Rent to Buy is an instrument introduced into our legal system by the 2014 Sblocca Italia Decree. This type of contract is still little used in Italy, but at a time of economic crisis and difficult access to credit, it can be an opportunity for those who want to buy a home but do not immediately have the necessary liquidity.
CHARACTERISTICS AND EFFECTS OF RENT TO BUY
he rent to buy is a type of contract by which the owner immediately hands over the property to the tenant and future buyer who after a period of time fixed in the same contract can decide whether to buy it, deducting from the price a part of the rents already paid.
The characteristic elements of this contract for the tenant are:
-the immediate use of the property;
-the obligation to pay a fee consisting of two different components: that intended to pay for use and that to be charged against the purchase price;
-The right to purchase the property within the term stipulated in the contract;
-The possibility of charging the portion of the fee specified for this purpose in the contract to the sale price.
In essence, rent to buy has two phases (one of which is only eventual):
- the first is that of granting the use of the property. As a result of entering into the contract, the owner of the property has the obligation to hand it over to the tenant, who, on the other hand, has the obligation to pay the grantor the agreed rent (both for the component intended for use and for the component to be charged to the purchase price).
- The second phase, the one involving the transfer of ownership of the property from the grantor to the tenant, is, on the other hand, only eventual; in fact, the rule does not provide for a mutual obligation of the parties to conclude the deed of sale, nor does it stipulate that the transfer of the property occurs automatically at the conclusion of the period of use; instead, the law recognizes the tenant's right to purchase. The latter, therefore, at the expiration of the agreed term is free to decide whether or not to proceed with the purchase (without prejudice, however, to the grantor's obligation to proceed with the transfer if the tenant so decides).
So it all depends on the decision to be made by the conductor, so:
If he decides not to purchase the property, upon expiration of the term the contract will cease to have any effect. The grantor will be entitled to the redelivery of the property and to retain the entire component of the rents attributable to the use; the tenant, on the other hand, will be entitled to the return of the percentage of the component of the rents attributable to the sale price as determined in the same contract
If he decides instead to exercise the right to purchase, the grantor will be required to consent to the sale. The lessee, in turn, will have to pay the agreed price net of the fees already paid for the component to be charged to the price.
DEFINITION OF THE PORTION ATTRIBUTABLE TO CONSIDERATION
The most sensitive issue to be addressed at the contract negotiation stage will certainly be the determination of the portion of the component of the rents attributable to the consideration that the landlord can retain in the event of non-purchase by the tenant.
In fact, there are two opposing interests: on the one hand, the grantor's interest in retaining most of this component, because this will provide an undoubted incentive for the tenant to exercise his or her right to purchase (in fact, in the event of non-purchase, the tenant would lose most if not all of what he or she has paid as an advance on the price); on the other hand, the tenant's interest in leaving the lesser part of this component to the grantor, so that he or she can decide more freely whether or not to purchase the property.
The final choice will, of course, be influenced by what the actual expectations of the parties are, with the consequence that the share of the fees attributable to the consideration will be the higher the greater the interest for both parties to reach the final sale of the property.
THE CANON
The contract will necessarily have to specify the two different components that constitute the fee to be paid: the one intended for use payment and the one to be charged as down payment.
The indication of the dual component of the rent is therefore an essential element, required for the very validity of the rent to buy. Should a token amount be indicated for either component, the contract would be null and void.
TYPE OF REAL ESTATE
he rent to buy can be entered into for any type of property: residential, commercial, manufacturing, office, and more. Nor are buildings "in the rough" excluded.
TRANSCRIPT
The transcription of rent to buy produces, according to the law, a twofold effect in relation to the two "phases" into which it is divided:
-an effect of enforceability against third parties, with regard to the granting of use with transcription required even if the duration is less than nine years, contrary to the provisions of the law for
leases, transcribable only if longer in duration;
-a reservation effect similar to that produced by the transcription of a preliminary contract
with regard to the grantor's obligation to transfer ownership of the property if the tenant exercises the right to purchase. In addition to this it backdates the effects of the transcription of the deed of sale, if any, to the time of the transcription of the contract itself, thus full protection is guaranteed to the tenant, enabling him to acquire the property in the "state of law" in which it was at the time the rent to buy was entered into, while at the same time neutralizing any prejudicial transcriptions or registrations subsequent to the transcription of the contract.
In order to rely on the aforementioned reservation effect, the final deed of sale must be transcribed before the term of the rent to buy expires and, in any case, within ten years of its transcription.
DEFAULT OF THE TENANT
Rent to buy entails various obligations on the tenant; the main one is certainly the obligation to pay the rent. Another obligation is to take care of the routine maintenance of the property.
In the event of termination for default by the tenant, the landlord is entitled to the return of the property and acquires the rents paid up to that time for their full amount, and thus also for the part to be charged to the transfer price as compensation for the damage suffered.
In the event of both tenant default and failure to exercise the right to purchase, the grantor is entitled to immediate return of the property.
If, however, the tenant fails to fulfill his obligation to redeliver, the grantor has no choice but to apply to the court in order to obtain specific enforcement of the obligation to deliver and release the property.
FISCAL REGIME.
A distinction must be made between:
the component of rents to be charged for use payment: in this case, the rent discipline applies; therefore, this component will be subject to registration tax at the rate of 2% or in the case of adherence to the dry coupon no registration tax.
the component of the royalties to be charged to the sale price: the residual discipline provided for deeds concerning services with patrimonial content applies, this component will therefore be subject to registration tax at the rate of 3% (with the right, however, to the deduction of this tax from the registration tax due for the final deed of sale).
More complex discussion if the owner is subject to VAT or for capital properties. In any case, to assess tax advantages or disadvantages, it is necessary to evaluate the specific position of the seller, making an economic and tax analysis of the individual case.
This is also why the client needs the cooperation of a professional from the very beginning.
For advice or to seek a solution to your needs, contact us at 0583 997201 or email us at info@marcocatelli.it
