Real Estate Law
Nctm’s Real Estate group is one of the leading groups in Italy offering the full range of services. We provide our domestic and international clients with efficient service in a timely manner.
Nctm assists and advises its clients on transactions related to the acquisition, sale and disposal of property, development of single properties or portfolios, whether carried out individually or through real estate companies and/or funds.
In the area of real estate funds, Nctm’s advice covers, with the assistance of other Nctm departments, all legal aspects of fund creation and management.
Nctm is one of the leading firms in the area of competitive bids for real estate spin offs, having managed or taken part in most of the major transactions carried out in this area.
This memorandum outlines the framework of the “rent to buy” agreement and the lease agreement with option to sell, in order to highlight the advantages that this new type of contract presents compared with the traditional scheme  .
This memorandum is composed in two parts: defining the main schemes of both types of agreements in order to distinguish between them; highlighting the main advantages when using the “rent to buy” instead of the traditional lease with option to sell.
- The distinction between “rent to buy” and lease with option to sell.
The “rent to buy” is defined by law as “the contract, different from financial leasing, that provides the lessee with the immediate enjoyment of a real estate, and with the right to acquire the property of such asset at a certain deadline, against the payment of its price reduced by the part of licence fees indicated in the agreement”. Accordingly, the operation is structured into two parts. In the first part, the lessor grants the enjoyment of the asset, and the lessee pays a periodic licence fee which includes an amount paid for the use of the asset, and an amount based upon the anticipation of its purchase price. In the second part the lessor purchases the asset, against the payment of its price reduced by the amount already paid as part of anticipated sale price under the lease.
Whereas, the lease agreement with option to sell is a contract of leasing which includes an option providing for a separate contract to sell. Therefore, leasing and selling are not a single unified economic transaction under one sole agreement, instead there are two separate transactions with two different agreements. First, there is a transaction that falls under the general provisions of the lease agreement. Second, there is a transaction that falls under the option agreement as a separate agreement to sell. The transactions are connected in the sense that they are interrelated if one selects the option to sell and then pursues that economic result.
While the distinction between the rent to buy and lease with an option to sell may not seem clear and immediate, in the abstract, the agreement should be considered as a “rent to buy” when the parties intend to establish a single unitary relationship characterised by leasing with an additional amount paid for the right to buy. Alternatively, an agreement should be construed as a lease when the parties intend to undertake two separate transactions: leasing and leasing with an option to purchase. In this latter agreement, only a leasing amount is paid and not an additional amount in anticipation of the intended purchase price. In practice, the essential element to distinguish between the two contracts is represented by the composition of the licence fee. In particular, the agreement falls under the “rent to buy” scheme whenever the licence fee is split into two parts, a portion aimed to remunerate the enjoyment and a portion aimed to anticipate the price.
- First advantage of the “Rent to buy”: the freedom of negotiation
The contract of “rent to buy” presents many advantages compared with the lease with option to sell. The first advantage consists in the freedom of negotiation. Indeed, the lease with an option to sell is entirely subject to the restrictions provided by the Law 392/1978 and by the Law 431/1998, and all the consequent mechanisms mandating the imperative substitution of clauses which do not comply with such provisions. In this agreement, each transaction remains governed by the regulation of the law for its respective type (lease, and option to sell). The mere connection between the transactions does not affect the applicable regulation.
Instead, the “rent to buy” is exempted by the application of the imperative provisions set by the law in relation to the lease. In this agreement, the parties shall remain entirely free to negotiate and agree upon the duration of the enjoyment, the early termination of the commitment, the amount and the raise of licence fees, the sublease and contract assignment, and all the mechanisms related to pre-emption, release, and indemnity for the loss of goodwill.
- Second advantage of “rent to buy”: the enforcement in case of non-fulfilment of the lessee
The second advantage consists in the timing of the enforcement in case of non-fulfilment of the lessee. In the lease with option to sell, the lessor is compelled to bring two different actions before two different judicial authorities. Previously, lessor needed to demand the verification of the entitlement and the breach of the contract in an ordinary trial, though this trial should be enough rapid, since it is regulated by the summary procedure of eviction stated in the article 658 c.p.c. Afterwards, once the judicial verification is obtained, lessor may proceed with the execution. Consequently, the satisfaction of the lessor’s interest requires two different proceedings, causing protracted time and costs.
Instead, the “rent to buy” represents itself an enforceable title for the release of the asset, providing that it is stipulated in the form of a notarial deed, and providing that it contains an express termination clause in relation with the failure to pay the licence fees due. Therefore, in case lessee does not fulfil all the lease to buy obligations, the lessor does not need to demand the verification of the entitlement and the breach of the contract, and can immediately proceed with compulsory execution. Nevertheless, this occurs only in case all the conditions previously mentioned are met. Indeed, on the basis of article 474 c.p.c. and on the basis of article 605 c.p.c., notarial deeds represent enforceable titles for the release of the asset only when they provide a right to restitution that is irrefutable, liquid and collectable. Consequently, it is not sufficient just to have a notarial deed, it also must vest the lessor with a right to restitution that is already certain and does not require any judicial verification. In this regard, it is necessary that the contract provides an express termination clause.
- Third advantage of “rent to buy”: the effectiveness against third parties
The third advantage consists in the possibility to claim the contract against third parties that have acquired rights on the asset after its registration. On the basis of the article 2643 c.c., the lease agreement could be registered only whether its duration would exceed nine years, and this does almost never happens in the economic practice. Since the acts subjected to registration in the land register are exhaustively stated by the mentioned norm, the lease that does not exceed the 9-year term limit cannot be registered. Consequently, the lessee bears the risk that, in the time between the conclusion of the agreement and the exercise of the option, another person makes a prejudicial registration(s).
This risk is resolved with the “rent to buy”, since it is always subject to registration, regardless of its duration. Furthermore, this registration produces the same effect of the preliminary agreement’s registration, that is to say a “booking effect” for the following transfer. In other words, the registration of the contract anticipates the effects of the registration of the following transfer. This neutralises the risks related to any later registration. However, this “booking effect” expires in case the lessee does not proceed to the registration after the transfer and, in each case, within ten years from the first registration.
In conclusion, the new “rent to buy” contract, as regulated by recent law, represents an agreement extremely helpful economic practice. The new contract ensures: (i) the parties remain free to negotiate the deal that best fits their interests without any restrictions, (ii) the lessor can obtain the restitution of the asset without the necessity of a judicial verification, and (iii) the lessee can avoid the risk of any prejudicial registrations.
The “rent to buy” agreement was created spontaneously in the economic practice. It has been typified only afterwards by the lawmaker with the Decree “Sblocca Italia” D.L. 133/2014 at the article 23.
Decree “Sblocca Italia” D.L. 133/2014, article 23, paragraph 1.
However, the restrictions to the freedom of negotiation provided by the Law 392/1978 is no longer applicable to the lease agreements whose licence fee exceed the amount of 250 k per year. In accordance with the recent D.L. 133/2014 article 18, the parties can freely derogate to all the imperative provisions set in the Law 392/1978.
Cassazione, 23 marzo 1992, n. 3587.
It should be pointed out that, in theory, even a lease agreement could be considered as an enforceable title for the release of the asset, provided that it is stipulated in the form of a notarial deed and contains an express termination clause. However, in practice, it does almost never happen.
Fabiani, Rent to buy, titolo esecutivo per il rilascio dell’immobile ed effettività della tutela giurisdizionale, in Studio per il Consiglio nazionale del notariato n. 283 del 2015, 1 ss..
 Delfini, La nuova disciplina del rent to buy nel sistema delle alienazioni immobiliari, in Riv. Trim. dir. civ. e proc. civ. 2015, 817 ss..
Nctm Studio Legale advised BT Enìa Telecomunicazioni S.p.A., a company controlled by BT Italia S.p.A., in the purchase of a line of business relating to a telecommunication network extending for approx. 1,500 km in Emilia Romagna belonging to IRETI S.p.A. (a company of the IREN Group engaged in the field of public local grid services), which was advised by Studio Bettini Formigaro Pericu.
At the same time, an agreement was entered into between BT Enìa and IRETI, whereby the latter was granted the right to use, for a period of 30 years, renewable by further 10 years, 25% of the overall capacity of the purchased network; furthermore BT Enìa entered into an agreement with IREN Energia S.p.A. (another company of the IREN Group) whereby IREN Energia granted BT Enìa the right to use 25% of the physical space existing inside all service cable ducts of the district heating network owned by IREN Energia, for a period of 30 years, renewable by further 10 years .
In this issue, we explore the new “Project Review” rule provided for by Article 202 of Italian Legislative Decree No. 50/2016, which allows the State to revoke funding previously granted for projects which – upon later and more in-depth review – are found no longer to meet the cost benefit ratio. What will the impact of this new rule be on port infrastructure projects in Italy? Are we at the beginning of a new era? We come back to the Italian port reform issue, this time to examine the ordinance power vested in the President of the Port System Authority. Analysing a judgment of the Regional Administrative Court of Liguria, we note how case law anticipated the reform when recognising the ordinance power of the President of the Port Authority even in the absence of an express statutory provision. We then deal with the need for prior review by the EU Commission of State funding projects involving upgrade works on EU ports. On 23 January 2017 the new EU Regulation on port governance was approved. We give a first insight on the main issues covered by the Regulation: financial transparency and the provision of port services. We examine the request to amend Directive 2009/13/EC, aimed at delivering better working conditions to seafarers in accordance with the amendments made in 2014 to the Maritime Labour Convention (MLC / 2014). We also provide some updates on maritime employment agencies. We then focus on a recent decision of the European Commission on State aid, which further helps improve the general understanding of the criteria to be met in order for State aid in port and airport matters to be deemed compatible with EU law. Finally, we draw our attention to an interesting decision of the Consiglio di Stato regarding the interruption of airport handling services, which is forbidden when deemed detrimental to the public interest in operation of scheduled air transport services.] We want to thank our colleagues at Nctm Brussels’s office for their contributions highlighting the most significant actions taken by EU institutions in the international shipping and trade sector. You will also find a list of our events taking place at our Milan and Rome offices, in addition to the usual update on our firm’s activities over the past two months.
As we settle into 2017 the drama of Brexit and Trump seem to have eased somewhat. While the drama might have lifted it doesn’t mean that the complexities that these two phenomena have introduced and are introducing into the practice of law have gone away. In fact, the more we reflect on what needs to be done to achieve Brexit the less clear the situation is. This week President Trump will outline what he means by the Wall and taxes on imports of goods. From a WTO law point of view it can only be disruptive and even destructive. The drama might have gone but the work is only beginning. In this issue we have a range of contributions covering how the Russian constitutional court has reacted to the European Court of Human Rights rulings in favour of the owners of Yukos, the OECD’s review of its own bribery rules, the EU’s new proposed ePrivacy Regulation, how the European Court of Auditors confirms our understanding of the responsibilities and obligations of Port Authorities in relation to concessionaires. We explain the new Italian Save the Banks decree and show how the EU Commission has a strong role in every step of the process and look at how the Commission proposes disciplining insurance distribution agents.
Trade features significantly in this first edition of Across the EUniverse for the year 2017. It cannot be otherwise. US President Trump has said that he will change US trade policy building barriers to market access and forcing US companies to manufacture at home. China President Xi has said that China promotes barrier free trade so long as the barriers are in third countries (not in China). The EU is in the process of reforming its trade defence instruments and digesting how a post Brexit world will look.
This change in trade is evidence of wider change that is taking place around us and which is likely to continue into 2017. There will be federal elections in Germany and national elections in France. If Italy gets to change its electoral law there may well be an election in Italy. Will the forces that backed President Trump in the US win in the EU as well. The country most likely to change is the Netherlands, once a bastion of openness but now toying with the idea of giving the most votes to an anti-Islam party.
In this issue we look at the legal debate concerning an Italian exit from the Euro; a comparison between Trump and Xi approach on the concept of trade; some consequences of the excessive length of court proceeding; we also examine the advantages of the new italian “rent to buy” agreement; as well as the Multilateral Investment Court; an overview of the service sector; a further examination of the trade consequences of Brexit and finally the advantages or disadvantages of enhancing the bilateral framework between EU and US in the field of energy.