Rent to buy is a new type of contract introduced into Italian law by the “Unlock Italy” Decree (Decree-Law 133/2014, converted into Law 164/2014). Under this scheme, the owner/grantor immediately delivers the property to the tenant/future buyer, who pays an instalment (rent). After a period of time set out in the same contract, the tenant may decide whether to purchase the property, deducting from the price a portion of the instalments already paid.
It is structured in two stages (one of which is only optional):
- the first is the granting of the use of the property;
- the second is the transfer of ownership of the property from the grantor to the tenant, and it is only optional: the law does not provide for a reciprocal obligation of the parties to complete the sale, nor that the transfer of ownership occurs automatically at the end of the period of use; instead, the law grants the tenant a right to purchase.
The instalment (rent)
The contract must specify the two different components that make up the instalment to be paid: the component for the use of the property (remuneration for enjoyment) and the component to be allocated to the purchase price if the tenant decides to exercise his/her right to buy.
Which types of property it can be used for
A rent to buy contract may be entered into for any type of property: residential, commercial, industrial, office, and also for land.
The importance of registration (transcription)
The registration (transcription) of the rent to buy contract produces, under the law, a twofold effect corresponding to the two “stages” of the scheme:
- an effect of enforceability against third parties with regard to the granting of use;
- a pre-emptive effect similar to that produced by registering a preliminary contract, with regard to the grantor’s obligation to transfer ownership of the property if the tenant exercises the right to purchase.
In this way, full protection is afforded to the tenant, enabling him/her to acquire the property in the same “legal condition” in which it was at the time the rent to buy was signed, while neutralising any adverse registrations or encumbrances recorded after the transcription of the contract.
The transcription of the rent to buy contract also guarantees specific protection to the tenant in the event of the grantor’s default.
Substitution in the position of the tenant
The rent to buy contract may also be structured according to the scheme of a contract “for a person to be nominated”, whereby the tenant is entitled to substitute another person in his/her place, who then assumes the rights and obligations deriving from the contract.
If the tenant is in default
If the tenant fails to comply with the obligations assumed under the rent to buy contract (including the obligation to pay the instalment), the grantor may, at his/her discretion:
- initiate enforcement proceedings against the tenant’s assets (Article 2910 Civil Code) in order to obtain what is due;
- seek specific performance (Article 2931 Civil Code) where the tenant’s default concerns an “obligation to do”, such as carrying out ordinary maintenance of the property;
- seek termination of the contract (Articles 1453 et seq. Civil Code), provided that the breach is not of minor importance.
If the tenant decides not to buy the property
If the tenant decides not to proceed with the purchase, the contract will cease to have any effect upon expiry of the agreed term. Consequently, the grantor will be entitled:
- to have the property returned;
- to retain, from the instalments paid up to that time, the amount corresponding to the component relating to use, while being required to return to the tenant the portion of the instalments allocated to the purchase price, to the extent specified in the contract.
Return of the property
Both in the case of the tenant’s default and in the case of the tenant not exercising the right to purchase, the grantor is entitled to the immediate return of the property.
Who pays the taxes related to ownership of the property
During the period of use, the taxes related to ownership of the property (for example IMU) are borne by the owner, as in ordinary lease contracts. TASI, on the other hand, is paid partly by the owner and partly by the tenant, in the proportions set by each municipality. TARI (waste tax) is borne by the tenant, who, as the party in possession of the property, benefits from the waste collection service.