Rent-Free Property Agreement: an Overview
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.
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.