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Buying a property in Italy can be a nightmare…

41Property purchase in Italy is a serious investment and often the fulfilment of a dream. Italy’s unique real estate laws and local customs all lead to the recommendation of  having the right team of advisors in place to make your experience successful.

A couple from Bristol found a house in the Abbruzzo that they wanted to buy. The local real estate agent, that the couple had engaged, got them to sign a Proposta di Acquisto (purchase offer).

The purchase offer was immediately given to the vendor. The offer basically stipulated the price the couple was willing to pay for the property and was accompanied by the couple’s cheque for €5000, made payable to the vendor. The vendor accepted the couple’s offer, took the cheque, and the deal became irrevocable. The agent also asked the couple for his brokerage fee of 3% of the purchase price, which they paid.

The couple then discovered that the charming outbuilding with self-contained accommodation had been added to the property without a building permit. Getting the building regularised would entail fees for a geometra (surveyor) and tax to the local municipality, and in fact, the building would need to be demolished if the permit was not granted – there was even the possibility that the couple would end up being prosecuted for an illegal construction. The vendor had no intention of remedying the situation and there was no recourse for the couple. The couple was stuck in a nightmare scenario and yet, the whole thing could easily have been avoided.

As a foreigner buying a property in Italy, make sure you have the right team of advisors working for you. Choose your own geometra to assess the integrity of a building’s structure, whether permits have been obtained and the costs for putting things right if required. An independent legal advisor will examine titles, review all contracts, help you negotiate the deal and make sure your rights are protected. Italian law requires that all property and land sales be completed before a notary. A notary of your choice, who is a representative of the Italian State, will ensure that the transfer of title is made according to law, that all state and city fees and taxes are paid and that the deed of sale is properly recorded in the land registry.

I cannot emphasise enough the importance of seeking independent advice. Choose your own professionals, who will have your best interests at heart. While the estate agent, vendor or other parties involved in the transaction may recommend professionals with whom they cooperate, you should bear in mind that estate agents and vendors have a vested interest in selling the property to you.

Once you find a property that you like, before signing any paperwork which may well legally tie you in to a purchase, do some preliminary due diligence yourself, or instruct your lawyer to gather ownership and other key documents from the current owner. The type of documentation you need to look at includes:

  • Atti di provenienza: demonstrating how the current owner obtained the property and showing good title.
  • Atto notarile (notarial deed)
  • Dichiarazione di Successione (estate tax return): if received by inheritance
  • Sentenza di usucapione: court judgment awarding title to property through adverse possession

Documentation pertaining to compliance with land registry, building permission and zoning:

  • Planimetria: map of property as it appears in the catasto fabbricati (registry for buildings)
  • Condono edilizio: certificate showing permission of works, which may have been conducted without relevant permits
  • originally done without a permit
  • Certificato di destinazione urbanistica: certificate showing designated use of the property. Is it for residential, agricultural, commercial use?
  • Certificato di Abitabilità: certificate acknowledging the health, safety and habitability of the property
  • Certificazione energetico: certificate showing energy performance of the property
  • Visura catastale: land registry certificate showing a lack of encumbrance or liens on the property

If there is land included in the purchase:

  • Mappe catastali: inventory of all parcels of land comprising the property with tax coefficients
  • Coltivatori Diretti: list of any tenant farmer(s) who work the bordering land
  • Check as well if there are any archeological covenants on the land parcels or underground gas pipelines that cross it.

You may also want to ask a geometra about the geology of the location. How prevalent are natural hazards such as landslides or earthquakes?

Once you or your team have examined everything and reported findings, you can feel more confident about entering in to a Proposta di Acquisto (Purchase Offer) and Contratto Preliminare di Vendita, (preliminary contract,  also commonly referred to as the “Compromesso” ).

This is a critical legal phase of the transaction. Buyers are often instructed that a purchase should be a two step process. That they should first make an offer with a purchase price that becomes binding on them upon acceptance by the seller; and second, enter into a preliminary purchase and sales contract which details the terms of the deal.

This traditional approach may be followed. However, without proper legal review of the offer, there is a risk of consequences similar to those suffered by our couple from Bristol.

A sensible and efficient alternative to this approach is an offer that includes all the terms and conditions of the transaction, including conditions to be met before the offer becomes binding. Such an offer, once the conditions have been met, will constitute the preliminary contract and allow you to proceed to the Atto di vendita (final deed of sale) with one unified agreement.

Preliminary contract terms and conditions may include the examination of seller’s title, having all buildings checked for structural integrity, absence of any encumbrances or liens, or obtaining a waiver of the state’s preemption rights on buildings on the Ministry of Cultural Heritage culturally protected list. If a condition is not met, then the buyer will have the right to ask for the deposit to be returned.

The preliminary contract should also include a full legal description of the property, including rights of way, sale price, terms and method of payment of deposit(s) and the final payment, date by which the sale is to be closed and the nomination of the notary to be present at completion as required by Italian law.

Execution of the preliminary contract legally binds the parties to go forward to complete the sale, assuming all the conditions are met. Failure to close after this point is considered a breach and can be resolved through the deposit provisions in the preliminary  contract as outlined below, or by filing suit in court to enforce specific terms and conditions.

The terms of the preliminary contract are the basis upon which the notary will draft the deed to be signed at the closing.

A deposit is paid by the buyer to the vendor at the time the preliminary contract is signed. Deposit will range from 10% to 30% of the total purchase price. The deposit is technically referred to as a, “Caparra Confirmatoria”. Should there be default on the part of the buyer, that party loses the entire deposit. If  the vendor defaults, the vendor must pay the buyer twice the amount of the deposit.

Many real estate agents seek to receive their full commission at the signing of the preliminary contract, or if the traditional approach is used at the acceptance of the purchase offer. Seek to negotiate the timing of the commission payment with the real estate agent at the time of entering into a contract with the agent so that 50% of the commission is paid at the time of the signing of the preliminary contract and 50% at purchase completion.

The final completion of the transaction involves both vendor(s) and buyer(s) appearing before the nominated notary to sign the Atto di Vendita – final deed of transfer. However, either party can be represented by a third party pursuant to a power of attorney. Lawyers regularly act on behalf of their clients at closings.

At this time the vendor is paid the balance of the purchase price and title to the property is transferred to the buyer. If the buyer is taking out financing to purchase the property a bank representative may also be present.

At De Tullio Law Firm, we offer a property background check, a  pre-purchase service, which aims to identify and prevent problems such as the ones the couple from Bristol encountered.

Likewise,  for those looking to sell their Italian property, we can help you prepare a pre- sales package that includes all the paperwork potential buyers will be looking to gather prior to making a purchase decision.

If we can be of assistance for your property purchase in Italy, please get in touch.

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