t was the best of times, it was the worst of times… — “A Tale of Two Cities,” Charles Dickens
Italy’s Prime Minister Enrico Letta’s coalition has just won a critical confidence vote on a platform of sweeping institutional reforms — this in a time of high unemployment, minimal growth, and considerable anxiety about the country’s future.
In the weeks before Christmas, angry workers, students and pensioners took to the streets and truckers blocked highways. The gloom is palpable. The country’s recessionary malaise is reflected in the real estate market where property prices (adjusted for inflation) have dropped 23 percent since their 2008 peak with another 10 percent loss possible in 2015.
Yet the country’s GNP is holding steady and its industrial base is strong. Some properties are undervalued and mortgage rates are at an all-time low. For those ready to go against the grain and buy, here’s a roadmap.
First, you’ll need an advisory team. A geometra (surveyor) will let you know a property’s value, the integrity of a building’s structure, whether permits have been obtained, and the costs for putting things right if needed. An attorney will examine title, review all contracts, help you negotiate, and make sure your rights are protected.
Italian law requires that all land sales be completed before a notary, who ensures the legality of the title transfer, the payment of all state and city fees, and the proper recording of the deed of sale in the land evidence registry.
Phase One: Preparation
Any buyer must see key documents, including:
Atti di provenienza: How the property was obtained and the seller’s good title.
Atto notarile: the notarial deed.
Dichiarazione di successione: Estate tax return, if the property was inherited.
Sentenza di usucapione: Court judgment if a title was awarded to the seller through “adverse possession” (often following a dispute).
In addition, a buyer will need to see documents that demonstrate compliance with registry and zoning, including:
Planimetria: A property map as it appears in the catasto fabbricati (registry for buildings).
Condono edilizio: A certificate showing grandfathered permission on any changes or refurbishing originally done without a permit.
Certificato di destinazione urbanistica: A certificate showing the intended “use” — e.g. residential, agricultural, etc. — of the property
Certificato di Abitabilità: A certificate acknowledging the property’s habitability.
Certificazione energetico: A certificate showing the building’s energy use.
Visura catastale: A land registry certificate that shows any encumbrances or liens.
Rural sellers will also need to show a mappe catastali, an inventory of all parcels of land that comprises the property, along with their tax coefficients, and coltivatori diretti, a list of any tenant farmers who work adjacent lands.
Phase Two: Buying
The buying phase requires a proposta di acquisto (purchase offer) and a contratto preliminare di vendita, a preliminary purchase and sales contract, also known as a compromesso.
Legally, this is a critical phase. Buyers are often told that purchase should be a two-step process, beginning with an offer that becomes binding upon acceptance by the seller; and followed by entering into a preliminary purchase and sales contract, which details the terms of the deal.
But without proper legal review, the traditional method carries the risk of the buyer being locked into the purchase prematurely.
An efficient alternative is an offer that includes all the terms of the deal, including conditions to be met before the offer becomes binding. Once all the conditions are met, such an offer then constitutes the preliminary purchase and sales contract (“preliminary contract”) and allows the parties to proceed to the final deed of sale with a unified agreement.
Conditions may include the examination of seller’s title, structural integrity of all buildings, and the absence of any encumbrances or liens (also, if necessary, obtaining a waiver of the state’s preemption rights on protected buildings listed in the country’s cultural registry). Failure to meet any of these conditions may be established as grounds for the return of a deposit.
The preliminary contract should also include a full legal description of the property, rights of way, sale price, terms and method of payment of deposit(s) and the final payment, closing date and the name of the notary.
The preliminary contract, once executed, legally binds the parties to complete the sale assuming all conditions are met. Failure to close after this point is considered a breach of contract that can be resolved through the deposit provisions (I’ll get to that) or by filing suit to demand compliance.
Preliminary contract terms are the basis on which a notary drafts the deed to be signed at closing.
The deposit the buyer pays to seller at the signing of the preliminary sales contract is technically referred to as a caparra confirmatoria and ranges from 10 percent to 30 percent of the total price.
If a buyer defaults, the entire deposit is lost. If the seller defaults, he or she typically owes the buyer twice the amount of the deposit.
Many realtors want their full commission when the preliminary contract is signed (or, if the traditional approach is used, when the offer is accepted). If you wish to split these payments — 50 percent after the preliminary contract signing and 50 percent at closing — you need to negotiate that when first entering into a realtor contract.
Phase Three: Closing
Buyer and seller appear before a notary to sign final deed of transfer, though lawyers regularly act on behalf of their clients through powers of attorney.
At closing, the seller is paid the balance of the purchase price and title is transferred to the buyer. If the buyer is financing the purchase, a bank representative may also be present.
Buying property in Italy is a decision that needs to be made with care. And one in which the right team of advisors can make all the difference.