A guide to buying a property in Italy

Buying a property in Italy can be really exciting! However, the Italian property market can be confusing and complicated for both Italian residents and foreign investors. The conveyancing process, influenced by Italian bureaucracy, might differ significantly from what you’re used to. This legal guide, prepared by our expert Italian Real Estate lawyers, offers a comprehensive overview of potential pitfalls and how to protect yourself when buying property in Italy, whether you’re aiming for rental income or personal use. 

Buying property in Italy: pitfalls and common mistakes

This excitement can quickly turn into disappointment for foreign buyers and even Italian residents unfamiliar with the complexities of Italian real estate transactions: a foreign language, a different legal and tax system, and potentially different business practices. Fluctuations in house prices can also add to the challenge.

Crucially, we strongly recommend hiring an Italian real estate lawyer. This is not an unnecessary precaution. Unless you are an Italian property expert, you need a bilingual advocate specializing in both Italian and International property law to represent your interests, especially when navigating the Italian real estate market. Italian law recognizes pre-contractual liability. If you feel aggrieved by the seller, you might be able to claim expense reimbursement and compensation.

We’ve encountered numerous cases where clients sought legal advice after signing reservation agreements (Prenotazione), sometimes paying a deposit. This can create difficulties, especially for those unfamiliar with the Italian language and the nuances of Italian property law. Renegotiating terms becomes much harder at this stage.

Therefore, before signing any document or paying any deposit, seek guidance from a specialized Italian property lawyer. This is vital for navigating the complexities of the Italian property market.

Purchasing a house in Italy: the importance of a real estate agent

Under Italian law, the real estate agent is paid a commission (Provvigione) both by the buyer and the vendor which is usually between 3% and 5% of the purchase price. It is possible to agree to other legal arrangements, whereby the agent is paid by the buyer or the vendor only.

Frequently, when buying a house in Italy with an Italian agent foreign buyers will be required to sign a standard agent’s fee contract, which should carefully be considered before signature. This applies especially to the terms relating to the amount of their commission and the time when it will be payable (normally upon acceptance of the purchase proposal).

As mentioned, Promisee Buyers are frequently asked to sign the agent’s fee contract together with the reservation form (Prenotazione) or the purchase proposal (Proposta d’Acquisto) for the particular property and the payment of a deposit.

Preparatory activities before buying a property in Italy

In order to complete the purchase of a property in Italy it will be necessary to carry out the following  preliminary activities:

• Engaging a Geometra/Architetto. Geometra and/or Architetto are surveyors who can be appointed to make sure the property is up to standard. You can instruct one yourself or take advantage of our in-house architects.
• Obtain an Italian Bank Account and Fiscal Code: if you are planning to buy a property in Italy, it is advisable to open an Italian bank account to pay for the transaction costs and the purchase price during the process and to manage the ongoing expenses after the sale. Italian banks require new customers (especially non-residents) to submit their application in person in one of their Italian branches. You will also need an Italian tax number (codice fiscale), which you can get at the Italian consulate in your home country or through an Italian tax office. In our experience, it can take up to three weeks to receive your Italian Fiscal Code. Our lawyers will provide you with the necessary assistance during these steps.
• Drafting a Special Power of Attorney: If you are not able to attend the final completion, it is required to draft a special power of Attorney which would allow your lawyers to represent you before the notary, signing the final deed on your behalf. A special Power of Attorney is a written document in which one person (the Principal) appoints another person to act on his or her behalf, by granting powers limited to a specific matter, such as selling or purchasing a real estate property, handling some bank account or executing a limited partnership agreement. A power of attorney may expire on a date stated in the document or upon written cancellation.
• Obtain the Energy Performance Certificate (APE): Before final completion, the seller is required by law to deliver to the promisee buyer a copy of the applicable Italian energy performance certificate (Attestato di Prestazione Energetica or APE for short).

Negotiating the purchase of real estate in Italy with a Letter of Interest

The Letter of Interest is a non-binding pre-contractual document signed by both parties to set out clearly and precisely the terms of negotiation of a real estate purchase.  It is aimed to avoid any misunderstanding during the negotiation and to allow both parties to carry out due diligence on the other party. Consequently, the Letter of Interest needs to be as detailed as possible, specifying clauses and information that will be reported in the following preliminary contract.

The Letter of Interest may be either unilateral or bilateral. It is unilateral when it is instructed by just one of the parties, such as the potential Buyer, without any direct negotiation between the seller and the buyer or, bilateral, when it is agreed and negotiated directly between the parties and undersigned by both, the buyer and the vendor.

Regardless of whether it is unilateral or bilateral, it may become binding on the parties’ intentions or not. So, when purchasing real estate in Italy, it is necessary to insert specific clauses to avoid any misunderstanding regarding its binding or non-binding nature.

Due diligence when buying a property in Italy

It is vital to acquire and carefully review the documentation and property searches when buying a property in Italy, or, at the very least, to have ascertained any legal and practical issues before completion. The vendor must inform the buyer of any material fact that may affect their decision to proceed with the purchase of that property. Such documentation will also enable buyers to carry out their searches to verify the actual status of the estate.

For this reason, before signing any contract, our Real Estate Team usually advises to conduct a survey of the property with the assistance of local surveyors and to carry out all the searches required to ensure that:

• the property complies with the description;
• it is legally fit for human habitation;
• it is legally transferable.

It is important to highlight that in case the preliminary contract is signed before carrying out all the searches and acquiring the relevant documentation, the buyer may experience unexpected problems at a later stage when it could be too late to cancel the contract without consequences. Indeed, even if these problems are covered by the terms of the preliminary contract, the vendor could be unwilling to deal with them correctly or to return the deposit.

If any issues arise with the property at this stage, the buyer will be in a much stronger position with the vendor if no contract has already been signed or the deposit has been paid. In this case, it would be possible for the prospective buyer to re-negotiate or simply walk away from the proposed deal with no obligations.

Financing your Italian property purchase

If the property purchase is completed with the assistance of a mortgage, it is essential to deal with all the necessary banking and legal arrangements before signing the contract.

It is possible to apply for a mortgage in Italy or from a lender in your home country registered to lend mortgage funds within the Italian territory.

In Italy bank mortgages cover most of the sale price of the property, and may be agreed in Euros, or any other foreign currency. However, for non-residents, it is likely that the banks will not lend more than 50% of the purchase price.

If you wish to obtain a mortgage, either for the purchase or for possible renovation expenses, please note that the mortgage structure in Italy is very different to what you may be used to. In fact, while the base rate may seem low, other charges may apply. For example, set-up fees are normally higher due to less competition.

It is highly recommended to get an independent financial adviser on board before submitting the mortgage application. Our lawyers and accountants specialise in banking and financial matters, providing you with both, legal and financial assistance, to obtain a mortgage. Moreover, we would be glad to introduce you to our trusted Italian-based mortgage brokers who will be able to advise you on both Italian- and EU-based mortgages for your Italian property purchase or renovation.

Before applying, it is advisable to budget for all the costs of a property purchase. Indeed, the buyer is responsible for paying the notary, the estate agent and the geometra fees, as well as any legal representative fees. The buyer is also charged with all sale and transfer of property fees.

Obviously, where an Italian property is already subject to a mortgage, it will be necessary to agree with the vendor that the existing mortgage will be paid off – and the corresponding entry on the Local Land Registry cancelled – before completion of the acquisition. The assistance of a local real estate lawyer is required and the procedure may be expensive and time-consuming.

Alternatively, it could be possible to agree with the vendor and the bank that the buyer will take over the mortgage (Accollo del Mutuo). In this case, it is essential to check the state of the past repayments and the terms of the original mortgage agreement.

Other restrictive clauses may be included in the documentation submitted to the buyer, such as limitations of liability, lack of any legal commitments on the part of the seller, etc. The presence of these one-sided clauses can be spotted usually by the request to sign the same document twice for ratification. This is a requirement of Italian law for unfair, unbalanced or unusual clauses, and should be a warning to the foreign buyer not to sign the particular document, without receiving prior legal advice.

Secure the purchase with a Preliminary Contract

The Preliminary sales agreement is a private agreement between the promisee buyer and promisor seller. This legally binding contract commits both parties to the transfer of ownership and to complete the purchase, paying the balance of the agreed price on a specified, future, completion date.

For this reason, it is frequently called a preliminary contract (in Italian, Contratto preliminare or Compromesso), as another final deed will be executed on completion of the acquisition. It is a complex legal document, which should always be considered with the assistance of specialised Italian lawyers before signature, to avoid the pitfalls of the property market.

When all the arrangements have been completed and the preliminary contract is agreed, the parties proceed to the signature and the exchange of two identical original Preliminary Contracts. This step can be completed both privately or before a notary. Upon exchange of the preliminary contract, a deposit is payable by the Promisee Buyer to the Promisor Vendor.

In the event that the Promisee Buyers decide not to pursue the purchase, the preliminary contract can be cancelled at any time. In such case, the Promisor Vendors have the right to alternatively retain the paid deposit or to seek legal action to enforce the purchase.

On the other hand, if the Promisor Vendors back out of the property sale, they will be liable to pay double the amount of the paid deposit. If this is the case, Promisee Buyers could also claim compensation for the damages suffered as a consequence of the abortive transaction.

Purchasing property in Italy: notary, final deed and completion

When purchasing property in Italy, it is common practice that the Notary is usually chosen and appointed by the buyer (ultimately responsible for the related professional fees) although they act for both parties and are asked to be completely neutral. Indeed, Italian Notaries are public officers who are responsible for:

1. verifying that the transaction complies with laws and regulations;
2. reading the whole deed of sale to ascertain the real intentions of the parties making sure they are aware of the legal consequences coming from the deed;
3. receiving all the taxes and duties related to the transaction to be transferred to the Italian Tax Authority (Agenzia delle Entrate).

The signature of the deeds of sale (rogito) before the Notary, together with the negotiations and the preparation of the preliminary contract, is the most delicate stage of the whole purchasing process, especially if you do not speak Italian.

For this reason, you would need the assistance of a lawyer throughout the following procedure:

• The original copy of the contract is read by the notary in technical legal Italian. Three copies of the contract are signed by both parties.
• The Buyer is now asked to pay the eventual stage payment or the balance of the purchase price to the Seller. A bank check (Assegno) or a cashier’s check (Assegno circolare) will be handed over to the Vendor. It is also possible to complete the payment through an urgent bank transfer to be credited on the same completion date.
• In case one or both the parties are not able to attend the final completion, the deed can also be signed by a legal representative for each party executing a special Power of Attorney (PoA) which allows your solicitor or a trusted person to represent you before the Notary.
• The original Italian energy performance certificate (Attestato di Prestazione Energetica or APE) needs to be attached to the final deed signed by the parties.

The costs of buying real estate in Italy

The round trip transaction costs of buying real estate in Italy include all costs of buying and then re-selling a property – lawyer and notary fees, registration fees, taxes and stamp duties, agents fees, etc. There are different kinds of taxes referred to a property purchase, depending on various factors.

For example, different rates of taxes apply if the property is sold by a “private” seller or by a company. If the property is purchased as a “first home” (in Italian prima casa) a lower rate is applicable within certain requirements. Our in-house tax consultants are ready to assist you and provide you with the best advice on the fiscal regime applicable to the purchase of your property in Italy and any possible tax deduction.

As reported, agent fees are usually divided equally between buyers and sellers ranging between 3% and 10%. It is advisable to always ask the real estate agency for their terms and coditions before appointing them for your property search or submitting any offer with them, and these will include:

• Notary fees depend on the sale price – a lower sale price equals a higher percentage which does not usually exceed 2.5-3%.
• Registration tax, payable upon completion, is 2% for a main residence. For non-residents, it is increased to 9%, and it may be as much as 10% for agricultural property. Purchasers of new properties are exempt from such tax. However, they are charged with Italian VAT on the property’s commercial value – 4% for a main residence, 10% for non-residents or a second home, and as much as 22% for a luxury property. Where applicable, Registration tax is payable at a fixed rate of €200.
• Land registry tax: it includes two different duties such as a) imposta ipotecaria (mortgage tax) and b) imposta catastale (cadastral tax) which are also payable at a fixed rate of about €50 each for private transactions (buying by private Sellers) or €200 each on properties purchased by construction companies.

Further costs to budget may be the fees payable to any appointed surveyor, architect or solicitor; the installation or connection of water (for new properties), electricity or gas, currency conversion costs (which can be minimised by using a professional company – please ask your fee earner for further details), and moving costs.

For a brief description of the transaction costs please have a look at the chart below: