Consequences of the Coronavirus pandemic with regard to the Italian Commercial Tenancy Law
The introduction of measures to contain the COVID-19 outbreak has led to the forced closure of shops and cessation of business for many retailers: What are the consequences for the rent of the premises used for this purpose?
In view of the fact that the Decree-Law “Cura Italia” only provided for a tax credit of 60% of the rent for properties in cadastral category C1, which only refers to the month of March 2020, one wonders whether solutions such as the suspension or reduction of rents are possible, given that, on the basis of proven economic difficulties, it is considered that, pursuant to Article 27 of Law No 392/78 , serious grounds can be invoked which, under Article 1467 of the Italian Civil Code, may lead to the termination of the contract (with 6 months’ notice).
When looking for a legal hook that could entitle retailers to suspend rent payments until the health emergency can be considered over, it is important to bear in mind that Articles 1256 and 1258 of the Italian Civil Code must be examined.
According to art. 1256 of the Italian Civil Code, in case of temporary impossibility to fulfill his obligation for a reason beyond the debtor's control, the debtor is not responsible for the delay in performance. If we apply the provision of the article in question to the period in which we live, the prohibition on carrying out commercial activities will lead to the impossibility for the tenant to use the property and thus carry out the activity that would have provided him with the income necessary to fulfill his obligation (rent), with the consequence that he will be insolvent at least for the entire period for which the health emergency will last. In application of this provision, the tenant is not responsible for the delay in performance. However, this is a postponement of the obligation and not a cancellation: from the moment the impossibility no longer exists, the tenant is obliged to pay the rent not previously paid.
Otherwise, pursuant to art. 1258 of the Italian Civil Code, in the event of partial impossibility of performance, the debtor is released from the obligation by performing the performance for the part that has remained possible. Therefore, when applying the provision under review, the lessee must always continue to pay the rent for the part that is still possible. Apart from the difficulty of determining which part is also involved in this case, since the partial impossibility is not final, the property will be fully usable again once the emergency situation has ended.
In summary, it seems possible to us at the moment to exclude the possibility that the tenant may lawfully and automatically suspend payment of the rent on his own initiative, while it seems advisable to reach an agreement with the landlord on the basis of articles 1256 and 1258 of the Italian Civil Code, at least until the crisis persists, to postpone or reduce the payment.
If you have any further questions, we will be happy to advise and support you.