Property purchase agreement and contracts in Italy
Italy’s cities, countryside, hills and mountains are filled with alluring properties for sale… with an experienced local real estate agent by your side you’ll be sure to find one that suits your taste and needs, and fulfills your wishes!
Yes, being able to count on an on-site expert for insight on current market trends and support is vital to source the right property to purchase, just as vital as having a trustworthy team of proficient lawyers, surveyors and architects by your side later on, once negotiations for purchase start.
As elsewhere, buying real estate in Italy follows a pre-established set of rules and proceedings that one must follow carefully, in full compliance with the law.
After finding the right property, the prospective buyer may either contact the vendor directly, or draw up a purchase proposal. This first to start negotiations, or, alternatively, drafting what is known as a purchase proposal.
This first proposal is by no means binding for either of the two parties, from a legal point of view, instead, its aim is informing the seller that there is a potential buyer interested in the property, and desirous to eventually go ahead with the transaction and sign a contract.
To prove one’s sincere interest, it is customary for the prospective purchaser to present the draft alongside a deposit, generally a small percentage between 5% and 10% of the price of the asset.
The vendor then has a limited time to accept the offer or not. If the proposal is accepted, the vendor countersigns the proposal and retains the deposit. Only once the proposal is signed by both parties does it become legally binding: if the seller does not accept, he/she simply refunds the deposit and there are no further implications.
Though accepted and legally acknowledged, purchase proposals are seldom used. This because it’s hardly possible for the prospective buyer to have all the needed information about the property when this first offer should be drafted. Hence, generally, the potential buyer contacts a lawyer for advice and moves forward with the preliminary contract, the compromesso in Italian.
The compromesso, i.e. the preliminary contract, is that document that has to be agreed upon and signed by both parties prior to the finalization of the deal. It is a private agreement, thus does not establish an ownership transfer, but it is legally binding inasmuch as it commands both parties to sign a final deed before a notary. Formally, the preliminary contract comprises the basic data of the transaction: agreed sale price, deadline date for closing of the deal and property details as shown in the land registry records. Pursuant legislation as issued in January 2007 the compromesso is to be registered with tax authorities. This step is carried out by the real estate agent in charge, and fees for registration are normally settled by the buyer.
It is customary for the buyer to enclose a down payment, an amount that generally ranges between 10% and 30% of the total sale price. The Italian term for this deposit is caparra confirmatoria, i.e. confirmation deposit, or caparra penitenziale, literally penitential deposit.
The caparra confirmatoria, the most commonly used of the two, serves to protect both parties in case a default should jeopardize finalization of the deal. Should the prospective purchaser be accountable for the drawback, he/she loses the deposit paid. Should the seller be held culpable, he/she will be obliged to refund the buyer twice the amount of the deposit. In case the buyer is able to demonstrate that the loss incurred exceeds the amount given as down payment, the vendor might even be asked to refund a higher amount.
When the down payment selected is the caparra penitenziale, the party that chooses to back out will be required to pay his/her counterparty the full amount agreed upon as deposit, and no further claims are accepted.
The decisive and final step of a property transaction in Italy takes place before a notary. Generally, the notary is selected by the buyer, who will also be in charge of settling the professional’s fees. The fee applied by the notary is usually around 1% of the price of the asset. Yet, because it is a variable fee, if the property’s price is very low the percentage can sometimes be higher. In compliance with Italian law both the vendor and the buyer need to be physically present, or at least duly represented by a third party bearing an official Special Power of Attorney act, at the meeting withing the notary’s office, and both are required to sign the deed. Current Italian legislation also maintains that the deed be drawn up in Italian language, yet the law allows for the document to be bilingual if one of the two parties does not speak Italian. In these cases, the non-Italian speaking party will generally hire a professional interpreter, to facilitate communication throughout the transaction, or be represented by a bilingual attorney.
Pursuant to Italian law provisions, the notary reads the contract out loud, to ensure both parties perfectly understand its implications and assess whether all reported statements are correct and legitimate. After the document has been read, understood and confirmed by both parties, the notary produces the final deed. The deed is issued in three copies, and all three are signed by the buyer, vendor and notary.
The last step is the settlement of the outstanding balance due. The easiest, and most seamless, way for this is a transfer via the notary’s escrow account, a special bonded account via which the notary may receive money for the payment of a property, and keep it safe and secure til when it can be transferred to the former proprietor. Once all criteria established by the sales agreement are fulfilled, and the full amount is paid, the property ownership is transferred to the purchaser.
As exciting and alluring as it may seem, buying real estate in Italy calls for skill, and a good an insider’s view. Aiming to provide prospective foreign buyers with the tools and know-how they need to find their way through the real estate market, and the crucial legal proceedings that lead to ownership our team of experts offers the undivided attention and trustworthy assistance one needs to successfully purchase property in Italy.
Comprising accountants and lawyers, real estate agents and surveyors as well as architects and engineers, we are able to facilitate our foreign clients’ search for the perfect property by sharing our insight with them, and helping them through the maze of the local real estate market. Then, our lawyers assist by examining all documents, and providing legally binding translations of important ones such as land register plans and energy rating certificates, and/or drawing up technical and due diligence reports, and drafting offers and preliminary contracts. Finally, to allow our clients to be time-effective, we can represent them before the notary public, thus ensuring proceedings are flawless, and their best interests safeguarded.