In reality, an increase in the rent does not lead to creating a new contract.
What does it mean, and why should you ask for a “novation” of the current real estate property rental contract?
The most common context in which a claim of “novation” of a rental contract can be observed is the procedural one.
Here, the landlord brings a legal action to obtain “validation of the license (or eviction) for termination of tenancy.”
The tenant, however, is most interested in the judge’s pronouncement of novation.
The reason is that with the pronouncement of novation of the contract, there would be a sort of renewal ordered by the Judicial Authority.
An immediate advantage is achieved for the tenant who would find himself enjoying a new contract.
Thus, the consequences of his arrears would be “dribbled,” referring to the date of the new contract and not to that of the initial contract.
In the event of a novation agreement, the reference date is the one on which the novation agreement was finalized.
Unquestionably, we are talking about a transaction of a consensual nature and with corresponding legal performances.
Likewise, it produces an extinguishing effect of the previous obligatory relationship and a constitutive one of the new one.
However, there is no shortage of those who think the “novative” agreement does not have the specific extinguishing and constitutive functions mentioned above.
Novation, for this last orientation of thought, results from different and incompatible agreements and is a way of extinguishing obligations other than consideration.
The orientation of jurisprudence still tends to deny the existence of the novation requirements, even if the contractual parties have made changes.
Mainly, this principle applies to the rent amount and the contract duration.
Urban properties for use other than residential.
Italian Law No. 392 of 1978 on leasing urban properties for use other than residential comes into consideration.
Article 79 provides for the nullity of any agreement that provides for the rent increase in favor of the lessor.
The only exceptions the Italian legislator makes are in Articles 67 and 68 of the Law of 27 July 1998, No. 392. They are concerning rental contracts already in progress when the Law, as mentioned earlier, came into force.
Even for these cases regulated by an ad hoc rule, the Italian High Court of Appeals has decided as follows.
It is impossible to speak of the ongoing rental novation if the other fundamental components of the contract remain unchanged.
The parties and the object, i.e., the leased property, are deemed the contract’s essential components by Sentence No. 753 of 1991.
Urban properties for residential use.
The same prohibition was provided for the Law regarding renting urban properties for residential use before Italian Law No. 431 of 1998 entered into force. Still, it is now the opposite.
Article 14 of the Law, as mentioned earlier, prevents clauses forbidding the increase in the monthly rent for urban properties for residential use.
Only the agreements to increase the rent in written and registered contracts remain in force.
For a novation of the rental contract to occur, however, an unmistakable parties’ desire to give rise to “a new stipulation” is required.
Also, a “new contractual motive” must be understood as a common interest of the parties to an effect new should arise.
The simple agreement or contract clause change cannot determine the novation effect. For example, when the payment method or the fee amount is changed,
Based on this conclusion, the Italian High Court of Appeals’ decision has a relatively consolidated orientation.
In the final analysis, the examination must involve the requirements to recognize the novation of the ongoing rental contract of a property.
What does the Italian Legal System provide about the “novation” of a real estate property rental contract?
On this occasion, the combined provisions of Articles 1230 and 1231 of the Italian Civil Code allow us to understand what “objective novation” means in the contract.
According to the Law, it is that event that occurs during the contractual relationship that determines the change in the object or title of the service.
Under those circumstances, “objective novation” is a “non-satisfactory” way of extinguishing the obligation.
This technical definition indicates that the original credit is not satisfied.
Still, a new relationship is created that provides for the satisfaction of the credit in another way or another reason.
For example, in Latin words, you are giving something “datio in solutum,” or extinction by compensation, not by consideration (or final payment).
Therefore, pure accessory modifications in the contractual scheme do not determine novation.
If a dispute arose and the case ended on the Court’s table, it would establish whether the abovementioned requirements apply to the specific case.
More precisely, the necessary elements provided for by Article 1230 of the Italian Civil Code and to be proven in Court may look enumerated with some Latin expressions:
For one thing, “aliquid novi,” which occurs when the object or title of the obligation changes, as mentioned above;
Secondly, “animus novandi” occurs when there is an unequivocal, even if implicit, will to extinguish the obligation stipulated in the contract and define a new one:
- It must be affirmed in Court since it is not presumed, but once deduced, it can also be inferred from the conclusive facts of the parties;
Thirdly, “obbligatio novanda” represents the obligation to be replaced, in the absence of which the novation has no effect by express provision of Article 1234 of the Italian Civil Code;
In the fourth place, “causa novandi” is seen in the common interest of the parties in achieving a “novative” effect:
- Thus, it must be revealed unequivocally, meaning that it can also manifest in the obligations of the new agreement incompatibility with the cause of the old contract (according to some, incompatible with its economic-social function).
- Equally important, making its coexistence impossible in the case of objective novation. Unless the parties expressly state their intention to extinguish the previous contract.
Given the dictates of the rules, what do the interpretations of the rules tell us about the “novation” of a real estate property rental contract?
In truth, the above requirements are verified at the outcome of a civil trial investigation, and the judge’s assessment must be logically and correctly motivated. But this is still a discretionary assessment.
Without prejudice to the above parameters. Ultimately, the “novative effect” is considered to exist even lacking an open manifestation of the “animus novandi.”
In the latter case, only to the extent that the overall content of the agreements appears incompatible with the preserving intent of the previous transaction.
For example, in a case, in addition to the rent and its duration change, one contracting party has also changed:
The jurisprudence has been led to recognize the generative effectiveness of the agreements that have arisen reform this time.
In the opposite case, in which the supervening obligations are compatible with those of the previous mandatory constraint:
To rephrase it, the latter allows the survival of the former, and the parties’ intent to have two different contractual links would be taken for granted.
An interpretative evaluation of the real estate rental contract is necessary when the Law is insufficient!
Without a doubt, interpretative work is essential to the extent that it establishes what the landlord and the tenant intended to agree on as long as the new agreement is not wholly incompatible with the previous one.
A reference parameter can undoubtedly be found in Article 1231 of the Italian Civil Code.
This is to say that the above Law provides a series of cases for which we cannot speak of novation: merely accessory changes to the contractual form.
On a practical level, therefore, if the change in the object or motive of the obligation is not such as to suggest the presence of:
- the objective element of the “aliquid novi“;
- or if its validity is controversial,
there will not be a “novation of the contract.”
To put it another way, the change in the “will against maintaining the old transaction” must occur unequivocally to allow the novation recognition.
That way only, provided that it’s happened in the subjective element of the “animus novandi” background.
FORMULARY FOR ITALIAN REAL ESTATE RENTAL CONTRACT FORMS.
Some examples of rental agreements are available in templates that can be used to draft a rental agreement for urban and non-urban properties and can be unlocked through the following links.
RENTAL AGREEMENT OF A PROPERTY FOR RESIDENTIAL USE BETWEEN INDIVIDUALS.
Click on the link below to download the template in Italian:
RENTAL AGREEMENT WITH SUBLEASE CLAUSE OF A PROPERTY FOR OFFICE USE BETWEEN BUSINESSES.
Click on the link below to download the template:
RENTAL AGREEMENT FOR A PROPERTY FOR COMMERCIAL USE WITH A RENT REDUCTION CLAUSE FOR IMPROVEMENTS BETWEEN A COMPANY AND AN INDIVIDUAL.
Click on the link below to download the template in Italian:
“Italynlaw” Law Firm issued this Article.
Image 17: Ostuni – Old town (BR, Italy).
Source: “Italynlaw” Law Firm. September 2023.