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The Preliminary Lease Agreement

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Don’t be frightened or confused by the name – the preliminary lease is simply a type of lease; which two parties create to oblige themselves to enter into a lease in the future.

At this point, you may already be wondering what is the point of concluding a contract today that commits the parties to concluding a contract tomorrow, in a week or a month. Wouldn’t it be better to sign the lease immediately? Well, there is a sense!

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What is the Preliminary Lease Agreement for?

You are the owner of a property and have been looking to rent your apartment for a few months. So far you have met several people who have visited the apartment showing some interest. Some even promised you they wanted to rent it… but then they disappeared into thin air! Meanwhile, you continue to wait, while your apartment remains vacant.

In this case, and in others like it, how can you be sure that the person in front of you has serious intentions? It’s simple: you can ask the potential tenant to enter into a preliminary lease agreement. By accepting this type of contract, the person undertakes in fact to enter into a real rental contract in the future.

Who can stipulate the preliminary lease agreement?

The preliminary lease contract can be requested and stipulated both by the owner of a property and by the future tenant. In fact, the advantages of this type of contract do not concern only the owners of a property.

Unfortunately, the cases in which a potential landlord promises to rent the apartment, then think again, find another tenant, or simply disappear, also happen to those who are looking for an apartment. The preliminary lease agreement protects both the future landlord and the tenant equally.

How to stipulate the preliminary lease?

The first rule to remember is that the preliminary contract is void if it does not have the same form that the law prescribes for the final contract. Therefore:

  • in the first place, the preliminary lease agreement must always be in writing:
    do not trust those who offer you preliminary contracts “verbally”, who swear by their honor, or rely on a simple handshake. The preliminary lease produces legal effects, since in the event of default you can claim compensation for damages. Promises and reputations, handshakes and oaths have no effect;
  • secondly, the preliminary lease agreement must have the same form that the law prescribes for the definitive agreement:
    there are various types of lease agreements. Some contracts can be drawn up in a more or less free form. While for other contracts – especially rental contracts with agreed rates – there are models, and the use of the models prepared by the Ministry of Infrastructure and Transport is mandatory.

To enter into the preliminary contract, therefore, you will stick to the final version of the lease.

…But why?

Because when the prospective tenant promises you that he really wants to rent your apartment, it means that there is a common will between you two. It is also understood that you have reached an agreement regarding the duration of the contract, the amount of the annual fee, the payment of the deposit, etc. It is necessary to put all this information in black and white. And in a certain sense it is also natural: those who really intend to conclude a lease as soon as possible will not hesitate to sign the preliminary contract.

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What Happens if the Potential Driver Pulls Back?

In these cases, in addition to protecting yourself by entering into a contract, you are protected from the risk of damage by means of a deposit.

The preliminary lease contract provides for two different types of deposit:

  • the confirmatory deposit
  • the penitential deposit

The deposit is paid by whoever undertakes to stipulate the future lease contract. So, if the proposal to stipulate a preliminary came from the potential tenant, the tenant is the person who will have to pay the deposit, and vice versa. If the tenant renounces to enter into the contract, because perhaps he has found a better apartment at a lower rent, the landlord will be able to keep the deposit.

The penitential deposit is a different type of deposit. This is a deposit that can be provided for in the preliminary lease only if there is a clause in the preliminary contract that obliges the parties to renounce the termination of the contract. Therefore, if the tenant renounces the stipulation of the definitive lease, he loses the penalty. If, on the other hand, he signs the final contract, you will have to return the deposit to him.

Is it necessary to indicate the deadline for signing the lease agreement?

In principle no. No preliminary contract, by law, must contain this clause. However, it is possible to indicate the maximum deadline for signing a lease contract, in order to possibly reduce potential risks.

Read More: PropertyNews

 

In any case, it is understood that whoever signs a preliminary lease intends to use the apartment, or even the commercial space, within a reasonable time.

Is it necessary to register the Preliminary Lease Agreement?

Perhaps, you have heard from many parties that you have to register the preliminary lease, that the registration must be done within 20 days, and that you will also have to pay a registration tax of 200 Euros, as well as having to buy various stamps, etc.

It is not so!

On January 27, 2017, with Sentence no. 2037, the Civil Court of Cassation established that registration is mandatory only for the final lease, not for the preliminary lease.

It is true that Presidential Decree no. 131 of 1986 – which you can find here – provides for registration for all types of preliminary contract. However, the Court of Cassation has given a different interpretation of Article 1 of Law no. 311 of 2004. Let’s see what the article says:

“Lease agreements, or which in any case constitute real rights of enjoyment, of real estate units or portions thereof, however stipulated, are void if, under the conditions, they are not registered.”

According to the Court of Cassation, the words “lease agreements” indicate only definitive contracts, and not even preliminary contracts. Why? The stipulation of a preliminary contract contains only the promise to enjoy the use of a property, but does not allow the actual availability of the property. When you sign a lease agreement, you are not given the keys to the apartment if you are a tenant. You do not start receiving the rent if you are the owner of the property.

These effects are produced only by the signing of the final contract. Furthermore, Article 1 was created to contain tax avoidance. It is obvious that you will begin to receive the rent only after having concluded the definitive contract. Therefore, for the purposes of preventing tax avoidance, the registration of the preliminary contract is not necessary.

The advantages

In summary, the preliminary lease agreement;

  • produces benefits for both the tenant and the lessor, as it reduces the risks for both parties;
  • it must always be stipulated in writing, following the format and contents of the final contract;
  • it may contain a clause indicating the timing of the stipulation of the definitive contract;
  • it is not subject to the registration obligation, nor to the payment of any tax.

 

Source: Businessworld

 

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