Congruity of security in case of exercising the right of retention

The court of Modena in Judgment no. 3/2004 of June 09, 2004 Agraria dealt with the issue of guaranteeing the payment of compensation due to the tenant as a result of improvements made by him to the fund. The court, in the case of the tenant, had been ordered to release the rustic property due to the expiration of the lease but conditioned on the release of security by the owners to guarantee the payment of compensation due to the tenant under Article 17 of Law no. 203/82 for the improvements made to the fund, had to resolve the problem related to the insufficiency of the guarantee given in the cognitive case with respect to the reimbursable improvements. According to what has already been stated in the Supreme Court ruling no. 8775/03 the ius retentionis assigned by Article 20 of Law no. 203/82 to the tenant who is owed the allowance for improvements may be asserted in both cognitive and enforcement proceedings and produces the temporary impediment to enforcement of the release title, but such “effect can be avoided by the provision of a bond set by the court on demand,” as was the case in the cited case. Such a bond, according to the court, “retains its precautionary nature even when it is contained in the judgment defining the judgment … may be modified by the appellate court … regardless of whether the modification was raised as a ground of appeal … without it ever acquiring res judicata authority.” Furthermore, as to the adequacy of the bail, the Court pointed out that “inadequacy is related to a different assessment of the circumstances existing at the time the bond was set, not to the emergence of new circumstances“. It must therefore be held that, having judicially determined the security at the instance of the person who is to obtain or execute a judicial title of agrarian release, the tenant’s right of retention is for that reason alone definitively extinguished, residing in the tenant’s hands only the possibility of requesting – at any time, and without procedural constraints – the revision of the amount of the judicially fixed security, without any inadequacy of it being able to integrate a valid ground of opposition. From the Court’s determinations can be deduced both the abstract groundlessness of the application for a determination of the persistence of ius retentionis, which had definitively ceased at the time of the judicial fixing of the bail, and, conversely, the possibility that the application for a determination of the inadequacy of the bail judicially may be subject to judicial review. The court also held that, in the event of a transfer of the property, the indemnity should be paid exclusively by the owner at the time, in view of the fact that the new owner became such by paying a price that already included the improvements in question. On closer inspection, however, Article 17 co. 5° Law No. 203/82 introduces the possibility, for the owner who sells to a third party the land on which the tenant has already made improvements that are indemnifiable but not yet indemnified, to declare this fact at the time of the sale, releasing himself in this case from the obligation. It would seem, therefore, that the rule implicitly recognizes the continuing liability of the selling landlord in relation to the payment of the indemnity in question, in the absence of the aforementioned declaration; although it does not at all exclude the arising of the same obligation on the part of the new owner, which, on the contrary, should certainly be generally affirmed, if one considers that the indemnity in question is due from the landlord (Article 17 co. 4 and Article 20) at the time of the termination of the lease relationship (unless otherwise agreed: Article 17 co. 2) and, therefore, by whoever at that time is such, even if as a result of taking over the position of lessor during the course of the relationship. Regarding the quantification of the indemnity, the court decided that the indemnity is due in an amount corresponding “to the increase in market value achieved by the fund as a result of the improvements … with reference to the current market value of the unimproved fund” (Article 17 co. 2°) and not simply using the historical cost of the improvement. Lastly, the court clarified that the security bond serves as a guarantee of the payment of compensation due to the tenant, and therefore should be maintained until such time as said payment, to the extent ascertained, takes place. The bond is, therefore, called upon to perform its further satisfactory function only in the event of default, so that its enforcement can only take place where counterparties, appropriately requested, voluntarily fail to make payment.

Attorney Chiara Roncarolo

Attorney Maurizio Randazzo