings and constructions.

40. What authorities regulate planning control and which legislation applies? Is there specific protection for special categories of buildings such as historic buildings?

Planning control and building activities are regulated by Presidential Decree 380/2001, among others. The competent authority is the Municipal Local Office.

Legislative Decree 42/2004 (Codice dei beni culturali e del paesaggio) sets out the restrictions to be applied to buildings of cultural and environmental interest. Construction of buildings in breach of such restrictions may be unlawful. Historic and artistic buildings cannot be freely transferred, provided that the state or regions are granted with pre-emption rights.

Any planned work on assets affected by restrictions requires prior authorisation from the competent authority (Sovrintendenza).

41. What planning consents are required for building works and the use of a building?

Presidential Decree 380/2001 provides for different permits to be requested depending on the type of work that is to be carried out.

The urban planning certificate (certificato di destinazione urbanistica) (CDU) is a document issued by a public authority (the head of the competent municipal office) within 30 days after submission of the application, containing planning provisions applying to a certain building (or land) and lasting one year.

If this certificate is not attached to the relevant transfer deed then the deed is null and void.

42. What are the main authorisation and consultation procedures in relation to planning consents?

Initial consents

A building permit application must be submitted at the competent municipal offices. Within ten days from the application, the competent office must appoint the person responsible for the procedure. This officer must propose a draft measure and provide a detailed report within 60 days from hearing opinions from the:

  • Municipal technical offices.

  • Local health authority (Azienda Sanitaria Locale (ASL)).

  • Fire brigade.

The person responsible for the procedure can request amendments to the original project and then the applicant (where it has been accepted) must amend and integrate the documents within 15 days. The final measure is adopted within 30 days from the proposal by the head of the office that issues the permit. After 30 days has passed, unless the head of the competent office has expressed a reasoned denial or has issued the permit on the building, the permit application will be under the silence implies consent theory (silenzio assenso) (introduced by Law Decree 70/2011 which was converted in Law 106/2011) and will be taken as fulfilled (except for monumental or environmental restrictions). Notice of the issuance of the building permit is given to the party concerned and disclosed to the public by publication on the municipal notice boards.

Third party rights and appeals

Article 11 of Presidential Decree 380/2001 provides that the building permit should not cause damage to third party rights.

Anyone that challenges a building permit must carry a qualified and actual interest in bringing an action.

For example, if the building is invasive and does not allow peaceful enjoyment of the property by third parties, they may claim damages of their rights through an objection to the building permit, which must be submitted to the competent Regional Administrative Court (Tribunale Amministrativo Regionale) (TAR) depending on where the municipal office is, and to the Council of State that is competent for the appeal.

The time for objecting to the building permit arises from the actual notice of the main elements of the building permit.



43. Are there proposals to reform real estate law and are they likely to come into force and, if so, when?

Law Decree Sblocca Italia (converted in Law 164/2014) contains several provisions concerning real estate. It has implemented, and significantly improved, the regulation of real estate investment trusts (Società di investimento immobiliare quotate) (SIIQs), in order to promote its expansion and appeal for foreign investors. It has amended rules applicable to lease agreements for non-residential use (with an annual rent of over EUR250,000) and it has introduced a particular type of agreement called "rent to buy", to encourage real estate investments. Additionally, specific tax deductions were provided for building owners to encourage refurbishing activities on buildings and energy efficiency in plants.


Online resources


Description. Contains legislation (both national and regional), latest amendments and judgments of the Italian Supreme Court.

Contributor profiles

Luigi Croce, Partner, Head of Real Estate

NCTM Studio Legale Associato

T +39 02 725511
F +39 02 72551501

Professional qualifications. Italy, Milan, 1996

Areas of practice. Real estate M&A; corporate M&A; bidding procedures.

Recent transactions. Involved in a large number of domestic and cross-border transactions.

Languages. English, Italian

Giovanni de' Capitani, Salary Partner, Banking and Finance

NCTM Studio Legale Associato

T +39 02 725511
F +39 02 72551501

Professional qualifications. Italy, Milan, 1989

Areas of practice. Banking matters in general; corporate, real estate and acquisition financing; structured finance; debt restructuring.

Federico Trutalli, Partner, Head of Tax

NCTM Studio Legale Associato

T +39 02 725511
F +39 02 72551501

Professional qualifications. Italy, CPA, 1996; Italian Register of Certified Auditors, 1997

Areas of practice. Domestic and international tax; M&A; corporate restructuring with an emphasis on foreign inbound and outbound transactions; management compensation plans for private equity and multinational groups and in IPOs; tax litigation; negotiation of settlements with the tax administration.

Languages. English, Italian

{ "siteName" : "PLC", "objType" : "PLC_Doc_C", "objID" : "1247710815439", "objName" : "Commercial real estate in Italy overview", "userID" : "2", "objUrl" : "", "pageType" : "Resource", "academicUserID" : "", "contentAccessed" : "true", "analyticsPermCookie" : "25e8a493e:15b08e9df1f:-6df1", "analyticsSessionCookie" : "25e8a493e:15b08e9df1f:-6df0", "statisticSensorPath" : "" }