The Italian Parliament has passed a law, effective November 12, 2014 by which, among other things, a revolutionary reform has been introduced in non-residential lease agreements.

The reform states that parties entering into a lease providing for annual rents in excess of 250.000,00 Euros may fully derogate to the law governing this type of leases (enacted in 1978), which is very protective of tenants. 

The change has broad effects, considering that it encompasses office, commercial, industrial, hotel, logistics leases and in general any non-residential use.

The reform aims at encouraging investments, both domestic and international, into the Italian real estate market by eliminating rigidities which traditionally - some claim - have curtailed investments into real estate, by empowering tenants.

It can be said that this change is likely to change radically the retail real estate world for this type of leases. 

The parties would now be allowed to depart from a number of rules which until today were mandatory and could not be changed even with the agreement of both parties.

The first major amendment has to do with duration: the mandatory mechanism which provides for a minimum 6-years duration with an automatic renewal for 6 additional years, with a withdrawal right for landlords only in a limited amount of instances, may now be derogated. This implies that lease agreements with a much shorter duration and no renewal rights will be legitimate. 

Rents may freely vary from year to year (up to date only indexation of rent was permitted).

The withdrawal right in favor of the tenants “due to serious reasons” may be cancelled, alongside with the mandatory indemnity due at termination of the lease in favor of tenants who had contacts with the general public of consumers (equal to 18 or 36 months worth of rent depending on the use of the space after termination).

The automatic transferability of the lease agreement together with the transfer of the business unit, used quite often to transfer the “location” from tenant to tenant, may now be freely derogated by the parties.

Rights of first refusal for new rents and sale of the real estate may now also be derogated. 

This new law brings a complete liberalization in an area which was tightly regulated with vast protections for tenants and opens the market to negotiation between the parties. 

This is truly a revolution in a field which has been untouched for nearly 40 years and is likely to have major consequences in the way business is conducted and locations are secured.

For more information please contact: 

Giulia Comparini gcomparini@cocuzzaeassociati.it

Alessandro Barzaghi abarzaghi@cocuzzaeassociati.it

Cocuzza & Associati  has vast experience in supporting multinational retailers in both the non-food and food business and in structuring all types of agreement aimed at the opening of new point of sales in Italy, from incorporation of the Italian branch or subsidiary to the structuring of the relevant agreements. C&A has acquired over the years  a complete expertise in this field, which is constantly updated with the most recent legal developments