First Article

HOW TO BUY A PROPERTY IN ITALY

For those who don’t know, let’s begin by clarifying the meaning of the term real estate law. It is the area of law that governs buying, using and selling land.
That being explained, when considering to buy a house in Italy, it is crucial to follow the process in all of its steps and not get lost in it. Here below a guide through the process on how to invest in real estate in Italy, underlining rights and responsibilities, in order to avoid any potential legal issues.

CHOOSING THE RIGHT HOUSE OR PROPERTY WITH A REAL ESTATE AGENT

It is advisable to find a reputable real estate agent or agency to help in the searching for the fittest housing. It can make the process smoother and simplify the task, if one doesn’t know where to start. It can be through recommendations or in an online search. It is possible to reach out to either international or local agencies.

PROPERTY INSPECTION

PRELIMINARY ASSESSMENT

A preliminary assessment is needed in order to determine the investment worth. A surveyor may conduct a survey of the property and release a report that allows to take a more informed decision.

DUE DILIGENCE REVIEW

Before making an offer on a property, it is advisable to verify the seller’s ownership and legal status of the property through a due diligence review by checking the land registry records and obtaining a copy of the deed. Furthermore, the review involves a thorough investigation of the property, including its legal and tax aspects, any liens or encumbrances, and any potential issues with the property’s construction or renovation.

RECIPROCITY

There also must be a condition of reciprocity between the two countries involved.
According to Italian law, a foreigner has the same civil rights as an Italian citizen if the Italian citizen has the same rights in the nation of the foreigner. This applies also to the foreign legal persons.

In relation to this, Italy has signed Bilateral Agreements on Investment Promotion and Protection (Bilateral Investment Treaties or BITs). In this case the condition of reciprocity is to be considered verified.

However, the content of Bilateral Agreements should always be checked on a case-by-case basis.
It is to point out that foreigner means citizen of a nation that is not part of the European Community. In most cases this is not a real obstacle for foreign buyers, but the lack of the reciprocity condition affects the validity of the contract itself, which makes the purchase void. A simple check can be done on the website of the Italian Ministry of Foreign Affairs, the site is frequently updated.

THE PROPERTY PURCHASE OFFER (“PROPOSTA IRREVOCABILE DI ACQUISTO”)

To temporarily taking the property off the market, a Property Purchase Offer is necessary. The “Proposta Irrevocabile di Acquisto”is a written statement by the possible future buyer to the seller in order to show interest in the transaction of buying and selling the property.

A deadline is set in the proposal that binds the proposer for a certain period of time; the seller is free to evaluate other offers before the deadline specified in the deed. The proposal binds only the proposer. The seller, prior to formal acceptance of the proposal, may evaluate other offers and choose the one he deems most convenient. The proposal lapses if on the date set in the proposal the seller has not accepted.
If the seller accepts, the document becomes a preliminary contract of purchase and sale. The money paid as a deposit is deducted from the final price.

The irrevocable purchase proposal must contain:

• – the cadastral data of the property
• – information regarding the provenance of the property (such as purchase, donation, inheritance, etc.)
• – the urban planning situation of the property, indicating the authorizations and certifications, building permits, condonations or amnesties
• – the price offered
• – indication of the time limit within which the proposal maintains its effectiveness

Usually, together with the proposal, a sum of money is handed over as a deposit. The deposit will remain locked until the expiration or acceptance of the irrevocable proposal. In case of non-acceptance, the “caparra” will have to be returned. Though, it is possible that in case of unjustified withdraw from the proposer, the money will not be returned.
Normally, the amount to be paid as a deposit varies in relation to the value of the property. It is usually around 10% of the price of the property.

Although the purchase offer does not oblige the parties to finalize the final sale and purchase agreement, it may produce legally binding effects. This is why it is recommended that the buyer should be careful when signing, otherwise the money that had been given will not be returned.

CAPARRA CONFIRMATORIA

“Caparra confirmatoria” is a sort of deposit. It consists in a sum of money that serves to demonstrate the buyer’s seriousness in the intention to purchase the property. At the time of the conclusion of the contract one party gives to the other, a sum of money or a quantity of other fungible things. In the event of fulfillment of obligations, it shall be returned or set off against the performance due.

And again, if the party who gave the “caparra” is in default, the other party may withdraw from the contract, retaining the deposit; but if the party who received it is in default, the other party may withdraw from the contract and demand double the deposit. If, however, the party who is not in default prefers the performance or the termination of the contract, damages shall be governed by the general rules.

Thus, if the “caparra” is given for a purchase and sale contract, if the contract is successful, the “caparra” will be treated as an advance on the sale price of the property; if, on the other hand, the contract does not come to fruition, the “caparra” will turn into a penalty clause becoming compensation for the injured party. If it is the seller who is in default, the seller must give the buyer double the deposit; if it is the buyer who fails in his duties, the seller will retain the deposit.

PRELIMINARY CONTRACT

The preliminary contract, “contratto preliminare”, also called “compromesso” is frequently (and improperly) used to refer to a preliminary contract of sale, more specifically one involving real estate. It is an agreement by which the parties, the buyer and the seller, intending to conclude a future purchase and sale, obligate themselves to conclude the final sale and purchase agreement.
The sale’s effects like transfer of ownership, payment of the price, delivery of the property, and so on, are produced only with the conclusion of the final contract. With the “compromesso” the parties sign a real contract (the preliminary sale, precisely), in which they undertake to conclude the final sales contract at a later date.

The preliminary contract of sale is very useful since it allows some relevant needs to be met:

• – it allows the parties to bind each other for the future, i.e., ensuring that none of them can avoid to conclude the final contract
• – it also allows to take advantage of the time between the preliminary and the final agreement, in order to put in place a whole series of fulfillments required for the sale

The fundamental elements that the preliminary real estate sale must have, are:

• – the consent of the parties
• – the written form
• – the exact specification of the real estate to be sold (address, type, cadastral data…)
• – the price

The preliminary agreement must be registered. The fees to pay are:

• – registration tax or “imposta di registro”, due in a fixed amount of 200.00 euros;
• – stamp duty (16.00 euros for every 4 sides of the deed and in any case every 100 lines, or 155.00 euros if the deed is notarized).

It is possible for the parties to agree on the payment of “caparra” or deposit, at the conclusion of the “compromesso”.
If the preliminary was concluded by public deed before the Notary, it is possible to proceed with its transcription.

In this case, the effects are:

• – it avoids legal problems in case the seller also agrees with third parties to transfer the same property to them. If prior, the transcription made by the buyer can be validly opposed to the third parties, safeguarding the future purchase
• – a further advantage is that the transcription of the final contract (or of the judgment that takes the place of the final contract not concluded, if any) has a so-called “reservation” effect (art. 2645 bis, second paragraph, Civil Code), making the purchase retroactive to the date of transcription of the preliminary, as if the sale had been concluded then
• – however, there is one aspect to be considered: the effects of the transcription cease within one year of the agreed date for the stipulation of the definitive one, and in any case within three years of the transcription itself

Second Article

Buying a property in Italy consists of a number of stages which might sound daunting from both a legal and bureaucratic point of view, especially to foreigners who do not speak Italian. Therefore, this article will aim to explain the main stages of the purchasing process in Italy in order for you to have a better understanding of the requirements that need to be met, and of what you need to look out for.

Please note that one of the requirements to purchase a property in Italy is to have an Italian Tax Code (“Codice Fiscale”). This is an alphanumeric code that identifies citizens, non-citizens, residents and non-residents, in all dealings with Italian public authorities.  While the Tax Code is assigned by birth to Italian citizens, it is assigned upon request to non-Italian citizens and residents. Foreign citizens can apply for an Italian Tax Code at any Italian Consulate or at any Italian Revenue Agency office (“Agenzie delle Entrate”).

Once you have found the property of your dreams in Italy, you can make a formal offer. The Purchase Offer (“Proposta d’Acquisto”) is a document that outlines the basic terms and conditions between the buyer and the seller. It also indicates the amount offered for the property and generally includes a small deposit of approximately 5 % of the property value, and while basic checks, in-depth due diligence are performed, the property is temporarily taken off the market. If the purchase fails due to legal problems the deposit is usually refunded.

The second stage, the Preliminary Contract of Sale (“Contratto Preliminare di Vendita” or “Compromesso”) is a contract which is legally binding and which defines the selling conditions which will include a description of the property, rights of way, payments and ownership rights. The Preliminary Contract of Sale should always:

1. define the property that is being sold;
2. state the identification details of both parties (buyer and seller);
3. state the agreed final price, the amount of the deposit paid and the payment plan for the remaining instalments;
4. state the property complies with all legal and building standards and codes, fiscal laws etc.;
5. affirm the seller’s unconditional commitment to sell the property on or before the agreed closing date, and guarantee that there are no limitations or any third-party rights pending.

When the contract has been signed, the purchaser pays a deposit of approximately 10%-30% of the property value. Under Italian Law the deposit serves various purposes. If the deposit is defined as “Caparra Confirmatoria” and the purchaser fails to fulfil certain obligations, the seller can then rescind the contract (“rescissione del contratto”) and the purchaser will automatically lose the entire deposit paid. If, on the other hand, the seller’s defaults, then the purchaser will be legally entitled to a refund.

Conversely, if the deposit is defined as “Caparra Penitenziale”, either or both parties can terminate the agreement.  If the agreement is terminated by the purchaser, the seller retains the deposit whereas if the seller terminates the agreement, the purchaser receives a refund of the deposit. When the Preliminary Contract of Sale has been signed, in most cases it is essential to perform due diligence of the property to ensure that it complies with all the legal, technical and structural requirements established by state and municipality building standards and codes.

Before signing the Final Contract the purchaser should always check the following:

• if a couple jointly own a property, the sale cannot go ahead without the consent of both spouses;
• if the property has been inherited jointly by multiple heirs, before the property can be put on the market, all heirs must be consulted;
• if the commercial or residential property is leased to third parties, these must be given the choice to purchase the property.

At this stage of the process, a Notary Public (“Notaio Pubblico”) is appointed. The Notary is an independent official who prepares and coordinates the purchase, drafts the Final Contract of Sale and acts on behalf of both the seller and the purchaser. The Final Contract of Sale (“Atto di Vendita” or “Rogito Notarile”) is signed by both parties at the Notary’s office and is countersigned by the Notary. If you are in the process of purchasing a property in Italy but do not have time to travel to Italy, you can grant an Italian lawyer or another person of trust the power to represent you and act on your behalf in order to complete the purchase.

As for the costs to purchase a property, the buyer needs to pay property taxes and notary fees when the contract is signed. When all the documents have been signed and the fees have been paid, the buyer receives the keys to the property. Other fees related to the purchasing process usually include notary fees (between 1.5% to 5% of property price), legal fees if you use an independent solicitor (between 1% to 2%), State/Cadastral taxes, and real estate agent’s commission (1% to 3%).

In conclusion, buying a property in Italy is not generally more complicated than buying a property in your home country; however, it is important to understand that the system and process can be quite different and not always the most straightforward. More specifically, local customs may be quite different and language barriers may present challenges.

If you are thinking of buying a property in Italy, our team of real estate professionals would be glad to assist you throughout the process of purchasing the house of your dreams.

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