Selling your Italian property it is a quite complex process. Whilst it is not tricky as buying one and it is very important to pay attention to specific aspects.
For this reason, it is better to have on your side a bilingual expert in the Italian property market, as well as with both the Italian and international property law. Keeping in mind that Italian law provides for pre-contractual liability. In the event that one of the parties feels aggrieved by the other’s behavior, the first one can claim for reimbursement for any occurred expenses.
In our experience some clients turn to Italian’s real estate expert contacting our Firm when they have already signed a reservation agreement (Prenotazione/Proposta d’Acquisto). when the buyer has already paid a small deposit to the agent, as a sign of serious interest in the property. This approach often poses problems as the vendor is not familiar with the Italian language and market. So, it would be much harder to renegotiate or amend general terms & conditions of the purchase.
Granted the above, a foreign vendor should be warned that in view of the legal, technical and practical difficulties involved in a property sale in Italy, it is highly advisable to seek the assistance of specialized Italian lawyers, at a very early stage, possibly before signing any document.
Real Estate Agent
Under Italian law, the real estate agent is usually paid a commission (Provvigione) which is usually between 2.5% and 3% of the purchase price by both the buyer and the vendor. It is possible to agree other legal arrangements, whereby the agent is paid by the buyer or the vendor only.
Preparatory activities before buying a property
In order to complete the purchase it will be necessary to carry out the following preliminary activities:
– Engage a geometra
A geometra is a surveyor and architect rolled into one. They will carry out a survey to provide you with an estimation of the property. With a similar estimation you will have a clear idea of the best price you can obtain from the sale at the current property market. Also, they make sure the property is up to code eg preparing the Energy Performance Certificate. You can instruct one yourself or take advantage of our in house-architects.
– Drafting a Special Power of Attorney
If you won’t be able to attend the final completion it will be necessary to draft a special power of Attorney that allows your selected attorney to represent you before the notary.
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 specific matters, 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. Usually the signer acknowledges before a notary public that he executed the power, so that it is recordable if necessary, as in a real estate transaction.
– Provide with the Energy performance certificate (APE): Before final completion, the seller is required by law to deliver to the prospective buyer a copy of the applicable Italian energy performance certificate (Attestato di Prestazione Energetica or APE for short).
Letter of Interest & Negotiation
It is a not binding pre-contractual document that both parties exchange to set out clearly and precisely the terms of the negotiation for the sale of a property. It is aimed to avoid datas and contents incompleteness and approximation of the negotiation that would lead to misunderstandings and loss of time for both parties. For these reasons, it must be complete and precise, specifying clauses and information that will be included and binding in the following preliminary contract.
The letter of intent 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 with the Seller-Owner 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. For this reason it is necessary to thoroughly check whether the letter of interest received from the buyer contains specific clauses to avoid any misunderstanding regarding its binding or not binding nature.
Searches – Checks on the Buyer
The whole negotiation and the completion of a property sale procedure are based upon faith and loyalty. Good faith and fairness are some of the main values of a transaction between parties. Unfortunately, good faith and fairness can fail during the negotiation or the completion procedure. For this reason, it is important to know your own counterparty and it is essential to complete a preliminary due diligence carrying out some preliminary searches on buyer’s solvency and reliability (natural person or legal person) before signing any letter of interest or preliminary contract.
These searches (e.g. job, pay slip/salary, assets, solvency, debts or credits, etc…) help the vendor to get to the completion avoiding any dangerous and annoying surprise or any potential misunderstandings.
The Preliminary sale’s contract is a private agreement between the “promising” buyer and the “promising” 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 date.
For this reason, it is frequently called “preliminary contract” (Contratto preliminare or Compromesso), as another final contract / deed will have to be executed on completion of the acquisition.
Preliminary contract is a complex legal document, which should always be considered with the assistance of specialized Italian lawyers before signature, to avoid the pitfalls that plague the property market.
The preliminary agreement will contain the following:
– Identification of the parties (full names, place and date of birth, passport number, nationality, tax identification number – in the case of companies which are selling, they must provide their value-added tax number, and their legal registration number).
– Indication of the location of the property (commune and province).
– Identification in the national Land registry (NCT) or urban areas (NCEU) – such identification is achieved by reporting the cadastral details of a recent title search. In case the property sale refers to:
– Indication of the deposit
Parties are free to agree the amount of the deposit. Usually, upon the exchange of the compromesso, a deposit will be payable ranging between 10% and 20% of the sale price, depending on what has been agreed. Once signed by both parties, it locks in the price of the property.
Under Italian law, the legal definition of deposit can have serious implications for the foreign buyer. A distinction is made between “Caparra Confirmatoria” and “Caparra Penitenziale“.
If the deposit paid is defined as Caparra Confirmatoria, it means that in case of default in completing the sale of the Italian real estate on the agreed terms, the purchaser will automatically lose the whole of the deposit paid. Conversely, if the vendor is to blame, he will be under a binding legal duty to pay to the buyer twice over, the sum originally received as a deposit. In addition further sums may be payable, if it is proved that the damages actually exceed the amount of the deposit.
If the deposit is defined as Caparra Penitenziale then, subject to the actual wording of the contract, it will enable either or both parties to the contract to withdraw from the transaction, by allowing the vendor to keep the deposit paid, in the case of the buyer withdrawing, or compelling the vendor to return the deposit received, where the vendor wishes to terminate the contract.
– Verification on whether any limitations exist to the title, e.g. judiciary or bank obligations, inheritance or property rights, rights to first choice of purchase, or any other limitations that reduce or in some way curtail the right to full title of the property. The seller must commit him/herself to eliminating such limitations prior to, or simultaneously with, the final sales act;
– Identification of all servitudes that might weigh on the property (roads, trails, pipelines etc that transit through the property to be purchased) and those from which the property should benefit (access to water from nearby natural sources or wells, rights of passage, and rights to access to pipelines etc);
– Building licenses issued after 1967;
– Building licenses in the process of being issued: in the case of purchase of a building to be constructed, agreement to purchase and total payment must be conditional on the issuance of the required license.
– The sale price, indicating the amounts paid at signature as a deposit, the eventual instalments and the balance to be paid at completion. The initial payment (anticipo) should be identified as the down payment (caparra confirmatoria). In case the sellers decide that they no longer wishe to sell, they will be asked to compensate the damaged buyer with twice the amount of the initial down payment.
– The completion date. It must be at least 60 days after the exchange of the preliminary contract.
The Compromesso proves the intention to buy and it is binding by law if registered with the Inland revenue office. Once both the parties have signed the Compromesso they are both committed to the property transfer. Such contract is very rarely broken and inevitably leads to the signing of the final deed of sale (Rogito).
Other restrictive clauses may be included in the documentation submitted for signature to the foreign 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 is usually shown by the request of double signature on the same document. 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 prior legal advice.
In the event that the buyer decides not to pursue the purchase, the compromesso will be forfeited or you may seek legal action to enforce the purchase. On the other hand, if you back out, you will be liable to pay double the amount you received as deposit.
Where the property is subject to a mortgage (Mutuo Ipotecario) or the purchase is to be completed with the assistance of a mortgage, it would 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. For this reason the assistance of a local Italian real estate lawyer or notary will be required in Italy, as the procedure may be expensive and time consuming. Alternatively, it is possible to agree with the vendor and the bank that the buyer will “take over” the mortgage (Accollo del Mutuo), but in this case it is essential to check the state of the past repayments and the terms of the original mortgage agreement.
Notary, Final Deed and Completion
When all the arrangements have been completed, and the draft preliminary contract agreed, signature of two identical original Preliminary Contracts should take place, both by the vendor and the purchaser before a notary.
According to italian practice, usually the notary is chosen by the buyer although he acts for both parties. They are completely neutral. Notaries do not act on behalf of either the buyer or the seller.
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 delicated stage of the whole purchasing process, especially if you don’t speak Italian.
For this reason you will need the assistance of a lawyer throughout the procedure:
-The two original contracts will be read by the notary (to double check that everything stated before is respceted and to avoid any misunderstandings of the legal terms) signed by both parties and should be exchanged.
-The vendor will receive the remaining price amount from the buyer now.
A cheque (Assegno) or a banker’s draft (Assegno circolare) for the deposit will be handed over to you, finalizing the formalities of this stage of the transaction.
Alternatively it will be possible to complete the payment through a bank transfer.
As mentioned before, in case the vendor cannot attend the final completion it will be also necessary to draft a special power of Attorney that allow the lawyer to represent you before the notary.
To avoid penalties the original Italian energy performance certificate (Attestato di Prestazione Energetica or “APE” for short) should be actually attached to the final deed signed by the parties.
Buying costs in Italy can vary. The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.
Agency fees (usually divided equally between buyer and seller) range from 2% to 3% – always ask the agent before you begin looking at property. Notary fees depend on the sale price – a lower sale price equals a higher percentage. That percentage is unlikely to exceed 2.5-3%.
Transaction costs, including taxes and Notary fees are paid by the buyer. Registration tax, payable upon completion, is 3% for a main residence. For non-residents it will be increased to 7%, and for an agricultural property, it may be as much as 10%. Purchasers of new properties are exempt, but will pay VAT – 4% for a main residence, 10% for non-residents or a second home, and as much as 20% for a luxury property.
Land registry tax is also payable, at a fixed sum of about €130 for a main residence, or 1% of the purchase price for non-residents. Other costs to take into account may be a surveyor’s, architect’s or solicitor’s fees, the installation or connection of water, electricity or gas, currency conversion costs (which can be minimised by using a professional company like Smart Currency Exchange), and moving costs.
For a brief description of the transactions costs please have a look on the chart below.
|TRANSACTION COSTS – Italian Property sale & Purchase|
|Registration Tax||3.00 – 7.00%||buyer|
|Land Registry Tax||€168 or 1%||buyer|
|Notary Fee||1% – 2.50%||buyer|
|Legal Fees||1% – 2% (+ 22% VAT)||buyer|
|Real Estate Agent’s Fee||1.5% – 4% (+ 22% VAT)
1.5% – 4% (+ 22% VAT)
|Total costs paid by Buyer||7.05% – 17.82%|
|Total costs paid by Seller||1.83% – 4.88%|
|ROUNDTRIP TRANSACTION COSTS||8.88% – 22.70%|