Emphyteusis is a type of leasehold arrangement
The closest Common Law legal term to Emphyteusis is a leasehold.
The landlord retains the ownership of property. However, a tenant has the right to use it for a contractually agreed period of time. In this type of leasehold or Emphyteutical arrangement, the tenant must both maintain and improve the property.
Leasehold or Emphyteusis is a contractual arrangement which has its roots in Roman Law. It formed part of the feudal system and has connections to the agricultural economy. Farmers had the possibility to cultivate land thereby sustaining themselves. In return, farmers paid an annual ground rent or canon in money and or in kind.
Italian leasehold or Emphyteusis arrangements are applicable to all types of physical assets
Contractual arrangements exist between two parties. On the one hand, the Dominium Directum, the freehold owner the (dominus) or landlord of the property. And, on the other hand, the Dominium Utile – the tenant (emphyteuta) who has the right to use property on a leasehold basis.
Emphyteusis is applicable to both land and buildings, including villas and apartments.
For the duration of an Emphyteusis contract, where land is involved, the tenant has the right to alter the surface of the land. This includes ploughing up pastures to cultivate a crop or plant trees.
Where the arrangement concerns buildings, a tenant may alter these. However, alterations must not cause any deterioration of the building. Therefore, if the tenant wishes to build an extension or add to existing structures, the tenant may do so.
The contract between the ‘landlord’ and the ‘tenant’ must be in writing. Rent payments are recurring and the duty to pay rent only ceases if the estate is destroyed. Destruction may either be due to human causes such as a fire or through natural events for example, an earthquake.
Duration and obligations of leasehold or Emphyteusis contracts
Emphyteusis can be in perpetuity or limited to a minimum of 20 years. In either case, entitlements are the same.
In other words, a tenant may sublet the property, receive compensation for improvements made and even retain the property until full payment of his credit is rightfully received. These things, as well as those previously mentioned, do not require the consent of the landlord.
If the Emphyteusis has a duration of 20 years, the tenant cannot contractually transfer rights to another party. The right of pre-emption does not apply to the tenant in the same way it does to farmers. This means that the tenant in a leasehold or Empyteutical contract arrangement does not have right of first refusal to purchase land.
The tenant has a very broad right to dispose of the property held under perpetual Emphyteusis. Thus a tenant may dispose of the emphyteutical property by means of a deed in compliance with Italian Civil Code. This can either be an act inter vivos, i.e. made during the tenant’s lifetime, or causa mortis, i.e. after death. In the event of death, disposal is by means of a will.
Redemption of leasehold or Emphyteusis contracts
A tenant can acquire full ownership of Emphyteutical property through the payment of a price corresponding to fifteen times the annual rent. A tenant can make use of this redemption right at any time.
This redemption right prevails as an equivalent right accorded to the landlord in case of breach of contract by the tenant, known as the “devolution” (devoluzione).
Redemption may be settled either out of court, by means of an agreement between the landlord and tenant. A notarised deed must reflect the settlement. Where the landlord and tenant cannot reach agreement, the dispute can be settled in court.
Check the title deeds of an Italian property before you buy
A tenant must increase the productivity, the usefulness or the value of the estate, rural or urban. This obligation lasts for the duration of the term of Emphyteusis and must be in writing. Annual rents to the landlord are payable annually.
The landlord has the right to request the end of the Emphyteusis due to a breach of contract by the tenant. The landlord must refund any improvements the tenant has made. Payments should be proportional to the increase of value of the estate when it returns to the landlord.
Acquiring, redeeming or disposing of property subject to leasehold or Emphyteusis arrangements can present challenges. Other types of leasehold arrangements also exist in Italian law. It is advisable that you contact an Italian lawyer to ensure you understand all the implications of such arrangements.
If you are looking at a real estate investment in Italy, why not talk to us? De Tullio Law Firm can advise and guide you throughout your Italian property purchasing journey. We have over 55 years of experience working with clients on their Italian and cross border property, family and inheritance matters. We are here to help. Get in touch with us.