New guidelines on the assignment by way of security of rents deriving from the lease of a going concern
New case law
The assignment of rent deriving from agreements for the lease of a going concern comprising immovable property and having a term longer than three years must be registered with the land registry so as to become enforceable against third parties. The Supreme Court has so ruled in its recent decision No. 26701 of 23 October 2018, intervening on the interpretation of Article 2643, Number 9 of the Italian Civil Code, which states that “deeds and rulings providing for the redemption or assignment of rents not yet expired, for a term longer than three years” must be made public by means of registration.
The decision sets an innovative principle, since the rule had always been interpreted as having a scope of application limited to the assignment of rents deriving from the lease and/or rental of immovable properties. This in consideration of the fact that, on the one hand, it relates to land registry and, on the other hand, Number 8 of Article 2643, preceding the rule at issue, expressly deals with the registration of agreements for the lease of immovable properties.
The judges of the Supreme Court, in the context of an extraordinary appeal, extended the scope of the connection between rule and immovable property, which may trigger the need for registration even if the property is only indirectly the subject-matter of the agreement: in particular, it was specified that the rule applies also to contracts longer than three years having as their subject-matter the assignment of rents due “for the lease of a going concern whose assets comprise also immovable property”.
Practical legal implications
In light of the extended interpretation of the scope of the rule introduced by the aforesaid decision (for the sake of clarity, the Supreme Court specified that this is a systematic rather than an extensive interpretation), attention must be paid to the formalities to be carried out on the assignment of receivables deriving from the lease of a going concern that includes immovable properties. Take, for example, agreements for the collateral assignment of rents deriving from agreements for the lease of a line of business customarily entered into in relation to large real estate complexes, such as outlets and/or shopping centres.
As known, said agreements are often entered into within real estate finance transactions, in which – obviously – it is extremely important for the secured creditor that the security rights acquired by it on the rents (often representing the first source of debt service and principal repayment) are enforceable against third parties, such as subsequent purchasers of the business, or other assignees of the same receivable.
Therefore, different from the practice followed so far, in addition to the fulfilments provided for by the relevant provisions on assignment of receivables (Article 1260 and ff. of the Italian Civil Code), it will be necessary to proceed with the registration with the land registry also in case of assignment by way of security of rents due for leases of going concerns longer than three years comprising immovable properties. For such purpose, it will be necessary to enter into the relevant assignment agreement by means of certified private deed or public deed, before a notary public. It is worth flagging that the issue concerns agreements for the assignment by way of security of receivables entered into after decision No. 26701/208. In terms of already existing agreements, these shall be registered in order to assure full protection of the secured creditor.