– Avv. Gabriella Crosariol e Avv. Mario Dusi.
The tenant does not have an automatic right to receive improvement allowance in Italy, if he did not agree on it in advance with the landlord. According to Art. 1592 of the Ital. civil law, at the end of the lease contract, the landlord must possibly pay out as compensation the lower sum of the costs and the value of the useful improvements (at the time of returning the premise). However, this only applies if the landlord agreed in advance with the tenant on such improvements.
When the landlord agrees to contribute to the costs of the tenant improvements, the landlord usually grants the tenant a temporary reduction of the rent (e.g. free-rent for one or more months).
This occurs especially with new leases, when the landlord is willing to accommodate and support the tenant to improve the premise with finishes or renovation works (for instance rebuilding the space with a design, finishes and improvements that benefit the tenant’s purpose of renting the space).
The tenant therefore has no automatic right of compensation for the improvements made to the rented premises.
Furthermore (according to Art 1592 Italian Civil Code) the improvements made by the tenant can be compensated with the possible damages to the rented premises if such damages were caused without gross negligence by the tenant.
On the other hand, according to the recent case law of the Italian Supreme Court of 23rd September 2022 N. 27932, if the tenant caused damages or made unauthorised improvements to the rented premises, the landlord may lawfully reject the rented premise until it is restored by the tenant: in the meantime, the tenant remains obliged to pay for the rent (even if he no longer uses the rented premises)!
Our recommendation: If the tenant intends to request and claim a contribution from the landlord for improvements on the premise, a general approval of the landlord is not sufficient; the tenant must also have informed the landlord on the exact planned costs of the improvements and have reached a specific and detailed agreement in advance on a possible “Tenant Improvement Allowance” (contribution to the tenant improvement costs).
In this way possible legal disputes can be avoided.
We also recommend that the landlord stipulates in the lease agreement that all modifications to the lease premises (including possible improvements) must be agreed in advance between the parties.
We advise international Clients on real estate law, including tenancy agreements, and recommend our Clients to contact us before negotiating a contract, in order to avoid possible future disputes.