BANKING AND FINANCE | The Italian Supreme Court on the conversion of a void land loan

On 2 January 2025, the Italian Supreme Court issued decision No. 19/2025 regarding the conversion of a void land loan into a valid mortgage loan, whenever the former exceeds the financing limit imposed by Article 38.2 of the Italian Banking Law (Legislative Decree No. 385 of 1 September 1993, TUB). Referring to Article 1424 of the Italian Civil Code and to a previous decision (Italian Supreme Court decision No. 33719/2022), which dealt with the exclusion of a financing limit from the essential elements of a contract, the Italian Supreme Court clarified the conditions of the conversion. It declared that, for the purposes of the conversion, it is, inter alia, (a) not necessary to prove that the parties originally submitted the valid agreement; (b) necessary that the parties were not originally aware of the void causes of the agreement; and (c) sufficient that the practical purpose for which the parties originally executed the agreement is, at least partially, respected by the agreement deriving from the conversion.

Newsletter n. 103 – January 2025