Among the many and varied detrimental consequences of the COVID-19 pandemic is the impact on the savings and investments of individuals, particularly in relation to estate planning. Financial markets have...
Buying and selling property in Italy
If you are considering buying or selling a property in Italy, a country where you may not be familiar with the language or the procedure and associated technicalities, it’s important to obtain independent legal advice to avoid exposure to any risks.
During the process of a property sale/purchase in Italy, it is not common practice for the buyer and the seller to be represented by separate lawyers. Instead, the Notaio, a public official who drafts the deed of sale, checks that all is in order and should represent and advise both parties equally.
If you are selling a property through an agent, you will usually receive a detailed formal offer from an interested buyer. The formal offer will be accompanied with a cheque for the deposit (the “caparra”). If the offer is accepted, you will be entitled to receive this deposit, and the offer will become a “compromesso”, also known as the preliminary contract.
This contract is fully binding, and it is therefore of upmost importance that any offer received by an agent is checked carefully before being signed. A lawyer can suggest the insertion of any clauses that will adequately protect you. Equally, it’s advisable that any agent’s mandate is checked by a lawyer before it is signed.
In the event of a private sale, it’s sometimes worth signing a preliminary contract if you need some time before the sale can go through. For example, a preliminary contract would be useful where you have inherited a property and have found a buyer but cannot sell until the succession procedure in Italy is complete. It would also be a useful tool to lock both parties into the sale.
The preliminary contract will contain a date by which the sale must be completed and this is binding on both parties, unless you mutually agree to an extension. If the seller does not complete by the agreed date, through no fault of the buyer, then the buyer is entitled to rescind from the contract and demand double the amount of the deposit paid, plus damages suffered as a result of the breach. If the buyer does not complete by this agreed date, the seller is entitled to rescind, keep the deposit received and ask for damages.
Compliance issues with the property could be one reason why the seller may not be able to complete. If, for example, the property has undergone renovation or construction works without relevant authorisation or planning permissions, and/or if the Land Registry is not updated in any way, these issues must be rectified before the property is sold. Current building compliance rules are stricter than previously, so these issues may have gone unnoticed at the time of purchase. It’s vital to be aware of any issues before a preliminary contract is signed to ensure you have enough time to rectify them and not be penalised for being unable to sell by the agreed date.
Whether you are the buyer or the seller, it is our advice to instruct a local architect or a surveyor to provide a full report on the property, making sure it has all relevant planning permissions and that the floor plans lodged with the Land Registry reflect its current state (the seller has to declare that it is in the deed of sale).
Selling a property in the knowledge that it has building or other issues could have civil consequences (the deed of sale could be annulled, and damages be awarded to the buyer, together with the full purchase price), as well as criminal consequences.
A buyer should either obtain this report or request that the seller provide one in order to avoid purchasing a property with issues that will have repercussions in the future.
If selling an apartment, the seller must check that the condominium has all the relevant certificates for the building, including the “certificato di agibilita’” (a certificate which confirms that the building containing the apartment adheres to all the health and safety regulations). Whilst its absence does not necessarily prevent a sale going ahead, or risk the deed being annulled in the future, a buyer can insist that it is provided for at the deed of sale. If the seller cannot provide it by this date, the buyer can state that the seller is in breach of the preliminary contract and ask for double the deposit back. Usually, however, the buyer will ask for a reduction in the purchase price in recognition of the lack of this certificate.
Once all the checks have been undertaken, and any other issues have been resolved, the Notaio will suggest a date for a meeting (“il rogito”) where all parties will be present to hear the deed of sale being read out, iron out any last minute issues, and sign the deed of sale.
You can choose to be present at this meeting and sign the deed yourself, or instruct someone to sign it on your behalf, with a Power of Attorney. If you are signing a deed in person, and do not speak Italian, the deed must be translated into English by a certified translator.
The seller must provide copies of all relevant planning permissions, the property energy certificate and certificate of use for the land, together with any other documentation the Notaio requests (such as proof of title). If they are selling an apartment, they must also provide a letter from the condominium administrator stating that there are no outstanding payments.
As well as any estate agent’s fees, the seller will be liable to Capital Gains Tax (“Plusvalenza”) on the property, calculated at 20% of the gain. However, liability exists only if the property is being sold within five years of purchase and is not registered as the seller’s main residence. Capital Gains tax will also not be applied if the property was inherited.
The buyer is liable for the Notaio’s fees, agent’s fees and taxes due; collectively called “imposte di registro” (Registration taxes). These are calculated at 9% of the “valore catastale” of the property, which is the tax value of the property, rather than the sale value.
If the buyer declares that this property will become their main residence (“prima casa”), then the taxes will only be 2% of the valore catastale. It’s important, however, that the buyer registers as a resident at his new property’s address within 18 months of the deed being signed, failing which they will be immediately liable for the difference in tax and heavy penalties.
It is usual practice that the buyer pays the balance of the purchase price due directly to the seller, either by handing over a banker’s draft at the rogito (if the seller has an account in Italy) or by bank transfer. It’s possible for the Notaio to hold these funds on account and send them to the seller.
In situations where the balance is being paid via mortgage, funds may not be received by the seller for 14 working days following the signing of the deed of sale, as the financial institution has to undertake checks to ensure they will have first charge on the property.
Once the deed of sale has been signed by all parties, the matter has completed and the keys are then handed over to the new owner. The Notaio will proceed to pay the taxes on behalf of the buyer, register the deed in the relevant Register, and update the Land Registry to reflect the transfer of ownership of the property just sold, together with any charges on the same.
If you are buying or selling a property in Italy, we can assist you throughout the whole process, by providing the following services:
- Examining the original deed of sale, the floor plans and Land Registry entries to identify any charges on the property and whether there are any potential building issues or land registry issues;
- Liaising with any estate agents and checking their mandate;
- Instructing a local architect or surveyor to provide a detailed report on the property and advise on any issues, how to rectify any problems and the costs and timings of the same;
- Checking the formal offer to purchase/draft a preliminary contract for sale;
- Liaising with the condominium administrators to check that the building has all the necessary certificates, requesting the required declaration;
- Liaising with the Notary as to any issues;
- Arranging for the translation of any documents, as necessary;
- Collecting all necessary documentation needed to complete;
- Advising on tax liabilities and other costs you will incur;
- Checking the draft deed of sale;
- Preparing a bilingual Power of Attorney, enabling another person to attend completion on your behalf;
- Attending the rogito on your behalf or with you, if requested;
- Checking that the sale has been registered and that the transfer has gone through;
- Assisting with post-completion matters, such as transfer of name on utilities and advising on ongoing liabilities, including yearly charges and property tax.