Preemption and simulation

Particular and delicate is the issue of simulation, often the same is put in place to discourage the grower from applying for the preemption procedure, or to contest that the type of negotiation falls within the scope of the negotiations subject to preemption.
In the first case, the simulation is usually put in place with reference to the transfer price of the land, which is simulatenously kept high in order to discourage the farmer from making the purchase of the land.
In the second case, there is even an attempt to challenge the occurrence of the right of first refusal itself by, for example, faking a donation instead of a contract to transfer the property for consideration.
It also happens that, in order to avoid the exercise of the neighbor’s preemption, the landowner simulates a deed of sale of the land with a lease contract to a direct grower, forcing the neighboring landowner to exercise the retraction by measuring himself against the evidentiary limits provided for in Articles 2724 and 2725 Civil Code.
Given the above, it can be guessed that the most qualifying moment for the pretermitted farmer to bring out the simulation is at the time of retraction. There is a kind of interpenetration between an action of retraction and an action aimed at having the existence of simulation declared. The judiciary did not fail to emphasize some key points:

1) The concept of a third party
Under Article 1414 et seq. of the Civil Code, the simulated contract has no effect between the parties (who can therefore enforce the simulation among themselves); while third parties can enforce the simulation when it affects their rights.
Therefore, third parties, in the case of a simulated transaction, may waive their right to enforce the simulation, or they may decide to enforce it when the simulation is detrimental to their interest.
In the case of agrarian preemption, the cultivator of the land or the neighbor acting by retraction may have an interest in asserting simulation when the price appearing in the contract of sale is higher than the price actually paid; or when challenging an apparent (simulated) contract of gift against an actual (disguised, i.e., hidden) contract of sale.
Alternatively, they may have no interest in asserting simulation when the sales price appearing in the contract is (almost always for tax-saving purposes) lower than the actual price paid out of the contract.
This is why the qualification of “third party” in the person who acts by retraction and simultaneously intends to enforce the simulation is important.
Supreme Court jurisprudence has affirmed that the person who brings an action for redemption and at the same time requests that the simulation of the contract put in place by the owner of the agricultural property be established, must be considered a “third party” with respect to the latter contract, with all the consequences of the law.

2) Link with redemption
Case law has clarified that in order for an action of simulation to be brought, an action to redeem the property must be instituted at the same time. In fact, it has been clarified that the action of simulation postulates an interest related to the exercise of one’s own right, which with reference to the sale of an agrarian property leased to a direct cultivator, is to be identified in the right of pre-emption or the successor right of redemption, pursuant to Art. 8 law no. 590/65.
It follows that having established the non-existence of the right of redemption, there is no interest in having the contract or any of its elements (e.g., the price) declared a sham.
The protection granted by the legislator to the tenant of the rustic estate, to whom the conduct of the grantor has prevented him from concretely availing himself of the right of pre-emption, consists fundamentally in the exercise of the right of redemption, while the other actions (of nullity, declaration of ineffectiveness, simulation) are by the cultivator exercisable insofar as they are functionally linked to a simultaneous exercise of the action of redemption, with the consequence that the peremptory term of one year from the transcription of the contract provided for such an action cannot be considered displaced, in the beginning of its expiration, by the prior exercise of one of the other actions, entailing an indefinite extension of that term, with prejudice to the certainty of legal relations.

On the basis of these reflections, it can be concluded by stating that the action to have the simulation of the contract put in place declared must be brought at the same time as the action of retraction and within the time limit established for it (one year from the date of transcription of the deed of transfer of the agricultural land) and that the farmer who challenges is qualified as a third party, with the possibility of requesting or not requesting the ascertainment of the simulation by any means.
Therefore, the question arises as to how to obviate, on the notary’s operational level, the assumption that, for tax requirements, a purchase price lower than the actual price is indicated in the deed. This problem has been addressed by case law, which has made it clear that the only possibility offered to counter the action of retraction at the price indicated in the deed (and thus at a price lower than the actual price) is to have a written counter-declaration, which, however, can only be used if it has a date certain prior to or contemporaneous with the public deed of sale.

Attorney Chiara Roncarolo

Attorney Maurizio Randazzo