1) What it is and to whom it may concern.

The so-called "Rent to buy" is a contract introduced into our legal system in 2014 by Decree-Law 133/2014, converted into Law 164/2014, with the intention of obviating the difficulties in the real estate market, caused both by the lack of liquidity and the difficulty of obtaining a mortgage for those who intend to purchase a property.
Said contract can be entered into not only for real estate, but also for agricultural or building land, as well as for buildings not yet completed.

With the institution of "Rent to buy", the tenant/buyer can pay the price of the property in installments, up to a maximum of 10 years, with the advantage of being able to obtain the immediate availability of the asset. Thus, the enjoyment of the asset is not an end in itself, as is the case with renting, but aimed at the future purchase and sale of the property.

The owner, on the other hand, will receive an economic benefit, represented by the payment of periodic rent by the tenant/buyer, until the final deed of sale/purchase is finalized.

2) How is a rent to buy contract structured?

We must clearly distinguish the two phases into which the institution is divided:

• granting the use of the property as a result of entering into the contract .. The grantor has the burden of handing it over to the tenant who, in turn, is obliged to pay him the agreed rent, including both the share allocated to the use and the share to be charged to the purchase price;
  
• the transfer of ownership of the property (only eventual) from the grantor to the tenant. In fact, there is no mutual obligation of the parties to conclude the deed of sale. The tenant, upon expiration of the agreed term, is free to decide whether or not to proceed with the purchase of the asset. Should he so decide, the lessor is obligated to proceed with the sale of the same. Should he refuse, the grantor is obliged to pay the tenant the portion of the fees charged to the sale consideration, plus legal interest and any compensation for the damage suffered.

Thus, in the contract of "rent to buy" the two different components that determine the rent to be paid must be well spelled out:

• payment for use(remuneration of enjoyment) and
  
• price, in case the tenant decides to exercise his right to purchase.
  

In the event that, for either of the two components, a merely symbolic amount is indicated in the contract, the contract will have to be considered null and void, so it will not unfold its effects between the parties.
The tenant may also pay the agreed rents by taking over any loan taken out by the lessor. In this specific circumstance, the parties will have to regulate in the contract how the mortgage fees will be charged.

3) Can we consider this a legal institution that guarantees all parties involved?

The lack of certainty about the actual transfer of the property at the contractual maturity is a risk that is balanced by the possibility of obtaining a generally higher amount of rent than in a simple lease, as it already includes a part of the price of the future sale, with the possibility of providing that a part of this component-price be retained by the owner even in case of failure to exercise the right to purchase (and therefore failure to conclude the sale).

Indeed, if the tenant decides not to purchase the property, upon the expiration of the term, the contract will cease to have any effect and the grantor will be entitled to the redelivery of the property retaining the entire component of the rents attributable to the use, while the tenant will be entitled to the return of the percentage of the component of the rents attributable to the sale price, including interest, as stated in the contract.

It is therefore essential that the consequences of non-purchase by the tenant be carefully and clearly regulated, and that the proportion of the rents to be returned by the lessor in the event of non-purchase, together with interest, be precisely defined.

In addition, the contract may be transcribed pursuant to Art. 2645 bis of the Civil Code.
In this way, full protection is guaranteed to the tenant, allowing him to acquire the property in the state of law in which it was at the time of entering into the Rent to Buy and neutralizing, at the same time, any prejudicial transcriptions or registrations subsequent to the transcription of the contract.

4) Obligations of the grantor and the tenant.

The regulations governing the rights and obligations of the grantor and the tenant recall the regulations on usufruct.

The tenant, before taking over the property, must take inventory, especially if the property is granted furnished.
The tenant must also give suitable security.

It is up to the parties to identify in the contract, the type of guarantee to be given, for example, a guarantee similar to that provided for the lease, or a deposit established by the tenant with the lessor, not exceeding three months' rent (to be calculated with regard only to the portion attributable to the payment of the use).

5) On the division of expenses and powers

The tenant shall be responsible for the expenses and charges relating to the custody, administration and routine maintenance of the real estate and its condominium parts. Extraordinary repairs caused by the tenant's failure to perform its obligations of ordinary maintenance shall also be borne by the tenant.

On the other hand, extraordinary repairs of the real estate, and of the condominium parts thereof, shall be borne by the lessor if the real estate is located in an apartment building. If the grantor refuses to carry out the repairs at his expense or delays their execution without due cause, the tenant is entitled to have them carried out at his own expense. The expenses must be reimbursed at the end of the relationship without, however, having to pay interest. The tenant, before proceeding to carry out extraordinary repairs, must notify the grantor, thus legitimizing his substitute action. The costs of disputes, which concern both property and rent, are borne by the grantor and the tenant in proportion to their respective interests.

In condominium meetings, voting rights are allocated as follows:

• accrues to the tenant, on agendas relating to the ordinary administration and the mere enjoyment of the common things and services;
  
• accrues instead to the grantor in other deliberations, unless the tenant intends to carry out extraordinary repairs; in this case the notice of convocation must be communicated to both.
  

The law firm of Attorney Benedetta De Paola offers its assistance and advice in the drafting of "Rent to Buy" contracts, implementing it based on the concrete interests of its clients.

Contact De Paola Law Firm for personalized advice on your contract.