Real Estate Litigation 2025 Comparisons

The process for recovering real property after a borrower default on a loan secured by that property is primarily judicial in nature: Italian law requires court intervention to enforce a secured property. The lender must initiate foreclosure proceedings (esecuzione immobiliare) in court to recover the property, which will be sold at auction, thus satisfying the outstanding debt.

An exception to the judicial route is the patto marciano pursuant to Article 48-bis of the Consolidated Banking Act (Testo Unico Bancario) which, if mortgage loans and debtors default, allows the related creditors to take ownership of secured real estate assets upon payment of the difference between the amount of their credit and the encumbered property. This legal scheme can be autonomously agreed upon by the parties who appoint an independent expert to market the assets in case of default.

Italian legislation recognises pledges over the equity (pegno sulle quote) or over the stocks (pegno sulle azioni) of a property owner, or, depending on the nature of the limited liability company involved. The pledge is released as security by the shareholder of the property owner (generally an SPV).

The process is in its nature judicial, meaning that the creditor must apply to the court to enforce the pledge and start the foreclosure sale process under the directions of the judicial authority.

Nonetheless, special rules apply to banks under certain conditions governing the parties that can foreclose directly on the asset or enter into a patto marciano scheme and market the property. The proceeds of the sale are used to reimburse the creditor, and the deficiency delta remains with the borrower.

If the contract between the parties includes a patto marciano, as defined above, the timing is strictly dependent on the agreement of the parties. In general, the procedure takes about three months to be completed, to which negotiation time with the third-party purchaser should be added.

Depending on the type of enforcement procedure, the debtor may eliminate the foreclosure process by repaying the creditor, provided that certain legal conditions and requirements are met, and until the moment the property is put on public sale auction.

A lender can pursue foreclosure of different types of security (eg, foreclosure on both the equity pledge and mortgage simultaneously) until its credit is repaid in full. This does not jeopardise the right of redemption of the debtor or the right of the lender to pursue other claims against the borrower or affiliated entities at the same time as foreclosure claim.

For judicial foreclosure procedures, an average of between 1.5 to two years are required, depending on the complexity of the case and procedural delays. In non-judicial foreclosure procedures, the estimated duration is between six and 12 months, making it significantly faster than the judicial timeline.

If there is a deficiency following a foreclosure auction, the borrower remains personally liable, and the lender still has a legal claim for the deficiency amount (eg, by seizing the borrower’s bank accounts, vehicles or other valuable assets).

Joint venture structures can be either contractual or corporate in nature. The former do not involve incorporation of a corporate special purpose vehicle, while the latter always entail the incorporation of a limited liability company – generally either a società a responsabilità limitata or a società per azioni (joint stock company), depending on the level of supervisory regulation applied thereto. Projects carried out involving real estate funds also fall under this category.

There is no obligation for partners to operate a specific type of joint venture (contractual or corporate) unless using a specific public project finance scheme where the incorporation of a limited liability company is required. Cooperation in a joint venture is, in the vast majority of cases, vested with a limited liability company or with a real estate fund.

The statutory duties of persons participating in a joint venture do not differ from those applicable to contractual parties or shareholders in limited liability companies or real estate funds in general. These duties can be negotiated at liberty by the parties in the contractual documents (joint venture agreement) or by those partnering into the capital of the special purpose vehicle (shareholder agreement and by-laws). Similarly, the remedies are those generally available under Italian legislation for contractual parties or partners in a limited liability company or in a real estate fund.

If disputes arise, where governing documents are silent, vague, or allow for a decision-making stalemate, recourse is made to the Italian Civil Code with deferral either to arbitration proceedings (if so agreed between the parties) or to the court.

As a general remark, according to Italian law, judgments rendered by the courts (at any level) are automatically enforceable; however, such judgements are not final and can be further appealed. The debtor is nonetheless entitled to request that the court suspend enforceability under certain criteria, such as fumus boni iuris (likelihood of success on the merit of the case) or periculum in mora (danger in delay). If the judgement is final and no longer appealable, meaning the debtor has not appealed the decision within the relevant term or the decision is rendered by the Supreme Court as the last-instance proceeding, then there is no further opportunity for the debtor to suspend enforceability.

Also, injunctions issued by the courts as a result of interim or precautionary proceedings (such as the injunction of payments, the order of release of premises, etc) can be granted with “provisional enforceability” under certain circumstances (eg, there is a written proof of the debt and an acknowledgement of the debtor’s position). The debtor may then still have the opportunity to request a suspension by the court.

There are no special considerations for winding down contractual joint ventures. The general rules for termination of contracts apply, together with the relevant termination regime agreed between the parties or set out in Italian legislation.

However, for corporate joint ventures, liquidation of the company is required, with a third party supervising the procedure (liquidatore) and all the company’s debts being dealt with before the liquidation procedure can be completed and without the partners maintaining liability for the relevant debts.

Two types of guarantees apply in real estate practice: personal guarantees (parent company guarantees and/or bank or insurance guarantees) and securities over the assets (pledge over shares or mortgage on the real estate asset).

“Bad boy” clauses or carveouts generally operate as an exception to the limitation of liability in the event of damages, and are applicable in cases of gross negligence or wilful misconduct (dolo o colpa grave). These are not borrower-specific but are applicable to any party charged with an obligation.

Liability under Italian law extends to actual damages and loss of profit to the extent that they are a direct and immediate consequence of an unlawful action or omission. They are limited to damages that can be predicted at the time of the action or omission that cause the damage unless in case of wilful misconduct.

Limitation of liability is allowed under Italian law unless gross negligence or wilful misconduct have occurred.

The solidity of guarantees – and particularly first demand guarantees, which are unconditional or absolute guarantees – depends on how well they are drafted. Italian system recognises absolute first-demand guarantees. It is particularly important, however, to respect time constraints which limit the enforceability of the guarantees.

Note that, in order to be considered a first-demand guarantee according to Italian jurisdiction, certain specific waivers must be provided within the text of the guarantee on the possibility of raising certain exceptions connected to the merits of the underlying guarantee relationship. 

Unconditional or absolute guarantees generally do not suffer any limitation that is not expressly covered in the guarantee itself. The only general limitation applied by the courts upon request of the guarantor is the so-called exceptio doli defence that occurs when the creditor enforcing the guarantee has already received payment, or enjoyed fulfilment of the obligation, or is openly enforcing the guarantee in bad faith.

For practical reasons, Italian jurisdiction allows the debtor to commence urgency interim proceedings to ask the court to release an order of suspension of the obligation provided within the guarantee. Such requests are assessed by the court on a case-by-case basis, and some legal and factual requirements must be met. The debtor will be required to prove the above-mentioned bad faith of the guarantor in enforcing the guarantee.

Enforcement of a guarantee does not require any specific judicial procedure, but written notice can be served. The defendant, however, has recourse to expedited judicial procedures to stop enforcement of the guarantee under Article 700 of Italian Civil Procedure Code.

Lenders are entitled to enforce all the securities available to them in the event of a breach of borrower’s obligations of payment or other contractual breaches. However, the lender cannot recover under different securities or guarantees more than the amount due by the borrower. Therefore, once the amount has been recovered, enforcement on the other guarantees is stopped.

Arbitration clauses are not uniformly applied across all real estate transactions in Italy. Their prevalence largely depends on the type of contract, the value of the property and the parties involved. While arbitration is generally seen as a faster, more affordable and less complicated alternative to traditional litigation, its use is more common in commercial real estate and large-scale property transactions than in standard residential leases.

When disputes arise in real estate transactions, the parties involved decide whether to resolve them through arbitration or litigation. Each approach has distinct advantages and disadvantages related to cost, speed, confidentiality and enforceability, as follows.

• Speed and efficiency: one of the most interesting benefits of arbitration is that this procedure avoids the lengthy delays of traditional litigation, allowing the parties to set their own procedural timelines, ensuring a faster resolution of the dispute.
• Confidentiality and privacy: real estate disputes often involve sensitive information such as financial details, business strategies and contractual terms. On this basis, arbitration would be the preferred solution since it offers strict confidentiality, keeping business negotiations and internal documents out of the public realm, in contrast with court proceedings, which are public.
• Specialist arbitrators: unlike litigation, where cases are assigned to generalist judges, arbitration allows the parties to select arbitrators with industry-specific knowledge. Therefore, complex issues, such as those regarding real estate, are decided by experts who understand the nuances of real estate law, leading to more informed and commercially sensitive outcomes.
• Flexibility: arbitration offers greater flexibility in setting procedures, selecting hearing dates and even choosing the governing law. This is particularly useful in international real estate transactions, where parties from different jurisdictions can agree on arbitration rules instead of navigating multiple legal systems.

On the other hand, compared to the advantages laid out, arbitration is certainly more expensive, and it is recommended for real estate disputes over a significant threshold.

Mediation has become an increasingly significant tool in real estate transactions and disputes in Italy. While, traditionally, disputes concerning real estate issues have been resolved through the court system, legislative reforms have made mediation a more common – and sometimes even mandatory – step in conflict resolution.

To address urgent matters, the Italian legislator provides provisional remedies (misure cautelari) to secure the legal position of one of the parties with urgency. These remedies assume particular importance when there is a risk that a property could be sold, encumbered or altered, potentially frustrating the enforcement of a future judgment.

One of the most powerful provisional remedies in real estate disputes is seizure (sequestro) which comes in two forms: a judicial seizure (sequestro giudiziario) under Article 670 of the Italian Civil Procedure Code, and a conservative seizure (sequestro conservativo) under Article 671 of the Italian Civil Procedure Code. Both types allow a creditor or an interested party to prevent the sale or modification of the property until the court resolves the dispute.

Other essential tools include the registration of a pending lawsuit in the land registry (Trascrizione della domanda giudiziale) pursuant to Article 2652 of the Italian Civil Code, which acts as a public warning to third parties that the property is subject to an ongoing dispute.

Provisional remedies are granted by the Italian civil courts upon request by a party that demonstrates an urgent need for protection while a proceeding is pending. A court order is always required, and the requesting party must meet specific legal criteria to obtain such relief. Each type of provisional remedy has its own requirements, although, in general, the petitioner must establish two pivotal elements:fumus boni iuris (the likelihood of success of the legal claim) and periculum in mora (the risk of irreparable harm that waiting for the final judgment would cause).

Improper use of provisional remedies in real estate disputes can expose plaintiffs to financial liability, court sanctions, and reputational harm. If a remedy is required regarding gross negligence or malice, the plaintiff may have to compensate the defendant for damages under Article 96 of the Italian Civil Procedure Code or post a security deposit as set in Article 669-undecies of the Italian Civil Procedure Code.

The Italian courts are generally willing to grant temporary or preliminary injunctions in real estate transactions, but only when the strict legal criteria mentioned above are met. These injunctions serve as provisional remedies to protect a party’s interest while a real estate dispute is pending. However, the courts carefully evaluate whether the urgency justifies immediate intervention, and whether the request meets the necessary legal standards.

To obtain a preliminary injunction or another provisional remedy, the party requesting it must demonstrate, inter alia, irreparable harm (periculum in mora). In the context of a real estate dispute, this element can be satisfied in various ways, depending on the circumstances. The common element, however, is that the delay in releasing a remedy may harm the property in a way that cannot be fixed afterwards, reducing its value or usability in a durable manner.

In Italy, contractors, suppliers, and similar vendors who have performed work or supplied materials for construction or renovation cannot automatically place a lien (such as a Mechanics’ lien) on a property without first obtaining a court order, unless it has been previously agreed between the parties. In certain circumstances, the law provides for a legal lien to be placed on a certain assets such as the legal mortgage of the vendor on the sold asset for the payment of the purchased price or a general or special privilege (privilegio speciale o generale) in favour of the tax authorities for the payment of certain taxes applicable to the real estate asset itself and/or to certain type of credits requiring enhanced protection under the law, as set out in the Italian Civil Code.

It is fairly common for private equity funds or similar companies/entities to invest in large real estate complexes via a Società a Gestione del Risparmio, or asset management company, set up specifically for this purpose. Such entities are subject to Italian Companies and Exchange Commission and the Bank of Italy regulations and specific rules requiring that certain criteria are met (eg, a higher level of minimum share capital and specific honourability requirements for directors, listed in the Bank of Italy’s registers). In litigation procedures before the court, a specific level of intervention by the Bank of Italy (eg, pertaining to a claim for declaration of insolvency and liquidation for the entities) is also required.

Public interest plays a pivotal role in all developments at the intersection of real estate and infrastructure. This is particularly true in large residential developments in populated areas, social housing and/or student housing. In such cases, the involvement of the public authorities (in particular, the municipalities and/or regional authorities) is fundamental, and communication with them on pricing and development features is necessary.