This Quickguide will provide an overview on the termination of lease agreements in Italy focusing on both residential and commercial leases.
It will outline the circumstances in which an early termination can occur and delineate the landlord’s and tenant’s rights under Italian law.
What laws apply to the termination of lease agreements in Italy?
What laws apply to the termination of lease agreements in Italy?
The termination of lease agreements might have significant consequences for both the tenant and the landlord. Thus, while some degree of party autonomy does exist on the subject, tenancy law in Italy is characterized by the existence of mandatory provisions that determine what steps the landlord and tenant must take for the termination of the lease agreement.
It is important to point out that these legal provisions predominantly favour the tenant who is seen as the weaker party and therefore in need of protection and this is particularly true for Residential Tenancy Agreements.
With regard to the termination of leases, the relevant provisions can be found in the:
Italian Civil Code (general framework for lease agreements).
Law n. 392/1978 (mainly regulating commercial leases).
Law n. 431/1998 (regulating residential leases).
Additionally, if the tenant does not voluntarily vacate the premises, the landlord will have to start the eviction process which will be regulated by the Italian Civil Procedure Code.
Termination of residential lease agreements in Italy
Italian tenancy law provides that a residential lease agreement can be terminated prior to its expiry date in one of the following cases:
Early termination by the tenant
The law specifies that the tenant can withdraw from the contract at any time upon the occurrence of serious reasons (Article 3(6), Law n. 431/1998). Italian case law defines serious reasons as:
unforeseeable events ensuing after the formation of the contract which fall outside the tenant’s control and that make the continuation of the contractual relationship extremely burdensome.
The tenant is required to give a written notice to the landlord by sending registered letter at least 6 moths before of the date on which the withdrawal is to take effect specifying the reason of the withdrawal.
Furthermore, parties can provide for additional circumstances in which the tenant can withdraw from the lease agreement by including a specific contractual clause. If the withdrawal is based on such clause, the tenant is also required to give notice at least 6 months before of the date on which the withdrawal is to take effect.
Additionally, the tenant can prevent the first renewal of the contract after the initial 4 years. Unlike the landlord, who must provide a reason for the refusal to renew the contract, the tenant is not required to offer any reason provided the refusal is communicated to the landlord at least 6 moths prior to the end of the first 4-year term.
Termination due to breach of contract or mutual consent
Under Italian law, the residential lease agreement can be terminated if one of the obligations set out in the contract is not performed by the tenant (e.g., failure to pay rent) or the landlord (e.g., failure to perform necessary maintenance on the building).
Parties can also convene to terminate the contract by mutual consent.
In both cases, the termination of the tenancy agreement will follow the common rules established for the termination of contracts by the Italian Civil Code.
Once the contract is terminated the tenant must return the keys to the landlord in a timely manner to avoid being held accountable for any damages arising from the delay.
First renewal refused by the landlord
The law allows the landlord to prevent the renewal of the residential lease agreement at the end of the first 4 years in a 4+4 contract. This can be done by sending a termination notice 6 months prior to the expiry date of the contract if one of the following conditions apply:
the landlord intends to use the property for him/herself, spouse, parents, children, or relatives within the second degree for residential, commercial, or professional use;
the landlord is a legal person, company or public body or has a public, social, mutualistic, cooperative, cultural, or religious purpose and intends to use the property to exercise such activities provided the tenant is offered another suitable property which is under the landlord’s full availability;
the tenant has the full availability of a vacant and suitable accommodation in the same municipality;
the property is part of a severely damaged building that must be reconstructed or the stability of the building must be guaranteed, and the tenant’s presence is of obstacle to the fulfilment of the necessary works;
the property is in a building scheduled to be completely renovated, demolished, radically transformed to construct new buildings, or in the event the top floor owner intends to carry out elevations in accordance with the law and their execution requires the evacuation of the entire building.
the tenant doesn’t continuously occupy the property without any legitimate reason.
the landlord intends to sell the leased property to a third party and has no other residential property except for its own. In this case, the tenant has pre-emptive rights on the leased property that is about to be sold.
The landlord is also required to specifically outline the reason upon which the renewal is refused.
At the end of the second 4-year term, the landlord can terminate the contract without having to provide any reason.
Termination of commercial lease agreements in Italy
Commercial lease agreements in Italy can be terminated in the same cases seen with residential leases. Indeed, the tenant can withdraw from the contract
at any time by giving 6 months written notice with registered letter provided the withdrawal is based on serious reasons;
breach of contract or by mutual consent;
tenant’s refusal to renew the lease agreement.
While in commercial leases the landlord can deny the renewal of the contract as well, there are some differences compared to residential leases due to the nature of the contracting parties and the applicable law.
First renewal refused by the landlord
Commercial lease agreements in Italy have a minimum duration of
6 years for industrial, commercial, professional or tourist leases which are automatically renewable another 6 years;
9 years for hotel leases which are automatically renewable for another 9 years.
After the initial period (6 or 9 years) the landlord can refuse the renewal of the commercial lease provided a termination notice is sent to the tenant 12 months (for industrial, commercial, professional or tourist leases) or 18 months (for hotel leases) prior to the expiry date of the contract. In case of commercial leases, the termination will be considered valid only if one of the following circumstances apply:
use the property as residence for him/herself, spouse, or close relatives;
use the property for commercial or professional purposes for him/herself, spouse, or close relatives; if the landlord is an administrative or public body, to exercise activities intended at achieving its institutional purpose.
to demolish, restructure or renovate the building, or to carry out works based on a multiannual municipal programme in accordance with the laws in force.
As seen with residential leases, the landlord is not required to provide a reason to end the lease at the expiry of the second 6-year term. However, the law requires the landlord indemnify the tenant for the loss of goodwill in certain cases.
Indemnity for loss of goodwill
The law provides that an indemnity should be paid to the tenant of a commercial lease for loss of goodwill in the event the contract is terminated (Article 34, Law n. 392/1978). The indemnity is
equal to 18 times the amount of the last rent paid in case of commercial leases;
equal to 21 times the amount of the last rent paid for hotel leases.
If the landlord leases the property to anyone who exercises the same activity carried out by the previous tenant, and the new activity starts within one year from the termination of the previous one, the tenant is entitled to double the above-mentioned amounts.
The goodwill indemnity is not due by the landlord if the lease agreement is terminated in one of the following cases:
breach of contract by the tenant;
tenant’s withdrawal;
tenant’s refusal to renew the lease agreement.
The goodwill indemnity is also not payable if the tenant:
carries out activities that do not require direct contact with the public;
exercises a professional occupation (e.g., lawyers);
carries out activities which have a temporary nature or is located in buildings complementary to, or inside railway stations, ports, airports, roads or motorway service areas, hotels and tourist villages.
Conversely, the goodwill indemnity will be payable if the landlord refuses to renew the lease agreement.