To complete our brief review of the particularities of the Italian real estate market, especially for foreign investors approaching the purchase, it seems helpful to provide some hints on the type of contracts typical of the Italian legal system and some indications to evaluate some particular negotiation aspects.
The purchase proposal
As anticipated, the acceptance of the purchase proposal already integrates a contract. However, the proposal is generally expected to be paid as a deposit of a relatively small sum. If the sale is not expected soon and the down payment is to be supplemented, the parties usually enter into a preliminary contract with the agent’s or the notary’s assistance.
The preliminary purchase and sale
The prior purchase and sale agreement is the contract by which the parties undertake to enter into the subsequent final contract (the so-called deed), the actual content of which they must have already determined.
In the event of non-performance attributable to one of the parties, the other – as a legal remedy – may demand, in addition to compensation for damages suffered, a (constitutive) judgment producing the exact effects that the contract that the other party did not want to conclude should have produced: so-called specific performance of the obligation to terminate the contract (Art. 2932 Civil Code).
The transcription of the preliminary contract
To be adequately protected as buyers, it turns out to be very important to arrange for the transcription of the preliminary on the real estate registers. Transcription of the preliminary is also allowed for buildings still to be built or under construction.
Another beneficial effect of transcribing a preliminary contract under Article 2645 bis of the Civil Code is that, in the event of non-performance of the contract, the buyer’s claims have a particular lien on the real estate subject to the preliminary contract, even in the event of the seller’s bankruptcy.
Special cases in which there is a greater risk for the buyer
Some special cases of real estate purchase are subject to greater risk for the buyer.
Below we point out some circumstances in which special caution is necessary:
The seller is an entrepreneur or company director.
In this case, the seller’s creditors, in the event of his bankruptcy or a liability action against him as a director, could take action on the real estate he owns.
The seller is married
If the property is in the name of only one of the spouses, it is necessary to verify that the legal separation of property regime is in force between them. The choice of the separation of property regime results from an annotation on the marriage deed, and if there is no such annotation, the community property regime is in force between the spouses. For property acquired before marriage and for property received by gift or inheritance, the owner of the property remains the exclusive owner of the right to perfect the deed.
The seller received the property by gift or inheritance
Special care is needed when purchasing property inherited or received by gift. In this case, other possible heirs will retaliate against the buyer because they feel their inheritance rights have been violated. The possibility of obtaining bank financing for the purchase of previously donated property may be greatly reduced for this reason.
The property is under construction, and the seller is the construction company
The purchase of property under construction must be properly considered since there can often be differences, even significant ones, between what is indicated in the plans (and purchased) and the property built, either because of construction or technical requirements that arose during construction or because of different construction choices. Contesting such discrepancies is not always easy and, in any case, involves a litigation phase that a buyer would never have assumed.
The property is of historical interest, or is listed
Regarding real estate, the matter is governed by the new Code of Cultural Heritage and Landscape (Legislative Decree No. 42 of January 22, 2004), which provides several limitations on the possibility of transferring ownership or possession.
The regulations also vary depending on the owner of these assets.
Real estate belonging to a private individual or a company falls under cultural property only upon notification of an extraordinary declaration by the Superintendency, which must be transcribed in the real estate registers. In theory, therefore, anyone can verify the presence of such a lien, although, in practice, this can be difficult because most of the declarations were transcribed in the years following the enactment of the former 1939 law, and it is often difficult to verify the lien quickly.
For listed properties, the law provides for the right of preemption by the state or, in the alternative, by the region, province, or municipality with territorial jurisdiction. Preemption must be exercised within 60 days from the date of receipt of the complaint, and during this period, the deed remains ineffective because it is conditioned suspensively on the exercise of preemption. The buyer, therefore, will acquire ownership of the property only after 60 days if the preemption has not been exercised. Until then, it is also forbidden to deliver the property, which must remain in the seller’s possession.
On the other hand, restricted properties that belong to a public entity or a private nonprofit entity (associations, foundations) can be alienated only with the permission of the Ministry of Cultural Heritage and Activities.
The code stipulates that all property whose execution dates back more than 70 years and is the work of an author who is no longer living is subject to verification of whether it is a cultural asset, and until then, it is presumed to be such; therefore, authorization is always required for sale.
In the case of purchasing property under construction, what if there is a discrepancy between what is indicated in the plan and what has been realized? What if the property purchased was inherited, and now the heirs complain about the validity of the purchase and sale?