Banking & Finance Law

Towards a “new” real estate securitisation

Recent updates on the securitisation of proceeds arising from ownership of real estate assets introduced by Italian Budget Law 30 December 2018, no. 45 and Law Decree 30 April 2019, no. 34 (so called “Growth Decree”).

The role of ReoCo in the assignment of non-performing loans

The first update introduced by the legislator concerns a full systematisation of the Real Estate Owned Companies (“ReoCo”) in the context of securitisations.

These vehicles manage real estate assets securing non-performing loans: by joining enforcement proceedings, ReoCos acquire the ownership of the real estate assets and deal with their management and subsequent sale, in order to satisfy the interest of the holders of the notes issued by the securitisation vehicle company. ReoCos owning the real estate asset until it has been sold avoids any risks on the securitisation vehicle company and safeguards its insolvency remoteness.

The Growth Decree now defines the ReoCos corporate purpose, which is to exclusively acquire, manage and enhance the value of real estate and registered movable assets granted as security of securitized receivables (see new Article 7.1, par. 4 of the Law 130). Moreover, the Decree now clarifies the nature of the lien encumbering both the assets owned by the ReoCo and the sums deriving from its management. These are qualified as segregated assets (patrimonio separato) created in favour and in the interest of the noteholders (thus avoiding such assets being seized by third parties other than the securitisation vehicle company).

The role of the ReoCo is defined also in case non-performing receivables arisingfrom financial lease agreements (including receivables arising from financial leases termination) are subject to securitisation. In such a scenario, the leased assets granted as security of the securitized receivables are assigned to the ReoCo and managed by it in the interest of the securitisation, within the same limits mentioned above (see Article 7.1, par. 5 of the law 130). However, it is also stated that ReoCos involved in such kind of securitisation shall be fully consolidated in the balance sheet of a bank and shall be incorporated for a single securitisation transaction (and back-up vehicle company shall be wound up once the transaction has concluded).

Legal updates are consistent with the Italian regulatory framework, represented by the 24th update to Circular no. 285 of 17 December 2013, issued by the Bank of Italy on 16 October 2018, introducing new guidelines for real estate investments with a view to improve management of real estate security and efficiency of receivables recovery.

The new securitisation of proceeds arising from ownership of real estate assets

In addition to the above, a new kind of securitisation has been introduced by the Growth Decree related to proceeds (and not receivables) arising from the ownership of real estate assets, registered movable assets or related in-remor personal rights (see Article 7, par. 1, let. B-bisof the Law 130) by securitisation vehicle companies (see Article 7.2 of law 130).

Regretfully, the wording of the Growth Decree  – even after its conversion into law – is not sufficiently clear with respect to the definition of the structure imagined by the Italian legislator. At first sight, it seems that ReoCos will acquire the ownership of the assets, whose proceeds will be securitized by a different vehicle company for the securitisation. In such a scenario, it would seem that assets and proceeds would constitute segregated assets (patrimonio separato) for the purpose of satisfying the noteholders. A different interpretation, instead, refers to the structure provided in the securitisation of proceeds arising out of the divestment of State real estate property, carried out by the Company for the Securitisation of Public Real Estate Asset (Società di Cartolarizzazione degli Immobili Pubblici S.r.l.) (see Law Decree 25 September 2001, no. 351). Here, the securitisation vehicle company acquires full ownership of the real estate assets and then securitises proceeds arising from the acquired assets. In the case covered by the Growth Decree, this would represent a new kind of securitisation vehicle, which can acquire itself the ownership of assets whose proceeds would be securitized and entrusts the management of such assets to an entity having the necessary qualifications and authorizations. It is worth noting that the above interpretation introduces critical issues with respect to the insolvency remoteness of the securitisation vehicle company (which, until today, could only acquire receivables), due to statutory, environmental and tax risks inherent to the ownership of real estate assets.

There are additional topics left open to discussion by the Growth Decree, such as the definition of “proceeds” subject to securitisation, the identification of the entity whose assets are segregated to secure the interests of the noteholders and, lastly, the disclosure regime applicable to real estate assets and registered movable assets (and related in-rem rights and personal rights) transferred in the context of the securitisation.

As to the first issue, as the law refers to the proceeds arisen from ownership of real estate assets, registered movable assets and related rights, everything deriving from the management, usage and disinvestment of such assets and rights (such as rents and future sale prices) shall fall within the scope of this category.

With regards to the second item, interpretation and practice of legal practitioners will have the task to verify which of the two structures mentioned above have meant to be addressed by the legislative update: the two-elements structure, where the ReoCo acquires the ownership of the assets and the securitisation vehicle securitises the proceeds, or the one where it is the securitisation vehicle that directly acquires the ownership of the assets.

On the disclosure regime, the update does not provide for exemptions to the ordinary disclosure regime of real estate assets, registered movable assets and related rights and, consequently, their transfer would be subject to the ordinary disclosure regime provided by Italian law.

Tax updates

The update has also introduced interesting tax novelties.

First, the definition of a substantial segregation regime of both assets and proceeds made by ReoCos in the interest of the noteholders ensures the application of a no-taxation regime to economic proceeds of ReoCos. Indeed, such proceeds should be treated as economic proceeds of the securitisation vehicle, not taxed on the securitisation vehicle as they are intended to satisfy the interests of noteholders. However, this is to be confirmed by Italian Tax Authorities that, in previous decisions, have deemed the link between proceeds made by ReoCos and rights of the noteholders not sufficiently relevant in order to prevent the proceeds from being taxed on ReoCos (see R.M. no. 18 of 30 January 2019 and R.M. no. 56 of 15 February 2019).

Finally, a relevant update concerns the application of fixed registration, mortgage and cadastral duties (equal to Euro 200) to the first transfer of real estate assets, registered movable assets and related rights to ReoCos, to the subsequent transfer from ReoCos to entities which carry out business activities  (provided that the purchaser declares in the relevant deed of transfer that it intends to transfer the acquired goods within 5 calendar years from the date of purchase), and to individuals opting for the application of the tax benefit related to the “first home” (agevolazioni “prima casa”).


This article is for information purposes only and is not intended as a professional opinion. For further information, please contact Matteo Gallanti, Stefano Padovani e Giovanni de’ Capitani di Vimercate.

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