The rent-to-buy contract under Italian Law
The rent-to-buy contract allows a promissory purchaser to immediately start living in a property, as a tenant, with the obligation of the vendor to sell the property later on, deducting the paid rental fees from the selling price. In the rent-to-buy contract, part of the rental fees is allocated partially or totally to the final payment for the property purchase. In case of partial allocation, part of the fees will be for the rental payment and the other part, set at an agreed percentage, will be for the purchase. After its introduction in 2014 by Decree “Sblocca Italia”, based on the UK model, the rent-to-buy contract is becoming a common legal instrument to promote the real estate market. Indeed, the tenant agrees with the seller, to pay him a regular rental fee and enter into the possession and use of the property, like an ordinary tenant but with the final purpose of buying it, as a sort of sale in instalments.
The main feature and advantage of the rent-to-buy contract is that it a way to buy a property, without the need to get a mortgage or to pay a significant amount of money upfront. Another important feature is that, initially, the tenant is entitled to buy the property, but he does not become the owner yet. On the other hand, the seller has the obligation to sell the property on the agreed date. Therefore, the seller has to guarantee and reserve the property from foreclosures or other similar adverse actions. Nevertheless, the tenant may or may not have the obligation to buy the property:
- The parties can agree that the tenant has the obligation to buy the property and the seller has the obligation to sell it. In this case, they are both obliged to comply.
- The parties can agree that the tenant has only the option to buy the property by establishing a specific clause. If the tenant does not exercise the right to buy within the established term, the tenant loses his right and the seller is not under obligation anymore. Furthermore, the seller shall return that part of the rental fee which was destinated for purchase.
Parties need to stipulate a proper contract of sale to transfer the property at the established price, by deducting all or a part of the amount of the rental fees as specifically agreed in the rent-to-buy contract.
Regarding the protection of the rights of the buyer, this is given by the legal transcription of the contract in the land registry, which prevents the property from being sold to third parties or from any creditors’ actions. The transcription lasts for a maximum of 10 years.
If the tenant does not pay 1/20 of the rent for a consecutive number of times, then the owner of the property may terminate the contract. On the other hand, if the owner does not sell the property, then the tenant may terminate the contract and the enforcement will take place.
If you are a foreign citizen willing to buy property in Italy VGS Lawyers will provide for the necessary assistance by way of its team of Real Estate Lawyers.