ITALY Law and Practice Contributed by: Guido Alberto Inzaghi, Ivana Magistrelli, Silvia Gnocco and Gabriele Paladini, SI – Studio Inzaghi
7. Construction 7.1 Common Structures Used to Price Construction Projects The most common structures are: • a guaranteed maximum price to be determined based on an open book approach, except for vari - ations; • a price determined on the basis of separate prices for certain works and the overall final price is deter - mined upon the completion of works; or • a cost-plus fee basis, where the price is deter - mined on an open-book basis plus a pre-agreed fee. 7.2 Assigning Responsibility for the Design and Construction of a Project Landlords in Italy can enter into separate agreements for design and construction. The relevant liabilities will remain with the appointed contractor, except in the case of any necessary variations. 7.3 Management of Construction Risk It is market practice to impose penalties on the con - tractor for delays. Regarding the project’s feasibility, the construction agreement typically includes appro - priate representations and warranties. Contractors are also required to deliver performance bonds. 7.4 Management of Schedule-Related Risk Construction agreements usually provide for penalties to be paid in case of delay. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance Contractors are required to deliver a performance bond and, upon completion of the works, to give a warranty bond and a ten-year insurance policy ( decennale postuma ) covering material defects of the building. 7.6 Liens or Encumbrances in the Event of Non-Payment In the event of a landlord’s default, contractors/ designers may be able to encumber the property and enforce a sale to recover their outstanding debts. This would imply a judicial proceeding.
termination. In any case, a tenant’s failure to fulfil its obligations may allow the landlord to terminate the lease. A tenant has the right (according to the final paragraph of Article 27 of Law No 392/1978) to withdraw from the lease agreement at any time on the basis of “serious grounds” ( gravi motivi ) with six months’ prior notice. This provision can only be derogated from by the par - ties in longer-term leases. 6.20 Registration Requirements All leases have to be registered with the tax author - ity and an annual registration fee equal to 1% of the passing rent must be paid. The registration fee is usu - ally paid equally by the landlord and the tenant. Certain leases with an initial term of more than nine years should be executed before a notary and reg - istered in the Land Register so that they can be accessed by all third parties. 6.21 Forced Eviction Under Italian law, if the tenant does not comply with the obligations under the lease, the landlord can ter - minate the lease and seek the tenant’s eviction. This is a court process, and the duration varies depending on the court. 6.22 Termination by a Third Party In Italy, a lease can only be terminated by a third party in cases of compulsory procedure and an indemnity is payable. 6.23 Remedies/Damages for Breach In the event of a breach by the tenant and termination of the lease, landlords may retain the cash deposit (which, except for longer-term leases, cannot exceed three monthly instalments of rent) and/or enforce the guarantee. In addition, landlords may seek further damages (eg, loss of profits and reputational damages) to be ascer - tained before a court and/or provide for specific pen - alties in the lease agreement.
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