Decision no. 4892 of 25 February 2025 of the United Sections of the Court of Cassation addresses the issue of compensation for damages for loss of earnings due to a lessor in the event of early termination of the rental agreement due to the tenant's breach of contract and return of the property before the natural expiry of the rental agreement, resolving a jurisprudential conflict on the subject.
The Facts of the Case:
The tenant of a property has suspended rent payments, becoming a defaulter. Following this, the lessor obtained the Validation of eviction for non-payment and has started the procedure for the release of the property. However, the host has voluntarily returned the property, before the natural expiry of the contract. The lessor therefore took legal action, asking not only for the back fees until the release, but also the compensation for damages for the loss of future rents that would have accrued until the contractual expiry or the stipulation of a new lease. Both the Court that the Court of Appeal of Rome they have rejected the request for future fees, considering that the early return of the property had eliminated any further prejudice, since the lessor had regained possession of the property. Against this decision, the lessor has appeal filed in Cassation.
Conflicting Orientations:
- The case has reached the Joint Sections of the Supreme Court due to a interpretative contrast concerning the right of the landlord to seek compensation for lost rent after the lease has been terminated early due to the tenant's breach and the property has been returned.
- Older and more prevalent (majority) orientation: A landlord who obtains early termination of the lease due to the tenant's breach of contract is also entitled to compensation for damages for the early termination of the relationship. This compensation should cover the lost canons until a new tenant is found. The amount is left to the assessment of the judge of merit based on all the circumstances of the specific case. For this orientation, the return of the property does not cancel the damage resulting from the failure to collect the rent until the contractual expiration. The interest protected by the contract is the indirect enjoyment through the collection of a fee.
- Other (minority) orientation: If the lease is terminated early due to the tenant's breach of contract and the property is returned, the failure to collect the rents that would have been due until the original expiry date or the start of a new lease does not in itself constitute “loss suffered” or “loss of profit”. This view holds that the rent compensates the landlord for giving up direct enjoyment of the property. Once the property is returned, the landlord regains this right, so the loss of rent after the return is not necessarily a damage. This view was adopted by the Court of Appeal in this case.
Reasoning of the United Sections:
- The United Sections they did not share the minority orientation adopted by the Court of Appeal.
- They considered that the idea that the cause of the lease is based solely on the lessor's renunciation of direct enjoyment of the property in exchange for rent is a marginal perspective. They pointed out that many lessors, especially those who purchase real estate for investment purposes (such as a commercial company), are primarily interested in generate income (income or profits) through rental, not through direct enjoyment of the property.
- The Joint Sections have emphasized that the lease agreement represents a economic exchange between the use of a property and the payment of a rent. The tenant's payment is not only a compensation for the non-use by the lessor; it is the correspondence for the utility offered by the lessor. The contract aims to create a new economic-legal arrangement (economic-legal arrangement) for both parties.
- There early return of the property by a defaulting tenant does not fully restore the lessor to his previous economic-legal position that existed After the conclusion of the contract. It certifies the failure of the contractual program through the tenant's fault.
- Simply put the locator back in the position it was in Before of the contract ignores the agreed interests and the failure of the contractual program, effectively neutralizing the relevance of the tenant's breach. Compensation for contractual damages (pursuant to Article 1223 of the Civil Code) is not limited to restoring the party to the pre-contractual position (negative interest) but also includes thepositive interest – what the party would have gained if the contract had been fulfilled.
- The Joint Sections also affirmed that Article 1591 of the Civil Code, which regulates compensation for the late return of the property, cannot be applied analogously to cases like this where the issue is a breach during the lease (failure to pay rent) that leads to early termination. Article 1591 specifically covers damages related to the delay in returning the property.
- However, the Joint Sections have clarified that the right to compensation for lost rents after repurchasing the property It's not automaticThe lessor has theburden of proof to demonstrate that the loss of rent was an immediate and direct consequence of the tenant's breach.
- This requires the landlord to demonstrate that he has conveniently activated to find a new tenant after regaining possession. If the landlord has been inactive without justification, this may suggest that the loss of rent is due to his own inaction, not solely to the default of the previous tenant. This burden of proof is essential to demonstrate legal causality.
Principle of Law:
The Joint Sections have enunciated the following principle: “The right of the lessor to obtain, pursuant to art. 1223 of the Civil Code, compensation for damages for loss of earnings due to the termination of the contract due to the tenant's breach of contract does not cease, in itself, following the return of the leased property before the natural expiry of the contract, but normally requires the lessor to demonstrate that he has promptly taken action, once he has obtained the availability of the property, for a new lease to third parties, without prejudice to the judge's assessment of the circumstances of the specific case also on the basis of the principle of good faith and in any case excluding the applicability of art. 1591 of the Civil Code”.
Content by Attorney Luca Tiberi.
