The free loan for use is a very common type of contract in Italy, especially as regards the granting of real estate such as houses or land. In this article, you will find all the information you need to understand what the free loan for use is, how it works, what the obligations and rights of the parties involved are, and how to properly stipulate and manage this type of contract.
What is the free loan for use
The free loan for use, according to article 1803 of the Civil Code, is defined as a typical contract of the Italian legal system where “one party delivers a movable or immovable thing to the other, so that they can use it for a time or for a specific use, with the obligation to return the same thing received”.
It follows that a given subject has the right to use a movable or immovable property, without paying any consideration.
Characteristics of the Free Loan for Use
- It is an essentially free contract, as established by art. 1803 of the Civil Code;
- It concerns both movable and immovable property;
- Anticipates a specific term or use;
- It imposes the obligation to return the goods received.
Form of the Free Loan Agreement
As regards the form of the free loan agreement, the report is not required. In fact, even in the case of a real estate loan – the duration of which exceeds nine years – it is not necessary for the contract to be drawn up in writing, the form usually remains free, unless one falls within the cases indicated by article 1350 of the civil code (which indicates the “Agreements that must be made in writing”).
However, it is advisable to draw up a written contract, as the signature of this is binding for both parties. To register it, this must then be presented to the Revenue Agency, also to obtain a certain date, which is important for evidentiary purposes.
Example of a Free Loan Agreement
A common hypothesis of gratuitous loan for use concerns the granting of a home by a parent to their child. In this case, the parent (bailer) grants the child (leaser) the use of the property for an established period of time or for a specific use, without asking for any payment in return. At the end of the agreed period or use, the child is required to return the property in the same condition in which it was received.
Duration of the Free Loan Agreement
The duration of the free loan agreement can be determined or indefinite, depending on the needs of the parties involved.
Fixed term loan
In the case of a fixed-term loan, the asset is granted for a specific period of time, agreed between the parties. At the end of this period, the borrower is required to return the asset in the same condition in which he received it.
Permanent Loan (Precarious)
If a precise term is not established in the contract, the so-called “precarious loan” is configured, pursuant to art. 1810 of the Civil Code. In this case, the borrower is required to return the property as soon as the lender requests it. The bailer therefore has the right to request the return of the property at any time, without having to provide any notice.
Obligations and Rights of the Parties Involved
The free loan for use entails a series of obligations and rights for both the lender (owner) and the borrower (user).
Obligations of the Borrower
The borrower mainly has the following obligations:
- Safeguard and conserve the property with the diligence of a good father of a family, as established by art. 1804 of the Civil Code;
- Use the asset only for the use determined by the contract or by the nature of the thing;
- Return the goods in the same conditions in which you received them, except for normal wear and tear due to use;
- Do not grant third parties the enjoyment of the property without the consent of the lender.
Rights of the Borrower
The borrower has the right to:
- Use the asset free of charge for the time or for the specific use;
- Request compensation for damages suffered due to defects in the property, if the lender was aware of them and did not warn the borrower (art. 1812 of the Civil Code).
Obligations of the Bailor
The bailer mainly has the obligations of:
- Deliver the goods in the conditions necessary for the agreed use;
- Compensate the borrower for any damage caused by the property, if he was aware of it and did not warn the borrower (art. 1812 of the Civil Code).
Rights of the Bailor
The landlord has the right to:
- Request the return of the goods at the end of the agreed period or use, or in the event of non-fulfillment of the obligations of the borrower;
- Possibly request compensation for damages if the borrower does not return the goods in the same conditions in which he received them, except for normal wear and tear due to use.
Taxation and Tax Benefits
IMU and TARI in the free loan for use
In the case of a free loan for the use of properties, the responsibility for paying the IMU (Unified Municipal Tax) lies with the owner of the property, while the payment of the TARI (Tax on Waste) falls to the borrower, as the user of the property .
The 2016 stability law (article 1, paragraph 10, of law 208/2015) provides that the tax base for IMU/TASI purposes can be reduced by 50% for real estate units (with the exception of those classified in the cadastral categories A/1 , A/8 and A/9) granted on loan by the taxable person to relatives in direct line, within the first degree, who use them as their main residence. In order to take advantage of this discount, it is necessary to register the loan agreement.
Registration of the Free Loan Agreement
Registration of the free loan agreement is mandatory for real estate and optional for movable property. In the case of real estate, registration must take place within 20 days of signing the contract, at the Revenue Agency, using form 69. The registration costs are borne by the borrower and amount to 200 euros for the registration tax, plus 16 euros for every 4 pages of the contract or for every 100 lines for the cost of the revenue stamp.
Particular Clauses in the Free Loan Agreement
There are some clauses that can be included in the free loan agreement to regulate specific situations, such as:
- Clause of right to lease to third parties: if the contract provides for it, the borrower may lease the property received on loan to third parties for short or long periods (e.g. holiday home, B&B, rental);
- Guarantee deposit clause: the bailer can keep a guarantee deposit to guarantee the correct fulfillment of the contractual obligations by the borrower;
- Early cancellation clause: the bailee can include a clause that allows him to request the early return of the property in case of urgent or unforeseen need, by notifying the borrower with a notice established in the contract.
Onerous or Modal Loan
Even if the loan is essentially free, it is possible in some cases to request a small fee from the borrower, such as for example an obligation to carry out ordinary or extraordinary maintenance, custody or another way of repaying the loan. In these cases, we speak of onerous or modal loan.
Sale of the property granted on loan
If the owner of the property granted on loan for free use decides to sell it, the new buyer can request the immediate return of the property. In case of resistance to the release by the borrower, the new owner can proceed to court to obtain compensation for damages and the release of the property for illegitimate occupation.
The free loan for use is a very common contract in Italy, which allows you to grant the use of a movable or immovable property without any consideration. However, it is important to know and respect the obligations and rights of the parties involved, as well as to follow the correct procedures for registering and managing the contract, to avoid possible disputes or tax problems. Always remember to consult a professional or a lawyer for the drafting and registration of the free loan agreement, in order to make sure that all the clauses are correct and comply with the law.
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