ITALY Law and Practice Contributed by: Guido Alberto Inzaghi, Ivana Magistrelli, Silvia Gnocco and Gabriele Paladini, SI – Studio Inzaghi
Italian laws set a minimum term for leases (see 6.4 Typical Terms of a Lease ), and the parties can freely fix the term in large leases. 6.4 Typical Terms of a Lease The Italian tenancy law provides for fixed mini - mum terms for non-residential leases of six years for office/retail properties and nine years for hotel properties. Temporary leases can be entered into based on certain objective reasons. In large leases, the parties can agree on a dif - ferent term. The Italian Civil Code provides for a maximum lease term of 30 years. The lease automatically renews upon the expi - ry of the first period, unless either party gives notice not to renew at least 12 months prior to the expiry term, or 18 months for hotels. A residential lease has a fixed/minimum term of four years. Upon the expiry of the initial term, the lease automatically renews for a further period of four years, unless the parties agree otherwise. The Italian Civil Code distinguishes between ordinary and extraordinary maintenance works, and tenants are generally responsible only for ordinary maintenance; however, parties can deviate from this principle. The frequency of rent payments can be freely agreed between the parties. 6.5 Rent Variation Parties are free to determine the rent, but once fixed it is subject only to an annual review based on 75% of the ISTAT consumer price index (or 100%, depending on the duration of the lease). Since November 2014, parties in large leases can freely negotiate and determine a mechanism to review and update the rent; however, current market practice still provides for the update of
the rent based on the ISTAT consumer price index. Turnover rents, stepped rents and free rent peri - ods are also permitted, with certain limitations provided by case law. 6.6 Determination of New Rent The general rule is that such leases are VAT exempt. However, landlords can opt for the VAT regime to be applied (at a 22% rate) exclusively in the following cases: • leases executed by (i) companies that built the leased building and (ii) companies that have performed, including through contrac - tors, the interventions referred to in Article 3, co. 1, lett. c), d) and f) of Presidential Decree No 380/2001; and • leases of social housing also carried out by other companies (not necessarily construc - See 6.5 Rent Variation . 6.7 Payment of VAT Residential Leases The general rule is that such leases are VAT exempt. However, landlords can opt for the VAT regime to be applied (at a 22% rate). The VAT option must be clearly stated in the agreement. 6.8 Costs Payable by a Tenant at the Start of a Lease No costs should be paid by the tenant other than rent (and ancillary charges, if any), unless there are fit-out works to be carried out within the property. If this is the case, the parties shall define which works are for the benefit of the ten - ant and which are for the benefit of the landlord. tion or reinstatement). Non-residential Leases
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