08 Set Finding a property in Italy: legal advice for foreigners
Finding a property in Italy and moving there? The laws you need to know.
The do and don’ts you need to know before finding a property in Italy
Finding a property and then, buying a home in Italy might be thrilling: the Italian real estate market can be complex and confusing. It is strongly rooted in the cultural traditions of the Country and is unlike anything you are accustomed to.
As a result, foreign buyers’ excitement can quickly turn to disappointment when they encounter the difficulties typically associated with such complex legal transactions in Italy, such as a different language, tax and legal system. You have to consider that buying a house for sale in Italy set you in a different environment toward doing business.
First and foremost, a real estate lawyer in Italy is required. It may sound weird and you may see this as overkill, but unless you are an Italian property specialist, you need someone whose main job is to represent your interests. Finding a property in Italy requires a person that must be fluent in Italian and expert in Italian real estate market and international property law.
Keep in mind that pre-contractual responsibility exists under Italian law (art. 1337 and art. 1338 c.c.). If you are dissatisfied with the seller’s unjust action, you can submit charges to be reimbursed for your expenses.
It is a fact that several foreign consumers turn to an Italian real estate specialist, usually a lawyer, after signing a reservation agreement and paying a small deposit to the agent, as a sign of interest in the property. This strategy frequently becomes an issue if the purchasers are not fluent in Italian, as it is extremely difficult at this stage to renegotiate or amend general terms and conditions of the purchase in accordance with the buyer’s genuine wishes. As we told, finding a property in Italy can be complex!
In the light of the above, it is important to tell a foreign buyer that it is highly suggested to seek the assistance of an Italian lawyer at an early stage, potentially prior to signing any agreement or paying a deposit, given the legal, economical and practical obstacles involved in acquiring a house for sale in Italy.
In this brief guide we speak of:
- Finding a property in Italy: who you can hire.
- Finding a property in Italy: what to do before purchasing.
- What you need to know.
- Finding a property in Italy: about the costs.
You may get help in finding a property in Italy by a Real Estate Agent. Note that the Agent’s only function is basically to propose houses for sale to you. Under no circumstances he or she can act on behalf of the buyer. In this case, according to Italian law, both the buyer and the seller must pay the Real Estate Agent a commission, which is often between 3% and 5% (sometimes more) of the transaction price. Other legal agreements can be made in which the agent is only paid by the buyer or seller.
A foreign buyer may be obliged to sign a standard agency contract (art. 1742 c.c.) when working with an Italian Real Estate Agent, which should be thoroughly studied before signing. This is especially true when it comes to the amount of commission and the date on which it will be paid.
These documents often include the payment of a deposit to justify the reservation of the property.
Real estate agent or a Real Estate Consultant, must meet the following qualifications (art. 5 del D.M. n. 452/1990 – Statutory Instrument):
- a high school diploma;
- a certificate indicating that he took part in a recognized training program;
- he must pass the professional qualification exam at the Chamber of Commerce;
- Individuals must register in the Real Section, while businesses must register in the Business Register.
In addition to these prerequisites, a Real Estate Agent must meet:
- have Italian or European citizenship, residence in Italy in the Chamber of Commerce’s province of registration, enjoyment of civil rights;
- lack of convictions for certain crimes and other deterrents, such as mafia delinquency.
After finding a property and before buying a house for sale, in order to execute the purchase, the following preliminary activities must be completed:
- Hire a professional: a geometra. Often a buyer comes across a professional figure known as a “geometra” when buying a house for sale in Italy. They are capable of performing a variety of jobs, which might make it difficult to comprehend what they can and cannot do. A geometra is a land surveyor who also works as a junior architect. A geometra does not have the same level of formal education as an architect. A geometra frequently undertakes additional “operational” activities, such as doing a technical study of a property and determining whether it complies with the building codes in effect at the time the building was built and maybe updated. Verification of the accuracy of the data, including the floor plan on file with the Real Estate Registry, the land registration for tax reasons, would generally be part of the examination.
- Open an Italian bank account and obtain a fiscal code: a bank account must be opened in person in Italy. You will also need an Italian tax code number, which you can get from an Italian tax office or the Italian consulate in your home Country. It is possible that this process will take up to three weeks. Our Law Firm will provide you with the assistance you require during these proceedings.
- Obtain the APE (D.M. 26 giugno 2015 and following): prior to final completion, the seller is required by law to present the potential buyer with a copy of the Energy Performance Certificate (APE).
- Drafting a Special Power of Attorney (art. 1392 c.c.): If you are unable to attend the final completion, you must create a special power of Attorney that authorizes your lawyer to represent you before the notary. A special Power of Attorney is a written instrument in which one person (the Principal) authorizes another person (the Lawyer) to act on his or her behalf by granting specific rights, such as selling or purchasing real estate, managing a bank account, or executing a limited partnership agreement. A power of Attorney can be set to expire on a specific date or can be formally revoked. Typically, the signer certifies that he used the authority in front of a notary public so that it can be recorded if necessary, such as in a real estate transaction.
Finding a property in Italy is an easy process: there are a lot of houses for sale you can preview via internet. The hard part is buying it: in order to do that, you need to know a few things. Let’s take a look.
- Letter of Interest and Negotiation
Finding a property that meets your interest can lead to a letter of interest. This is a non-binding pre-contractual agreement signed by both parties that clearly and explicitly states the terms of negotiation for a property purchase. It is intended to prevent miscommunications throughout the negotiating process and to enable both parties to undertake due diligence on the other company.
As a result, the letter of intent must be exhaustive and precise, comprising language and material that will be included into and bind the later preliminary contract.
Letters of intent can be unilateral or bilateral in nature. It is unilateral when just one of the parties, for example, the potential Buyer, instructs without direct negotiation with the Seller-Owner, or bilateral when agreed and negotiated directly between the parties and signed by both parties, the buyer and the seller.
It may or may not become binding on the parties’ intentions, whether unilateral or bilateral. As a result, certain terms must be used to clarify whether the clause is binding or nonbinding.
- Due diligence checklist
After finding a property, it is necessary to obtain and thoroughly review the documents and search reports required to complete the transaction, or, at the at least, to ascertain any legal or practical difficulties prior to closing.
The vendor must disclose any material fact that may affect the buyer’s decision to proceed with the acquisition of that property. Additionally, these records will enable the purchaser to do research to ascertain the estate’s current condition.
As a result, before to entering into any contract, our Real Estate Team typically recommends inspecting the property with the assistance of our surveyors and doing the essential searches:
- the property corresponds to its description;
- it is permissible to purchase;
- it is legal to reside there.
It is crucial to note that if the preliminary contract is signed prior to doing all necessary searches and acquiring all relevant documents, the buyer may encounter unexpected issues at a later stage, when it may be too late. Indeed, even if the preliminary contract contains terms addressing these difficulties, the seller may be reticent to resolve them correctly or to restore the deposit.
If there are any issues with the property at this point, the buyer will have a far stronger bargaining position with the vendor, as no contract has been signed or a deposit paid. On the contrary, the prospective purchaser may renegotiate or withdraw from the intended arrangement.
If a mortgage (art. 1813 c.c.) is used to purchase the home, it is vital to complete all relevant banking and legal procedures prior to signing the contract.
You can apply for a mortgage either directly in Italy or through a lender authorized to offer mortgage in your home Country. Bank mortgages in Italy typically cover the bulk of the purchase price of the property and can be structured in either Euros or another foreign currency. The loan can be repaid in either fixed or floating instalments.
If you are considering obtaining a mortgage, either for the purchase or for possible renovation needs, keep in mind that the Italian mortgage structure is drastically different from what you are used to. While the base rate may appear to be cheap (sometimes as low as 2%), additional fees will be assessed. Due to the lack of competition, startup costs are higher, and banks are hesitant to lend you the full worth of the property. It is strongly recommended that you contact with an independent financial expert prior to filing a mortgage application. Our lawyers and accountants are banking and finance professionals, and they can assist you with both the legal and financial elements of mortgage acquisition.
It is prudent to factor in the total cost of home purchasing prior to application. Indeed, the purchaser is responsible for notary, estate agent, geometra, and any other legal counsel fees. The buyer is also responsible for all property transfer and selling expenses.
Obviously, finding property that is already mortgaged, must need an agreement with the vendor. It must state that the existing mortgage will be paid off and the associated registration with the Local Land Registry will be cancelled prior to the acquisition being completed. A local real estate lawyer’s services are required, and the procedure can be costly and time demanding. Alternatively, the buyer and seller can agree that the buyer will “acquire” the mortgage, in which case it is necessary to verify the status of previous mortgage repayments and the parameters of the original mortgage agreement.
Additional restrictive conditions, such as liability limitations, the seller’s lack of legal obligations, and so on, may be placed in the documents presented to the buyer for signature. Frequently, the request to sign the same document twice shows the presence of these one-sided clauses (articoli 1341 e 1342 codice civile). This is a necessity under Italian law for clauses that are unjust, imbalanced, or unexpected, and should serve as a warning to the foreign buyer not to sign the contract without first getting legal counsel.
If you decide not to proceed with the purchase, the compromesso will be null and void, or the seller may take legal action to compel the purchase. If, on the other hand, the seller cancels the transaction, he is bound to refund you twice the amount of the deposit.
- Preliminary Agreement
After finding a property in Italy you can sign a preliminary sales agreement. The preliminary sales agreement is a confidential document between the promisee purchaser and the promisor seller (art. 1351 c.c.). This legally binding contract obligates both parties to the transfer of ownership and completion of the purchase, with the remaining balance of the agreed-upon amount paid at a later date.
As a result, it is occasionally referred to as a preliminary contract, as another legal deed will be executed upon the conclusion of the acquisition.
To avoid the property market’s dangers, it is a complicated legal document that should always be read with the advice of specialized Italian lawyers prior to signing.
After all arrangements have been made and the preliminary contract has been agreed upon, both the purchaser and the vendor should sign two identical original Preliminary Contracts in the presence of a notary.
Italian custom dictates that the buyer selects the notary, even if he operates for both parties. Indeed, notaries do not work on behalf of either the buyer or seller, and they are supposed to maintain complete impartiality.
The signing of the sale documents in front of the notary, as well as the discussions and preparation of the preliminary contract, is the most delicate stage of the entire purchasing process, especially if you do not speak Italian.
As a result, you will want the assistance of a lawyer during the following procedure:
- the notary reviews the original copy of the contract to ensure that all previous statements are adhered to and to avoid any misunderstandings regarding the legal provisions. Three copies of the contract are signed by both parties;
- the buyer is now required to make the final stage payment or the remainder of the purchase price to the seller. The vendor will be issued a bank check or a cashier’s check for the deposit, concluding this stage of the transaction. Additionally, a bank transfer can be used to complete the payment;
- If one or both parties are unable to attend the final completion, the deed may be signed by a legal representative who executes a special Power of Attorney (PoA) authorizing your solicitor or another trusted person to represent you before the notary.
The signed final deed must include an actual energy performance certificate, the so called APE.
A home’s transaction expenses include all of the costs associated with purchasing and then reselling a home, including lawyer and notary fees, title and registration fees, taxes and stamp duties, and real estate agency fees (if expected), among other things.
There are various different sorts of taxes that are involved with the acquisition of a house for sale, each based on a different set of conditions.
Amounts and taxes due are subject to frequent changes. It’s difficult to list them all.
For example, depending on whether the property is sold by a private seller or by a corporation, different tax rates may be applicable. For those who are purchasing their “first home” (a condition where you set your residence in that property) a lower tax rate may be available.
If you require assistance or advice on the fiscal regime applicable to the buying of your house for sale in Italy, as well as on any prospective tax deductions, Studio Legale Berti e Toninelli’s tax consultants can assist you and provide the best advice possible.
According to reports, agents’ fees are often paid equally between the buyer and the seller and range between 3 percent and 10 percent of the purchase price. Before entrusting a real estate business with your home search, it is always a good idea to inquire about the firm’s terms and conditions. You had better entrust a real estate lawyer to oversee the whole process: from the start – finding a property – to the conclusion – signing the purchase agreement.
Notary fees are decided by the sale price — a lower sale price equals a higher percentage, which is generally not more than 2.5-3 percent of the purchase price.
The registration tax for a primary house is three percent of the purchase price and is required upon completion of the project. In the case of non-residents, the rate is increased to 7 percent, and it may go as high as 10 percent in the case of agricultural assets.
For non-residents, a fixed rate of about €130 is paid on the acquisition of a principal residence, or 1 percent of the purchase price for those who do not reside in the country.
Enrico Berti is specialized in civil and corporate law. He is a founding partner of Studio Legale Berti e Toninelli and he has an extensive expertise on real estate. For legal advice or further information, please complete the form at this link.
Studio Legale Berti e Toninelli pratictises throughout Italy.