The procedure for purchasing a property in Italy differs significantly from what happens in many other countries and from the conveyancing practice in Anglo-Saxon countries. Therefore, it is highly recommended to seek the assistance of an experienced Italian law firm that can guarantee the safe acquisition of real estate in Italy. To make it easier to understand the procedure of buying a property in Italy, we will outline below the various steps to take, and the risks involved in entering into negotiations for the purchase of Italian real estate.
Buying a property in Italy usually takes place with the following procedure: 1) The purchase proposal; 2) The preliminary contract; 3) The final contract or Notarial deed of sale/purchase.
Normally, if the real estate agent is involved, the prospective buyer is advised to sign a purchase proposal addressed to the seller, thereby expressing his interest in purchasing the property and stating a date by which the interest continues to exist. The offer to purchase is one of the most sensitive stages of the negotiation process as, from the moment it is signed, it binds the proposer to purchase for the agreed period. It is binding on the proposer but not yet on the vendor, who remains free of any commitment until it is accepted and signed. At the end of the period of validity, if the seller has not accepted it, the offer lapses and the prospective buyer has no obligation.
The preliminary sales contract is a document by which the seller and the buyer undertake to enter a future contract, known as a final contract, setting out its terms and conditions. The parties undertake to go to the notary to draw up the formal deed of sale in which the property is transferred to the buyer. In particular, in the preliminary contract, the property must be marked with all the elements suitable for its unequivocal identification, the price, and the parties to the future contract (which is particularly important in the case of more than one seller and not to be overlooked also in the case of a company, the signature of the person in charge and the signature of both spouses in the case where one of the sellers is in joint ownership). The conditional contract of sale or preliminary contract of purchase of real estate shall mandatorily include the following elements: a) name, surname, date and place of birth (or company name and legal status of the person signing the deed, in the case of a company), tax code and property regime of the buyers and sellers; b) the most accurate description of the property as possible, with the data from the cadastral survey, the boundaries, the house number and the cadastral plan of the real estate.
All the premises must be described, with particular attention to the appurtenances, such as attics, cellars and garages, which are sometimes not listed in the cadastral sheets; 3) the agreed price; 4) the method of payment of the price; 5) the date by which the parties intend to stipulate the deed and the notary appointed to draw it up, which is usually chosen by the buyer; 6) the deadline for delivery of the property (possibly providing for a fine for late payments, or for late signing of the deed) 7) the existence or non-existence of mortgage liens; 8) the transfer of any residual mortgage to the buyer or its extinction by the seller with a consequent commitment to cancel the mortgage; 9) the origin of the property, i.e. how the property came into the possession of the seller with particular attention to property received by way of donation or inheritance; 10) the seller's guarantee that the property complies with urban planning regulations, that it is not encumbered by easements or third party rights, that all condominium expenses up to that point have been paid, and anything else deemed necessary. The signing of the preliminary contract is the moment when part of the price must be paid. It goes without saying that all payments for the purchase of a property must be made by cheque or bank transfer.
The cost of the deed or notarial deed is normally borne by the buyer, who therefore has the right to choose the notary of his or her liking. The deed is the final contract for the purchase of the real estate that sanctions the transfer of ownership to the buyer. Notary fees are usually proportionate to the value of the property.
As a rule, we advise our clients to make the validity of the offer to purchase and/or the preliminary agreement conditional upon the successful outcome of the due diligence process. In essence, the property should be found to comply with planning regulations and the expectations of the prospective purchaser before the contract comes into effect. The main checks to be carried out during the due diligence process are as follows.
The first and most important check to be made before signing the preliminary contract is to make sure that the seller is the real owner. To this end, it is first necessary to check whether the person making the sale is in possession of a valid deed of purchase. In order to check the ownership of the property, it is first necessary to go to the Land Registry and request a certificate (cadastral certificate). After this step, it is advisable to check whether there are any mortgages, foreclosures, or easements/encumbrances, i.e., those rights that may restrict the enjoyment or use of the house. Another risky situation is the purchase of a property resulting from an inheritance or donation. Each heir, in fact, assuming that his or her inheritance is affected, has ten years from the death of the person who made the inheritance or donation to assert his or her rights, claiming that the value of the property is considered part of the estate. Particular attention should also be paid when the seller is married in joint property ownership and the property was purchased by him/her while he/she was already married. In this case, it is alleged, until proven otherwise, to belong to both spouses, even if only the name of one of them appears on the previous purchase deed.
When purchasing a house that has already been built, it is essential to verify its regularity from the town planning/zoning point of view, i.e., that the actual state of the property is not substantially different from the plans filed with the Land and Buildings Registry where the property is located. Therefore, before signing the preliminary contract, it is necessary to acquire from the vendor the building permit or other equivalent document if renovation work has been previously carried out on the property, and the 'Certificate of Occupancy' proving that the safety, hygiene, health and energy-saving conditions of the building and the systems installed in it have been deemed compliant with the regulations in force.
It is highly recommended to check, prior to any commitment, the set of rules contained in the Memorandum of Association or the Condominium Document. This check is of relevance in several respects to:
- check that, if a change of use is to be made to the property whose purchase is being negotiated, if the rules prohibit it
- check the criteria for the distribution of shares among the owners
- whether or not the presence of animals is allowed
- check whether there are any extraordinary maintenance expenses on the common parts (e.g., re-roofing or the heating system) that have been previously approved by the owners' meeting, but whose work has not yet begun
- check whether the seller has paid all outstanding condominium expenses.
Another document that plays a key role in the purchase of a house is the certificate of compliance of the installations. These certificates attest to how the systems were installed, the type of materials used, and whether the practices comply with the criteria imposed by the European Union for CE certification. In addition to the above-mentioned certifications, it is also recommended that tests be carried out to verify in practice that the various systems (electrical, plumbing, heating, gas supply, sewage etc.) work properly.
The energy certificate is nothing more than a certificate from which it is possible to understand how the building has been constructed from the point of view of thermal insulation, i.e., how much a building consumes and how it can contribute to saving energy. Thanks to this document, buyers of a house can get an idea, with a good approximation, of the energy expenditure once they go to live in it. Energy certification is, in fact, the assessment of the integrated energy requirements of a building with the certification and allocation of a certain energy class. It is in the interest of the buyer, who wants to purchase a property, to find out whether the building under negotiation meets all the requirements for energy savings, thus assessing the possibility of choosing and, if appropriate, even negotiating a discount for a property that does not have such certification.
The taxes on the purchase of the property provided by the Italian legislation can be: 1. VAT It applies when the seller is a building firm that sells the property within 5 years from the time of the completion of the building or the complete renovation. The VAT is calculated on the price agreed between seller and buyer and the applied rates are 1) 4% with the first-time homebuyer tax credit; 2) 10% without first the first-time homebuyer tax credit; 3) 22% luxury buildings. When the deed is subject to VAT other taxes are added, that is: a) mortgage tax € 200 = flat tax b) cadastral tax € 200 = flat tax
Registration tax is payable when the deed is not subject to VAT or if you are buying a house from a private seller, a 'non-construction' company, or a 'construction' company (or one that has completely renovated the building) that has completed the work more than four years previously. This tax must be paid directly to the notary at the time of the deed and must be added to the mortgage and cadastral taxes. In conclusion, if the seller is not subject to VAT, the taxes to be paid for the purchaser are a) without first-time homebuyer tax credit: 1) the registration fee of 9% + € 100; b) with first-time homebuyer tax credit: 1) registration fee of 2% + € 100. The taxable base on which to calculate the registration tax at the proportional rate is the cadastral value of the property (in the case of a sale between private individuals), regardless of the purchase price, which must in any case be indicated in full in the deed of sale.
There are four mandatory requirements by law to take advantage of tax relief for the purchase of a first home which we mentioned earlier: a) the purchase must relate to an abode that cannot be considered a "luxury home" according to a series of particular criteria (set by the Ministerial Decree of August, 2nd 1969), among which there is mainly the surface, which must not exceed 240 square meters (excluding balconies, terraces, basements, attics, stairs and parking lots); b) the property must be located in the town or municipality in which the purchaser has his residence or in which he intends to establish it within 18 months of the stipulation or in the town or municipality in which the purchaser carries out his main activity (any type of commercial activity, including those carried out without remuneration); this is not necessary if you are an Italian citizen who has emigrated abroad or if you belong to the permanent staff of the armed forces or the police; c) the purchaser must not be the sole owner or joint owner with his spouse (legal or conventional) of rights of ownership, beneficial interest, use and habitation of other dwellings in the municipality where the property to be purchased is located. Consequently, the co-ownership of an abode with parties, other than the spouse, does not hinder the tax relief application.
Consequently, co-ownership of a dwelling with parties other than the spouse does not prevent the application of the tax benefits; d) it is not necessary to be the holder of shares, even in common ownership, in the national territory, of rights of ownership, beneficial interest, use, dwelling or residual life annuity, of another dwelling, also purchased by the spouse, having taken advantage of the tax benefits for the 'tax credit for the purchase of the first home'
A private individual selling a dwelling may achieve a taxable surplus. The surplus is generated when the real estate is sold for more than the purchase price, including costs. The surplus is not taxable when: 1) five years have passed since the purchase; 2) the house has been a main residence for most of the period of ownership: so, if you sell a house within two years of purchase, you will not pay any surplus if the house has been used as a residence for more than one year.