Renting out Italian Property: A Guide for Property Owners

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Renting out your Italian property can help you earn extra income and offset the costs of owning a holiday home. However, you should consider some crucial factors before jumping into this venture to ensure a successful and stress-free experience.

Our blog post will outline key points to keep in mind, helping you navigate the process with confidence and ease.

If you would like more tailored details for your situation, you can book a free preliminary consultation. 

Renting out Italian Property: Buying The Right Property

If you’re considering buying a property to rent out, it’s essential to keep in mind what potential renters are seeking. Location is a critical factor, as well as the number of bedrooms, bathrooms, and amenities like a pool or garden. However, it’s equally vital to understand the local rental market and what kind of properties are in demand.

When choosing a property, consider its proximity to key attractions such as beaches, public transportation, and popular restaurants or shopping districts. Moreover, ensure that the property has sufficient space and amenities to accommodate potential renters’ needs.

To make a wise investment, it’s essential to research the local market to determine what type of properties are most in demand. Consider the local rental rates, vacancy rates, and any emerging trends that may impact the demand for rental properties.

By keeping these factors in mind, you can make an informed decision when buying a property to rent out, maximizing your investment and attracting high-quality renters.

Upkeep

Maintaining the appearance of your Italian rental property is essential to attract guests and ensure their satisfaction during their stay. Keeping the property clean and well-maintained, as well as ensuring that all amenities are in good working order, is crucial to provide a comfortable and safe environment for your guests.

Regular cleaning and maintenance of the property, including deep cleaning and upkeep of outdoor areas, are essential to ensure the property remains attractive and inviting to potential renters. Additionally, ensuring that all appliances, fixtures, and equipment are in working order is crucial to provide a hassle-free and comfortable experience for your guests.

If something breaks or needs repair, it’s essential to address the issue promptly to minimize any inconvenience for your guests. Regular inspections and preventative maintenance can help identify potential issues before they become major problems and prevent costly repairs in the future.

By prioritizing the appearance and maintenance of your rental property, you can provide a positive experience for your guests and optimize your rental income by attracting repeat business and positive reviews.

Renting out Italian Property: Management

When renting out your Italian property, it’s essential to have reliable external assistance to ensure that your guests have a pleasant and safe stay. If you’re unable to be present to manage cleaning and maintenance, it’s best to enlist the services of a reputable company or a trustworthy individual in the area who can take care of these tasks on your behalf.

In addition, it’s important to have a designated individual who can welcome guests, show them around the property and provide them with keys. This person should be easily accessible to attend to guests’ needs and emergencies or resolve any urgent issues, such as gas or water supply interruptions or power failures. They should also be able to provide information about the local area, including recommendations for restaurants, activities, and attractions.

By having a reliable team in place, you can ensure that your rental property is well-managed and your guests are well-cared for, resulting in positive feedback and repeat business. Moreover, a trustworthy team can provide you with peace of mind, knowing that your property is in good hands, even when you’re unable to be present.

Renting out Italian Property: Tax Matters

Holiday rental owners in Italy previously evaded taxes by not declaring their rental income to the authorities. The government recently took steps to combat this issue by introducing the “Regime fiscale delle locazioni brevi”. This tax applies to informal B&Bs and private individuals renting out their residential properties through online portals such as Airbnb, Essentialitaly.co.uk, Vrbo.com and other platforms.

The new legislation aims to level the playing field for hotels and ensure fair taxation. Property owners should be aware of their tax obligations and seek professional advice to avoid penalties.

Cedolare secca system

The “Cedolare secca” taxation scheme applies to short-term rental income generated through online platforms in Italy. The scheme deducts a 21% tax from the rental income when the rented house is one, but homeowners must pay taxes on income not paid through the portal. If the houses for rent are more than one, the deduction applied is 26% from the rental income.

Income tax rates are 23% on earnings below € 28,000. To address tax evasion, the Ministry of Tourism is considering introducing identification codes for each rental property. It is advisable to seek professional guidance regarding compliance and the complexities of Italian tax regulations.

When Rental Becomes A Commercial Business

In Italy, if you rent out more than four holiday properties, you become classified as a professional landlord by the State. As a professional landlord, you are required to register with the local authority and chamber of commerce and comply with all relevant safety regulations.

Additionally, you must charge Value Added Tax (VAT) on your rental income, which means you will need to obtain an Italian VAT number and register for VAT.

It is also important to note that if the rental period exceeds 30 days, you must register the contract with the local tax office. This is a legal requirement that must be adhered to, and failure to comply may result in penalties and fines. Therefore, it is essential to ensure that you meet all necessary registration and compliance when renting out your property in Italy.

To ensure that you are meeting all legal requirements, you should seek professional advice from a qualified tax consultant or a legal professional. They can guide you through the process and provide assistance with all the necessary registrations and compliance requirements.

Registration And Tourist Tax

When hosting holiday rentals, it’s important to be aware of the local regulations concerning guest registration and tourist taxes. Depending on the city, you may need to notify the local authority of each guest’s arrival and submit a monthly list of all guests.

Additionally, you will need to pay the tourist tax, also known as “tassa di soggiorno,” to the local authority and/or province via bank transfer. To avoid any potential penalties or legal issues, it’s crucial to familiarize yourself with the specific rules and procedures in your area.

Renting out Italian Property: Insurance

If you are renting out your Italian property, it’s crucial to protect yourself and your investment by taking out a comprehensive insurance policy. Unexpected events like flood damage, theft, or other emergencies can disrupt your guests’ stay and cause significant financial loss. With a good holiday home insurance policy, you can quickly and easily resolve these issues and minimize any disruption to your business.

Your insurance policy should provide coverage for public liability, protecting you against any legal claims that may arise from accidents or injuries that occur on your property. Additionally, your policy should cover your property even when it’s not occupied, ensuring protection against damage caused by natural disasters or other unforeseen events.

When choosing an insurance policy, it’s important to carefully review the terms and conditions. Some policies may exclude certain types of damage or may not cover you if you are renting out the property on a short-term basis. Moreover, it’s crucial to ensure that your policy provides liability coverage for any potential issues that may arise from renting out your property to guests.

You may also want to consider getting cover for loss of rent or income in case your property becomes unavailable due to unforeseen circumstances.

To discuss your situation, get in touch for a free consultation, or click here to get all our FREE guides for foreigners planning to renoveting, buy, sell or live in Italy.

Finally …

Overall, renting out your Italian property can be a great way to earn extra income while enjoying the benefits of owning a beautiful home in Italy. However, it’s important to understand the legal and tax implications of renting out your property, as well as to take the necessary steps to ensure that your property is well-maintained and properly insured. With the right planning and preparation, you can successfully rent out your Italian property and enjoy the rewards of being a holiday rental property owner.

De Tullio Law Firm provides international clients with independent legal advice. We offer services in all the major fields of Italian Law, with particular expertise in real estate, residency, family law and inheritance matters. If you are thinking of renting out your Italian property or are thinking of buying a rent to let property in Italy, why not get in touch with us to discuss your project? We are happy to offer you a free, no obligation, preliminary consultation.

You may also be interested in our article about Applying A Power of Attorney.

Rental Contracts in Italy

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Italian rental contracts

Renting a property in Italy entails navigating a complex landscape of legal obligations and procedural steps to establish a fair and transparent relationship between landlords and tenants. Consequently, a comprehensive understanding of the Italian rental contract process is indispensable, whether for residential or commercial purposes.

This guide aims to provide a detailed overview of the various types of rental contracts available, their distinct characteristics, essential legal requirements, as well as the rights and responsibilities they entail for both parties. Additionally, it explores effective methods for resolving disputes, ensuring that all aspects of the rental process in Italy are approached with clarity and compliance.

If you wish to discuss your situation, please contact us for a free consultation. We are here to help.

Types of Rental Contracts in Italy

Italy offers several types of rental contracts:

Free Market Contract:

These are the most common type of rental contracts in Italy. They typically last four years with the possibility of automatic renewal for a further four years.

The rent and other contractual terms are freely negotiable between the landlord and tenant.

Agreed Rental Contract:

These contracts last three years with a two-year extension. Homeowners and tenant associations set the rents, often resulting in lower rates than free market contracts.

Transitional Contract: 

These contracts meet short-term rental needs, ranging from 1 to 18 months.
Additionally, they are non-renewable and require a stated reason due to their short-term nature.

Student Tenancy Contract:

These contracts cater specifically to university students and last from six months to three years, aligning with their study schedules.

 

rental contract

Rental Contracts in Italy: Characteristics

A typical rental contract in Italy should include the following:

1. Parties Involved:
Clearly identifies the landlord and tenant(s) including full personal information.

2. Property Description:
Provides a detailed description of the rental property, including the furniture and accessories.

3. Duration:
Specifies the start and end dates of the rental period and any renewal terms.

4. Rent and Payment Terms:
Agrees on the rent amount, payment frequency (usually monthly), and accepted payment methods.

5. Security Deposit:
Typically, this is equivalent to two months’ rent, held as security against damage or unpaid rent.

6. Maintenance Responsibilities:
Clearly defines maintenance and repair responsibilities, distinguishing between minor and major repairs.

7. Termination Conditions:
Outlines the conditions under which either party may terminate the rental contract, including notice periods and penalties for early termination.

Legal Requirements for Rental Contracts in Italy

Several legal requirements must be met to validate rental contracts in Italy. First, all rental contracts must be in writing and signed by both parties. Additionally, contracts lasting more than 30 days must be registered with the Inland Revenue (Agenzia delle Entrate) within 30 days of signing, with the registration fee typically shared between the landlord and tenant.

Moreover, landlords are obligated to declare rental income and pay applicable taxes, while tenants may benefit from tax deductions on rental payments under specific conditions.

In terms of rights and responsibilities, both landlords and tenants have distinct obligations under Italian law. Landlords must ensure the property is habitable, meeting safety standards, and they must perform major repairs and maintenance. They must also respect the tenant’s right to privacy and peaceful enjoyment of the property.

Tenants, on the other hand, are responsible for paying rent and agreed fees punctually, maintaining the property in good condition, and undertaking minor repairs as needed. It is essential for tenants to comply with the terms of the contract and refrain from using the property for unauthorized purposes. These legal frameworks help establish clear guidelines and promote a harmonious rental relationship in Italy.

rental dispute

Dispute Resolution

Resolving disputes between landlords and tenants regarding Italian rental contracts involves various channels, each tailored to different circumstances and preferences.

Negotiation

Initially, parties can engage in negotiation, where landlords and tenants directly discuss and resolve issues. For example, they might negotiate adjustments to the rent to account for maintenance responsibilities or agree on a revised schedule for property inspections.

Mediation

Mediation offers a structured approach with the assistance of a neutral third party. This process helps clarify misunderstandings and facilitates compromises that satisfy both parties. An example includes using a mediator to resolve disagreements over the interpretation of lease terms regarding property usage or responsibilities for repairs.

Legal Action

If informal methods fail to yield a resolution, parties can pursue legal action through the local Rent Tribunal. This step becomes necessary when there is a significant disagreement over lease termination conditions or disputes regarding security deposit refunds. The Rent Tribunal serves as a formal venue where both parties can present their cases, and decisions are made based on Italian rental laws and regulations.

These options ensure that disputes are addressed promptly and fairly, thereby promoting a harmonious landlord-tenant relationship and upholding legal standards in the rental process in Italy.

To discuss your situation, get in touch for a free consultation, or click here to get all our FREE guides for foreigners planning to renoveting, buy, sell or live in Italy.

Finally …

We understand that renting a property in Italy can be confusing and involves legal risks. If you plan to rent an Italian property, always seek legal advice beforehand.

With over 55 years of experience in Italian property law, at De Tullio Law Firm we are specialists in negotiating rental contracts, drafting bilingual versions tailored to your needs and facilitating communication between property owners and tenants. Additionally, we offer comprehensive support in managing legal obligations and effectively resolving disputes.

Moreover, if you are considering letting your Italian property, we offer comprehensive services to ensure a secure and smooth process.

If you need further clarification regarding property rental or letting, or wish to discuss your situation, please contact us for a free consultation. We are here to help.


You may also like to read about buy to rent in Italy.

The Italian Rent to Buy Scheme. Information And FAQ

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Introducing the Italian rent to buy scheme

In September 2014, the Italian parliament introduced measures to revitalise the property real estate sector. Measures include an Italian rent to buy scheme as part of the Sblocca Italia – Unlock Italy – decree (Article 23 of Legislative Decree 133/2014).

The Italian rent to buy scheme has two main aims. Firstly to help people purchase a property and secondly to support builders and developers sell property stock.

The Italian rent to buy scheme is similar to the UK model

It allows a promissory purchaser to immediately start living in a property as a tenant and provides the option to purchase the property at a later date.

As a tenant, the promissory purchaser pays a regular rent. In effect, this postpones the purchase of the property until a specified future date. Purchase should take place no more than 10 years from the start of the rent to buy contract. Rental payments reduce the overall property price.

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Decree 133/2014 addresses and resolves problems that stemmed from the lack of specific legislation in this domain. Notably, the decree provides for the legal transcription of a rent to buy contract in the land registry for the duration of the contract.

Essentially, the land registry transcription counts as a full and proper reservation of the purchase of the property. Consequently, the owner of the property cannot sell it to anyone else for the duration of the contract.

No mortgages or easements or any other prejudicial rights can be held on the property. Creditors of the property owner / vendor will neither be able to register a mortgage on the property, nor foreclose on it.

As soon as a rent to buy contract is in the land registry, this guarantees that the property is reserved for the promissory purchaser. Any other transcription or registration will be unenforceable against it.

Frequently asked questions about the Italian rent to buy scheme

What is a rent to buy contract?

The contract combines a rental contract and a preliminary contract of sale for a specific property. This means that from the outset of the contract, the owner/vendor gives the promissory purchaser the right to buy the property. The promissory purchaser is able to live, as a tenant, in the property and pays a regular rent. After a contractually agreed period of time, but not more than 10 years, the promissory purchaser may decide to buy the property. The owner must deduct rent paid during the term of the rent to buy contract.

Example: Consider the sale of a villa for €100,000. The monthly rent is €1,000 per calendar month. A part of this rental payment, €500, is the rent payment for living in the property, as if it were a normal rent. The remaining €500, counts toward the purchase of the property. In effect, this portion of the monthly rent constitutes a down payment on the sales price.  If the term of the rent to buy contract is 5 years and at that point, the promissory purchaser decides to buy the property, rather than pay €100,000, the promissory purchaser pays the outstanding EUR 70,000. This is because €30,000 has already been paid as part of the rent to buy scheme.

Is the promissory purchaser obliged to buy the property at the end of the rent to buy contract?

The law provides for an option to buy the property. However, there is no obligation. Obviously the parties may agree that the tenant must purchase, but that contract would not be subject to rent to buy legislation. It is merely a private arrangement.

How long does a rent to buy contract last?

The parties to the rent to buy contract establish the period within which the tenant may decide to buy the property. According to legislation,  this must be within 10 years from the start of the rent to buy contract.

What are the benefits of a rent to buy contract for property vendors?

The main advantage is the ability to find a larger number of potential buyers.

What are the risks of a rent to buy contract for property vendors?

There are a couple of risks. Firstly, a tenant may decide not to buy the property. In this case, however, the owner can retain part or all of the rent payments. These should be a sum greater than a normal rental income.

The other risk is that the tenant doesn’t abide by contractual terms, becomes insolvent or causes significant damage to the property. This may mean the property owner has to go to court to evict the promissory purchaser, regain possession of the and free the property from contractual obligations in order to sell it to others.

What does an eviction order entail in terms of time and cost?

The procedure is not strictly-speaking an eviction, but the release of a property. Generally, this is a much shorter and less costly process. Just how long the release of a property takes very much depends on individual courts.

In order to use a property release procedure, the rent to buy contract must contain legally compliant and watertight clauses. You should always seek independent legal advice in structuring the entire rent to buy contract. It is crucial to ensure that you cover everything.

Are there any measures in place to safeguard the owner /vendor?

It is imperative that the rent payments are higher than a normal rent contract. In the event that the sale does not conclude, the retainer payment that the property owner retains serves as compensation.

Commitment to retainer conditions also serves as an indication of the promissory purchaser’s commitment to conclude the transaction at term.

What protection does rent to buy provide for promissory purchasers?

The law provides for the transcription of an Italian rent to buy contract in the land registry. In the same way a deed of sale is managed. A notary – an official of the Italian State –  must oversee the rent to buy contractual process. The contract must be legally compliant. The transcription in the land registry guarantees that the promissory purchaser has agreed to buy a property free of mortgages, liens, foreclosures, or any other detrimental matters, which might arise following the transcription of the rent to buy contract. The land registry transcription is valid for a maximum term of 10 years.

This protection holds even if the property vendor / owner is declared bankrupt during the term of the rent to buy contract.

What type of property can be included in rent to buy contracts?

Rent to buy contracts are valid for any type of property. This includes apartments, houses, farms, garages, vineyards, shops, offices, factories, land.

Are rent to buy contracts also applicable to buildings under construction?

Yes. Rent to buy contracts are applicable to buildings under construction. For contractual purposes, any pre-existing mortgage on the construction must be repaid. If after careful consideration and having taken independent advice, the promissory purchaser wishes to assume a pre-existing mortgage, it is however possible to provide a clause to that effect.

For building and development companies, rent to buy contracts can represent an interesting way to finance mortgage payments for property construction.

Regarding rent to buy contracts for buildings under construction, does the promissory purchaser lose money if the builder or developer goes into administration?

No. The buy to rent contract continues even if the property vendor / owner is declared bankrupt. So long as there is a price agreement in the rent to buy contract and the property is the main residence of the promissory purchaser or close relatives, the owner / vendor’s insolvency will not impact the sale.

Can the promissory purchaser confer a power of attorney to sign the rent to buy contract?

Yes. Legislation provides the right to confer a power of attorney on a third party to sign the rent to buy contract, and the final deed of sale, where applicable, on the promissory purchaser’s behalf.

You should be extremely careful about who you chose for your power of attorney. You are delegating the management of your legal and financial affairs to someone else. Hence, it is extremely important that you entrust these matters to a reliable and competent person, preferably a professional. Appointing anyone who does not have enough experience or who has a vested interest is highly inadvisable.

What taxes are applicable with a rent to buy contract?

Tax depends on whether the owner / vendor of the property is a private individual or a company. Direct tax is chargeable to the owner / vendor and indirect tax is levied on the promissory purchaser.

As a rule of thumb, for the duration of the rent to buy contract, as with any Italain rent contract, tax related to the property ownership is borne by the vendor / owner.

The promissory purchaser pays costs pertaining to the transcription of the contract in the land registry. And, where applicable, the promissory purchaser is liable for any subsequent costs, expenses and tax liabilities and/or costs associated with completion of the property sale.

For tax calculation purposes, each rent to buy contract requires case by case assessment regarding advantages and/or disadvantages. This is another reason to involve an independent professional from the outset when considering a rent to buy scheme in Italy.

Finally …

If you do not find your question relating to the Italian rent to buy scheme here, please contact us and we will be happy to answer it for you.

At De Tullio Law Firm, we specialise in Italian and cross border legal matters. If you are buying any type of property anywhere in Italy and you need advice or you would like to discuss your purchase, please get in touch with us. We are here to help.

For more comprehensive information about the Italian property purchasing process, you might like to read our guide. You may also like to watch our info videos about Italian property law.

Rent-Free Property Agreement: an Overview

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A rent-free agreement is not for financial gain

Italian law defines a rent-free property agreement as a party lending an item they own to a borrower. The borrower may use the item for a given period of time or for a specific reason. The borrower then has the obligation to return the item to the lender. As the name implies, a rent-free agreement is not for financial gain.

Italian law does not restrict a rent-free agreements to property. Third parties might borrow all sorts of items.

For example, if you loan your a car or some gardening equipment to someone, this constitutes a rent-free property agreement. In general, it is not necessary for the agreement between the parties to be in writing. An oral agreement is legally valid.

Validity of rent-free property agreements

One of the most common examples of a rent-free property agreement pertains to a parent allowing a child to live for free in a property. And, as far as homes or properties are concerned, this type of agreement must be registered with the Italian tax authorities.

With respect to registered agreements, the 2016 Law of Stability has introduced a tax benefit. This takes the form of a 50% discount on IMU. However, the agreement is subject to three conditions. Firstly, the property must be the main residence of the occupier benefitting from the rent-free agreement. Secondly, there must be first degree kinship relationship between the parties of the contract (typically parents and children). Thirdly, the property owner can own only one additional property. The rent-free property and the other property must be in the same comune.

Other types of property rent agreements in Italy

A word about two other types of property rental agreements in Italy.

A free market agreement (contratto a libero mercato) allows the tenant and landlord to agree financial terms and conditions between themselves. This kind of rent agreement is valid for four years and renewable for an additional four-year period.

Then there is a convention agreement (contratto convenzionato). This is valid for three-year contract and has a two-year renewal option. However, the initial period can be increased to five years without a renewal option.

Finally …

We recognise that letting a property in Italy can be confusing and there are legal risks of allowing somebody into your property without an agreement. If you are planning to let an Italian property, you should always seek legal advice beforehand. we can draft a bi-lingual rental agreement for you. Likewise, if you are planning to have your land managed, you need to protect your rights.

De Tullio Law Firm has over 55 years experience of cross border and Italian property law.  We can negotiate appropriate rental agreements to meet your needs. We can also liaise between property owners and tenants. If you would like further clarifications regarding property rental, or want to discuss your situation, please contact us for a free consultation. We are here to help. 


You may also like to read about buy to rent in Italy.