According to Graziano Cecchetti, Italian lawyer, "Value is to be found in Italy, property prices are still relatively low. Whether it is a villa in Capri, a characterful farmhouse in Tuscany or an apartment with views of Lake Como, vast amounts of property are still available at affordable prices in 2016. With this in mind, Graziano Cecchetti explains how to easily buy Italian real estate in 2016.
How Do I Start the Property Purchase Process?
The first stage is to check, with the assistance of a local notary, the legal status and owner details of the property. You must ensure the seller has the right to sell the property and no mortgages, third party rights or charges are outstanding. An Italian lawyer will arrange the necessary planning searches with the local authorities (commune) and land registry (catasto), and ultimately produce a written document of qualification.
A local surveyor (geometra) report will assist the buyer in confirming the following regarding the property:
- Meets the applicable local planning, building and land registry regulations, (regolarita, edilizia, urbanistica e catastale) alongside any relevant document on consent/building plan as issued by the local authority (commune)
- Suitable for human habitation with a certificate issued to that effect (certficato de abitabilita).
- The vendor is compliant with the relevant tax regulations and filing of tax returns and payment of income tax (Imposta Sui Redditi) and council tax (ICI-Imposta comunale Immobili) including other taxes or charges brought forward from the previous tax years.
- In case the vendor is a trader, commercial entrepreneur, or a company, it is ascertained that the vendor is not declared bankrupt, the business compulsorily wound up (fallito), and there are no pending applications against the vendor or his Italian company as may be deemed applicable.
- For property that is amongst a block of flats (condominio) the service charges due for payment should have been paid and up to date.
- In situations where the property is connected to an agricultural land, it must be ensure that the tenants or neighbours do not have farming pre-emption rights (Prelazione agraria), or any third party rights over the use of the property
In the offices of a local public notary (notaio) all parties sign the preliminary contract (compromesso), a binding legal document, stating the completion of the property purchase at a future date. It is generally recommended that you seek the assistance of an Italian lawyer before signing the preliminary contract (compromesso), as this is a complex legal document and by signing commits you to purchase the property at the agreed price.
The foreign buyer should ensure the following details are properly stipulated in the contract:
- Clearly defines in detail the property being sold with reference to all the parcel numbers indicated, according to the relevant Local Land Registry (catasto). An attachment of the sold property's scale plan should also be attached to the contract.
- The amount paid as deposit should be clearly stated alongside the receipts for all the payments made. The actual property price and the agreed price should also be shown.
- The unconditional commitment by the vendor towards the sale of property on the specified date should be clearly stated with all the doubts and reservations eliminated from the legally binding document.
- Any kind of dealings where the property is involved, such as existing mortgage, third party rights, or any other problem identified in the process of documentation, searches and/or surveys as submitted by the vendor, should be clearly outlined.
- To be included also are the formal sworn statements and all the necessary details as required under the recent legislation issued in August 2006, for the protection of both the buyer and the vendor.
In order to avoid attracting penalties, the original Italian Energy Performance Certificate (Attestato di Prestazione Energetica "APE") should be attached to the preliminary contract to be signed by both parties involved.
What Do I Need to Watch out for?
It is always very important to scrutinise all documentation and search reports, as the vendor might be reluctant to deal with issues covered under the terms of the preliminary contract at a future date. Furthermore, given the nature of legal proceedings in Italy, future legal proceedings will be expensive and time consuming. Problems detected before the contract is signed may result in re-negotiation of the contract, or cancellation, since there is no legally binding contract or deposit made. If you will have a mortgage (mutuo iIpotecario), a binding mortgage agreement will need to be arranged or an irrevocable offer needs to have been formally accepted before the actual signing of the preliminary contract. If legal or practical problems occur, always set a specific timeframe for these to be rectified before signing.
To complete the purchase process, the purchase deed (rogito) will be drafted at the local notary office (notaio), as well as the registration, execution and payment of Italian taxes.
How Is the Property Sale Completed?
The foreign buyer will be given a certified copy of the purchase deed by the appointed Italian notary. The sealed, certified copy of the purchase deed should be collected from the notary's office within a period of two to three months after completion, and all taxes paid. The vendor should use the form available at the notary's office to give a formal notice of sale to the local police authorities (questura). New utility contracts (volturazione delle utenze) can be initiated, such as the requests for the provision of power, gas, water, etc. In case the facility is within a block of flats then the condonium manager (amministratore del condominio) should be notified of the new property owners.
Will I Need a Power of Attorney?
The vendor is required to produce the title deed, building licenses/certificates, alongside the relevant planning documentation and other necessary information. The buyer on the other hand should make arrangements for a power of attorney (procura). A power of attorney is only necessary if the buyer will not be able handle the completion formalities towards the acquisition of the real estate in person and is willing to nominate someone else to handle formalities, like signing on his/her behalf. If the foreign buyer is not fluent in Italian, a "procura" may be legally required, as the foreigner may not be authorised to sign the relevant completion documents by the notary due to lack of proper understanding. A third party that is fluent in Italian can be selected to sign the completion documents on behalf of the foreign buyer. With the consent of the appointed notary, the "procura" can be avoided if an interpreter/translator is appointed who can interpret to the buyer in a language he/she understands, the entire Italian title deed (rogito). The foreign buyer will then be able to personally sign the title deed of sale (rogito). However not all Italian notaries agree to this procedure.
Do I need an Agent?
Agents are useful, however will the buyer or vendor be paying for the agent? According to Italian law, an agent is paid through commission (Provvigione) and has the duty of cultivating a common ground acceptable to both buyer and vendor. An agent must be registered at the Italian Chamber of Commerce. It is advisable to avoid engaging in the signing of documents at an early stage, as it can easily result in a binding legal contract. The buyer should ensure all payment records are kept; copies of any cheques delivered, details on any bank transfers made, evidence will be required later in the purchase process.
Can I pay in Cash?
Cash payments in excess of €1000 are deemed illegal under current money laundering regulations in Italy.
Do I Need to Pay a Deposit?
Yes, a deposit is paid between 10% and 30% when the preliminary contract is signed. According to Italian law, the legal interpretation of the deposit can have complex implications for foreign buyers. If the paid deposit is "Caparra Confirmatoria", the buyer stands to lose the entire deposit paid if he/she defaults.
What Else Do I Need to Consider?
The illegal practice of declaring a lower value of the property on the title deed (Rogito) is common in Italy; however by registering "compromesso", the local tax authorities will be able to obtain a copy of the Preliminary contract stating the actual contracting price making it difficult to declare a lower value. This translates to full payment of Italian Registration Tax (Imposta di Registro), which should be paid by the buyer for the transaction (Italian Registration Tax and other associated minor taxes that are payable at a flat rate of either 10% or 17%, of the stated value as per the title deed of the property in question). There are a few legal exceptions to this rule.
What Laws Protect Me if I Buy Off Plan?
Towards the end of July, 2015 a new legislation aimed at protecting the buyers of residential property sold while still under construction, referred as "off plan", came into force. The legislation was intended to protect buyers who enter contractual agreements, pay substantial amounts of money as deposits, only to realize later that the vendor has been declared bankrupt, insolvent or even disappeared.
The new legislation therefore provides the vendor or builder must deliver to the buyer:
- A guarantee by the bank (Fideussione) that covers the total amount paid before completion of the sale and release of the Italian real estate at the time of contract exchange (Compromesso stage). The bank guarantee should authorise the refund of the paid amount to the buyer, by the bank or guarantor in case of insolvency of the vendor or builder arises. The refund should be done within a period of 30 days from request, once all the required documents are delivered and there is evidence of the total amount paid to the vendor/builder.
- Insurance policy covering a period of 10 years (polza assicurativa indennitaria) for all the damages, defects, partial collapse and other third party damages that may occur. The insurance policy is to be due at the time of actual completion of the property (rogito stage). A list of technical documentation needs to be included in the preliminary contract, including:
- All planning permission listed in detail.
- Detailed set of specifications for the building being sold.
- Detailed list of all amounts paid and all the payments still due.
- Comprehensive list of the bank guarantors
- All the measurements and detailed map of the building under sale.
- Detailed list of projected deadline for completion of construction.
What Taxes Are Paid on Completion of Property Purchase?
Tax legislation in Italy is quite complex and is frequently exposed to extensive changes.
Relying on the advice given by the vendor or estate agent can be disastrous, if any irregularities are identified, the foreign buyer may be charged fines, interests, corrective assessments, and in the extreme case even with criminal proceeding, Italian tax court proceedings are often uncertain, expensive, and can last quite a longer time.
The foreign buyer is required to pay three different types of Italian taxes for the acquisition of Italian real estate.
- Registration tax (Imposta di registro)
- Stamp duty (Imposte ipotecarie e catastali)
- Italian VAT (IVA)
Under legislation enforced in August 2006, real estate property transactions are subject to different kinds of taxation dependent on whether the property is registered as a residential place (Immobili abitativi) or as an industrial, commercial or professional place (Immobili strumentali).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.