4+4 and 3+2 leases in Italy explained

The 4+4 contract: free rent, long term

Article 2, paragraph 1 of Law 431/1998 lets the parties sign a residential lease of “no less than four years”, after which it is renewed for a further four-year period. The rent is not capped: the parties set it, and any indexation clause is a matter of the contract (see the guide on cedolare secca for the effect of the flat-tax option on indexation).

The landlord’s freedom to end the contract is narrow. At the first expiry (after four years) he may refuse renewal only on one of the grounds listed in art. 3 of the same law, with at least six months’ notice. The grounds are, in summary:

• the landlord wants to use the home for himself, his spouse, parents, children or relatives up to the second degree (for residential, commercial, craft or professional use);
• a landlord that is a legal person or a public or non-profit body wants the property for its institutional activity and offers the tenant another suitable property;
• the tenant has a free and suitable home in the same municipality;
• the building is seriously damaged and must be rebuilt or secured, and the tenant’s presence blocks the works;
• the building will be fully renovated, demolished or radically transformed (or, on the top floor, extended upwards), and vacating is technically indispensable;
• the tenant does not occupy the home continuously without good reason;
• the landlord wants to sell to a third party and owns no other residential property apart from the one he may live in; the tenant then has a right of pre-emption (prelazione).

The notice must state the ground, “on pain of nullity” (art. 3, para. 2). If the landlord regains possession through an unlawful notice, he owes the tenant compensation of not less than 36 months of the last rent (art. 3, para. 3). If he regains the home and does not use it for the stated purpose within 12 months, the tenant may ask for the lease to be reinstated on the same terms or take the same compensation (art. 3, para. 5).

At the second expiry (after eight years) either side may start a procedure for renewal on new terms or for non-renewal, by registered letter (raccomandata) sent at least six months before expiry. The other party must answer by registered letter within 60 days. If there is no answer or no agreement, the contract ends on the expiry date. If nobody sends the notice, the contract is renewed tacitly on the same terms.

The 3+2 contract: agreed rent

Article 2, paragraph 3 allows an alternative: rent, duration and other terms are fixed “on the basis of” local agreements between organisations of property owners and of tenants. Municipalities convene those organisations, and the agreements are filed with each municipality in the area. Under paragraph 5 such a contract may not last less than three years. At the first expiry, if the parties do not agree on renewal, the contract is extended by right for two years, except where the landlord uses the grounds of art. 3 (own use, works, sale). At the end of the two-year extension, each party may start the renewal or non-renewal procedure by registered letter at least six months before expiry. A 2019 interpretive provision (D.L. 34/2019, art. 19-bis) adds that, absent that communication, the contract is renewed tacitly at each expiry for a further two years.

The 2017 ministerial decree sets the national criteria for these local agreements. It requires the agreed contract form to be used (the form approved under art. 4-bis of the law) for the tax advantages to apply, and it provides for a joint negotiation and conciliation commission that can certify that a contract matches the local agreement.

Why choose one or the other

The practical difference is the rent ceiling against the tax saving. On a 3+2 contract the landlord accepts a rent within the local agreement, and in return the Agenzia delle Entrate describes a flat-tax rate of 10% instead of 21% for agreed-rent contracts in the municipalities with housing shortages it lists (Bari, Bologna, Catania, Firenze, Genova, Milano, Napoli, Palermo, Roma, Torino and Venezia, their neighbouring municipalities, the other provincial capitals, and the high-tension municipalities identified by the CIPE). Whether your municipality has a local agreement in force, and what rent band applies to a given zone and size, is something to ask the municipality or the organisations that signed it: it is not set nationally.

What it does not cover

Article 1 excludes some properties from arts. 2, 3, 4, 4-bis, 7, 8 and 13: homes of historic or artistic interest and those in cadastral categories A/1, A/8 and A/9 are governed by the Civil Code rules unless the contract follows the agreed-rent model; public housing has its own rules; and homes let exclusively for tourist purposes are outside the law (see short-term rentals). Contracts for temporary needs and for students have their own regime: see transitional and student leases.

Nullity and registration

Article 13 makes void any term that sets a rent higher than the one in the written, registered contract, and any term derogating from the legal duration limits. For agreed-rent contracts, a rent above the local maximum is void too. The landlord must register the contract within 30 days and tell the tenant and the condominium administrator within the following 60 days. A tenant who has overpaid may sue for the excess within six months of returning the property. See registering a rental contract.

Which professional to consult

A landlord choosing between the two forms normally compares them with an owners’ association, a real estate agent who handles lettings, or a tax adviser. A tenant can use the tenants’ organisations named in art. 2, paragraph 2 for assistance. Payotte lists no individual and recommends no one.