Europa Estates Property 05.07

Europa Estates International Properties Special Edition 2007

Buying Real Estate in Italy
Conveyance Overview by Tom McGrath

What is the Purchase Process?
STEP 1 Preliminary Offer and Deposit
STEP 2 Vendor Review of Offer
STEP 3 Preliminary Deed
STEP 4 Final Purchase Deed

STEP 1 Preliminary Offer and Deposit
Once you decide on your Italian property, the next step is making an initial offer on the property, usually through an estate agent. The potential buyer usually gives a deposit (caparra) at this point which shows the commitment to buying the property. It is important to know that this offer, though preliminary, is usually binding and not refundable after a certain period of time.
The elements included in this preliminary offer can have consequences for later negotiations, so it is advisable to engage your lawyer prior to signing or paying anything. It is wise to make the offer contingent upon the property fulfilling certain criteria, such as necessary planning permits being issued or the vendor clearing any outstanding debts prior to purchase. Establishing a time limit for the vendor to review the offer is advisable as well, so you can be guaranteed a response by a certain date without waiting interminably,

STEP 2 Vendor Review of Offer
At this point the vendor reviews your offer and decides whether or not he wants to accept it. If the vendor accepts within the established term, the purchaser is legally obliged to go ahead with the purchase at the agreed purchase price and at this point the offer becomes binding for the vendor as well. The agent commission is legally due when the offer is accepted by the vendor, but most realtors do not ask for their fee until the signing of the completion deed.

STEP 3 Preliminary Deed
It is advisable to enter into a preliminary deed, a legally registered preliminary contract will be signed which serves to formalize the initial offer.

Note: this preliminary contract is often mistakenly called the compromesso. This preliminary contract typically stipulates that both parties agree to buy and sell the property, and concur on the terms and conditions of the sale.

At the signing of the preliminary contract, the purchaser will usually pay a deposit of 5 to 10 percent of the total purchase price. Under typical conditions laid out in the contract, an attempt by either side to back out gives the other party the legal right to force the sale through, or to seek damages. If the preliminary offer is properly drafted, then the preliminary deed can be avoided and the transaction can move directly to the final purchase deed.

STEP 4 Final Purchase Deed
Normally, the final purchase deed of sale is signed in front of a Notary Public (Notaio). The Notaio can either write the legal deed of sale (atto pubblico di compravendita, also called rogito) or witness the signature of the private agreement written by the parties.

In both cases the Notaio registers the sale at the relevant local public registry (ufficio dei pubblici registri immobiliari). After the final deed is signed, the balance of the purchase price is then paid to the vendor, normally by bank draft cheques. Should you for any reason not be able to attend the signing of the final deed, your attorney can represent you with a power of attorney.

Special Considerations
The Notaio • Italian Notary Public
The Notaio's fees are established by law according to the transaction being processed. For property transactions the fee is legally set based on a sliding scale related to the property sale price. The Notaio is also responsible for registering the sale for tax purposes, collecting fees from the parties and paying the related transfer taxes.

The role of the Notaio is advantageous in Italian conveyance in that he is independent and impartial. The disadvantage of this for the purchaser is that the Notaio will not be working on his behalf. Therefore, a foreign purchaser who has not hired a solicitor to represent his interests could find himself at the completion with a neutral party (the Notaio) and a party interested in making the sale (the agent) available for guidance. Many Italian notaries, particularly in rural areas, do not speak English, or at least, do not speak K well enough to give advice on complex issues.

Purchase Deed Declarations
The purchase deed written by the Notaio will include legal and binding declarations made by the purchaser and the vendor. Most of these serve to protect the purchaser, such as planning permission violations and confirmation of current ownership. Other statements will concern the parties’ marriage status which can have significant tax consequences for the purchases. All the statements registered in the deed can have important civil law and tax law implications.

Pre-emption Rights
The principle of pre-emption rights (prelazione), or essentially the right of a third-party to buy a property, is a key element in Italian conveyance. When applicable, this principle legally allows certain subjects first refusal on the property at the asking price.

These subjects are typically neighbours or tenants of adjacent properties. Once the preliminary contract is signed, a copy of the contract with the potential purchasers name should be sent to all subjects holding a pre-emption right who have a certain term to decide if they wish to match the offer.
Should they wish to exercise their rights and match the offer, this would then take precedence over the buyer's bid on the property. Should they not wish to exercise their right, an official and expressly .written document waiving this right must be obtained prior to the deadline.

Declaring the Purchase Price
Traditionally, it has been the Italian custom to under-declare the actual price paid for real estate, as taxes and the Notaio's fees are calculated on the basis of the officially declared purchase price. According to the 2007 Italian financial law, if a private individual is purchasing a property and the transaction is subject to registration tax, as opposed to VAT, the buyer can apply for the so called "price-value" (prezzo-valore) taxation. According to the "price-value" taxation, the taxable amount is the property value on record instead of the purchase price actually paid. When properly applied, this option can save purchasers money.

Limited Company Ownership
There is also the option of buying through a limited company, either Italian or non-Italian, where allowed, as company shares in a property can be redistributed without triggering a pre-emption right (prelazione) or pay transfer taxes, which can also make the property easier to sell in the future.