The loan agreement and the lease agreement are two legal instruments used to regulate the use of a property by a person who is not the owner. Although they may seem similar, they have distinctive features and purposes that make them suitable for different situations. In this article we will explore the definition and peculiarities of the commodity contract, highlighting the main differences from the lease agreement.

Definition of a loan agreement

The commodate contract, regulated by Articles 1803-1812 of the Italian Civil Code, is an agreement through which one party, called the bailer, delivers a movable or immovable property to another party, called the commodatee, for the latter to use for a specified time or use, with the obligation to return it at the end of the agreed term.

A commodate is essentially free of charge: the commodatee does not have to pay any consideration for the use of the property. However, he is responsible for the expenses necessary for the use and preservation of the asset, unless otherwise agreed. The bailee is obliged to guard and preserve the asset with diligence, using it only for the agreed use. He may not grant third parties the enjoyment of the asset without the consent of the bailor. Upon expiration of the term or when requested by the bailor in case of urgent need, the bailor is obligated to return the property. In the absence of a specific term, the bailor may demand return at any time, thus configuring a precarious commodate.

Differences with lease agreement

A lease, governed by Articles 1571 et seq. of the Civil Code, is an agreement through which one party, called the landlord, grants another party, called the tenant, the use of a property in return for the payment of a periodic, usually monthly, consideration. While a commodate is always free of charge, a lease requires the payment of a rental fee. Bailment is often used within the family or among friends, or for the temporary use of assets for specific noncommercial needs. In contrast, renting is aimed at generating income for the landlord, and is mostly used for housing, business premises or other for-profit properties.

In the commodate, the tenant bears the ordinary maintenance expenses without being able to claim reimbursement, unless otherwise agreed for urgent and necessary extraordinary expenses. In the tenancy agreement, the tenant is required to maintain the property in good condition and return it in the state in which it was delivered, except for normal deterioration in use.

Regarding the duration, the commodate can be either fixed-term or precarious. In the precarious commodate, the bailor can demand the return of the property at any time. On the other hand, the lease, on the other hand, has a specific duration stipulated in the contract and can be terminated only in the manner stipulated by law or in the contract itself.

When to use the commodity loan

The loan agreement is particularly useful in noncommercial situations, such as the temporary use of a property by a family member or friend, or for the concession of movable property on a nonprofit basis.
It is also used in business for temporary leasing of equipment or space without payment of a fee. It is important to draw up a clear and detailed loan agreement to avoid misunderstandings and possible legal disputes.

Fully understanding the difference between a commodate contract and a rental contract is the first step in choosing the instrument best suited to your needs. As we have seen, while a commodate is suitable for free and noncommercial uses, a lease is the ideal choice for generating income through the concession of use of assets.
Both contracts, when used correctly, offer flexibility and legal protection to the parties involved.