The Italian real estate system is very secure and structured with safeguards for both the buyer and the seller. The Italian Constitution, art. 42, declares how private property is recognized and guaranteed under state laws. The Civil Code, art. 922, defines how it is possible to acquire ownerships by occupation, invention, access, identification, confusion, usucapio, contract, inheritance and by any other way set by law.
Government seems to encourage real estate investments, which are often led by real estate brokerage companies. Brokers working in this field are required to attend special courses and to pass an examination in order to be licensed.
According to Civil Code, art. 1755, agent’s commission is due from both seller and buyer. There is not a set standard commission. It usually depends on the type of real estate treated. There are usages and indications given by Chamber of Commerce, but it is really left to parts will.
Despite this, there is a substantial number of formalities to cover, many checks to flag, and significant requirements to review before buying a real estate. Many pitfalls could be just around the corner, this is why it is strongly recommend the assistance of a lawyer well connected with other technical expertise in order to protect the buyer and the seller for a safe trade.
Consultancy is always cheaper than a trial!
While choosing a property, it is important to know how it is classified and if it satisfy all the requirements according state, regional and city law. The classification takes place through a system named “catasto”. This name comes from the ancient Greek word meanings “line by line”. It is a collection of documents, maps, and acts listing and describing real estate properties and the relevant taxes. The Italian catasto is “geometrico particellare” which means it is divided in labelled “particelle”, small parcels of land owned by the same proprietor and designated to the same use. Every property is labelled with a letter and a number indicating its type. In example, A1 is a luxury home, A2 corresponds to a standard civil home, A5 represents a very low cost house, A7 a detached house, A8 a villa, A9 castles and palaces with artistic and historical value, A10 offices and privates studios. The “B” letter is used for public properties such as hospitals, schools, convents, art galleries, libraries and prisons. The “C” represent commercial real estate such as stores, shops, and warehouses, laboratories for arts and crafts, cow sheds, stables, barns and garages.
It is important to highlight that the Italian catasto has fiscal purposes only. It is not probationary and it does not prove a person’s right of property over the designated particella.
The Property Register Records Office (conservatoria) addresses probationary matters. It is a public authority intended to certify property owners. Among several property deeds, the first one registered with the conservatoria is the legitimate one. Therefore, if someone sells the same property to different persons, only the one who first register the notary deed will be the rightful owner.
Before buying a property it is necessary to make some background check on the seller marital and economical status. It is important to know whether third parties can lay claims on the property. Notary deed of provenience is needed in order to understand how the seller had acquired the property and if any mortgages are active. It is essential to find out if there are mortgages of any kind on the property. Cadastral papers have to be shown and their match with real status has to be confirmed. If the purchase involves a property which is not yet complete or in a different status that the licensed project, there will be additional considerations and formalities to manage.
Moreover, it is necessary to check the electrical and hydraulic system certification, as well as it would be better to have the maintenance book of the boiler and air conditioners.
It is not uncommon for real estate brokerage companies to hire lawyers in order to take care about all the legal checks and formalities.
Once the buyer has finally found the property of his taste and suitable to be bought, parts may agree trade terms black on white. It usually used a short agreement (Proposta di Acquisto) drawn up at that stage, either as a statement of intent or as binding terms. The buyer gives a modest deposit to confirm his interest; it is usually the 5-10% of the transaction.
The proposta di acquisto, should be registered at the tax office within 20 days but it is usage to register the “contratto preliminare” or the actual notary deed before the death line in order to save some money on registration taxes.
In fact, after parties have agreed on the proposta di acquisto and prior to completing the purchase, a preliminary agreement (Contratto Preliminare) may be signed from both seller and buyer. Preliminary agreement is a special contract by which parties undertake mutually to the signing of the final agreement. Preliminary contract is required to have the same written form of the final deed. If written by a notary or signed in front of him, the preliminary contract may be registered at the conservatoria office in order to make it opposable against third buyers. It sets out what is being purchased, the scale and timing of payments and any conditions the buyer or seller have agreed on. There is not a similar kind of contract in Common Law countries. It is a binding agreement containing a chance of penalty in case of withdraw of the seller or buyer. As either parts may abandon the agreement anytime, a substantial deposit (Caparra Confirmatoria) is usually included as extra protection for the transaction. According to the caparra confirmatoria instrument, the buyer’s deposit is forfeited if the buyer pulls out and a sum equal to twice the deposit would be paid to the buyer if the seller pulls out. The decision to accept the payment or to finalize the final contract is left to the part that did not forfeit. In fact, according to the preliminary contract, it is possible to transfer the property thought a court action. We can say that caparra confirmatoria substantive deposit provid the necessary encouragement for both parties to complete the agreement.
A lawyer may compose both proposta di acquisto and contratto preliminare, while the final contract has to be necessarily written by a notary.
Notaries are public officers. They are independent for both parties but in most of the cases the buyer chooses them. They draw up the final formal purchase contract, ensure that all aspects of the sale and purchase are legally satisfactory. Notary fees are notoriously difficult to estimate in advance as a complex scale of charges is used, but with translation costs or the costs of a proxy, it might be prudent to budget a further 2-3%.
It is quite normal for purchasers to engage an internationally oriented Italian lawyer to guide and represent them through the purchase to assure that everything the notary requires is in place. This part of the process (rogito) would require that both the seller and the buyer attends the Notary’s office where payment is made, transaction taxes paid and ownership passes to the buyers. Parts are allowed to make a proxy allowing their trusted lawyer to go through all the process and to attend the notary office in their place.
The new ownership will show up at the “conservatoria” office and at the national land register (Catasto). Catasto office is very slow, so it may take a while.
There are several taxes to consider when you buy a property in Italy. We are now going to list the main ones. Please notice that taxation changes often in Italy, therefore you need to consider the following data as an example:
If the buyer is a company then it will pay VAT (IVA) in place of the “Imposta di Registro”. The Italian rate is today 10% (22% for luxury properties) although houses and building work are usually subject to a concessionary 10% rate. Where a company (rather than a private individual) sells a property, VAT shall be evaluated at the rate of 10% for non-residents and 4% for residents is charged on the full purchase price.
Last, anyone willing to buy a property needs a “Codice Fiscale”. It is a personal Italian fiscal code; without it none can purchase a property or have a bank account in Italy. Anybody can apply for Codice Fiscale in person at a local Italian tax office, or by a third party with a copy of the person’s passport.
Even if taxation seems to be high and there are many formalities to care about, 2016 is the right year to invest in Italian real estate. Loans rate are fairly low (approximately 3- 4 % for a 30 years fixed-rate loan) and the market is very low caused by the crisis of monetary liquidity.
Contact us if you have any questions, we would be pleased to assist you.
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