A purchase proposal usually includes little more than the offer made by the seller for the property and is binding only on the seller; you’re free to accept or reject the offer, usually within a time limit of up to 15 days. If you accept the purchase proposal, both parties then sign a preliminary contract (see below). If you reject the proposal, your deposit is returned to the buyer.
Purchase proposals are rare and, if an estate agent insists that you sign a purchase proposal and pay a deposit before signing a preliminary contract, you should make sure the money is deposited in a safe ( escrow) account.
The first stage in buying a home in Italy is usually the signing of a preliminary contract ( compromesso di vendita, also referred to as a contratto preliminare di vendita but normally called simply the promesso), which may be drawn up by the vendor, estate agent, notary or a lawyer. The compromesso may be hand-written or a standard printed document (they’re available from stationery stores). On signing the preliminary contract, both parties are bound to the transaction and it’s possible to register the compromesso to prevent the sale of the property to multiple buyers.
The compromesso contains the essential terms of the sale, including full details of the property, details of the vendor and buyer, the purchase price, how it’s to be financed, the closing date, and any other conditions that must be fulfilled before completion. Some agents provide an English translation of a contract, although translations are often so bad as to be misleading or meaningless. You should ensure that you understand every clause in the preliminary contract. A sale must be completed within the period stipulated in the compromesso, usually six to eight weeks (although it can be from two weeks to three or four months).
You should obtain a fiscal number ( codice fiscale) as soon as possible after signing the compromesso, as this is necessary for the completion.
The preliminary contract is binding on both parties and therefore it’s important to obtain legal advice before signing it. Although it isn’t necessary to employ a lawyer (or a notary) when signing a preliminary contract, it’s often wise.
Most experts consider that you should have a preliminary contract checked by a lawyer before signing it.
One of the main reasons to engage a lawyer ( avvocato) is to safeguard your interests through the inclusion of any necessary conditional clauses in the contract. If an estate agent’s commission is payable when the compromesso is signed, you must ensure that it’s refundable if the sale doesn’t go through and get it in writing! There are various other reasons to employ a lawyer: for example, the best way to buy a property in Italy is sometimes through an Italian company or you may wish to make special provisions regarding inheritance.
The method of buying Italian property has important consequences, particularly regarding Italian inheritance laws, and it can be difficult or expensive to correct any errors later.
Some estate agents may ask the buyer to pay a reservation fee or deposit ( acconto anticipo caparra or deposito) in order to secure a property and take it off the market, although in practice the property isn’t secured for the buyer until a purchase contract is signed.
Beware of paying large amounts of money as a reservation fee to an estate agent; from €250 to €1,000 generally should be enough.
It’s possible to pay a nominal sum as a holding deposit (anticipo di pagamento) before the compromesso is signed as a gesture of good faith, but a deposit (caparra or deposito) of between 10 and 30 per cent must be paid to the vendor at the time of signing the preliminary contract and is forfeited if you don’t go through with the purchase (except under certain circumstances); if the vendor reneges, he must pay you double the amount of the deposit.
A deposit isn’t usually paid to a third party such as an agent or notary in Italy, although an agent may hold it if the seller is absent. It’s preferable that the deposit is described as caparra penitenziale and not as caparra confermatoria. With the former, the buyer ‘simply’ loses his deposit if he withdraws from a sale, while with the latter the vendor can take legal action to force a buyer to go through with a purchase.
A deposit is refundable under strict conditions only, notably relating to any conditional clauses, such as the failure to obtain a mortgage, although it can be forfeited if you don’t complete the transaction within the period specified in the contract. If you withdraw from a sale after all the conditions have been met, you won’t just lose your deposit, but must also pay the estate agent’s commission.
Always make sure you know exactly what the conditions are regarding the return or forfeiture of a deposit.
A preliminary contract, whether for an old or new property, may contain a number of conditional clauses ( clausola condizionale/resolutiva) that must be met to ensure the validity of the contract. Conditions usually apply to events outside the control of the vendor or buyer, although almost anything the buyer agrees with the vendor can be included. If any of the conditions aren’t met, the contract can be suspended or declared void and the deposit returned. However, if you attempt to withdraw from a purchase and aren’t covered by a clause in the contract, you will forfeit your deposit or could be compelled to go through with the purchase.
If any accessories such as carpets, curtains or appliances are included in the purchase price, you should have them listed and attached as an addendum to the contract. Any fixtures and fittings present in a property when you view it (and agree to buy it) should also be included in the contract.
There are many possible conditional clauses concerning a range of subjects, including the following:
- Being able to obtain a mortgage (see Mortgage Clause below);
- Obtaining planning permission and building permits, e.g. for a swimming pool or extension;
- Discovering that there are plans to construct anything (e.g. roads, railways) that would adversely affect the enjoyment or use of the property;
- Obtaining confirmation that land is sold with a property;
- Pre-emption rights or restrictive covenants over a property (such as rights of way);
- Completion of the sale of another property;
- Obtaining a satisfactory building survey or inspection.
You may wish to convert a property that is classified as ‘rural’ ( casa rurale) into an ‘urban’ property ( casa urbana), for example when buying an agricultural property that you wish to convert into a holiday home (although this isn’t always possible). If done before completion, conversion will reduce your registration tax. The cost of conversion varies with the province, e.g. from €100 to €300.
The most common conditional clause states that a buyer is released from the contract should he be unable to obtain a mortgage. Even if you have no intention of obtaining a mortgage (you don’t have to obtain a mortgage, even if you state that you’re going to), it’s recommended not to give up your right to do so; if you give up your right and later find that you need a mortgage but fail to obtain it, you will lose your deposit. The clause should state the amount, term and interest rate expected or already agreed with a lender, plus the lender’s name (if known).
If you cannot obtain a mortgage for the agreed amount and terms, you won’t lose your deposit. You must make an application for the loan within a certain time after signing the contract and have a specified period in which to secure it.
Buying Through A Company
Buying a property in Italy through an Italian company can be beneficial, particularly when two or more people or families are buying between them or when you wish to avoid Italian inheritance laws. When a number of foreigners are buying a property together, the Italian company can in turn be owned by a company abroad, thus allowing legal disputes to be dealt with under local law.
The principal advantage of buying a property through a company is that, when it’s sold or bequeathed, its shares can be transferred to the new owner. On the death of an owner, shares in the company are treated as movable assets and can be bequeathed in accordance with the owner’s domicile. Owning Italian property through a company is of little or no benefit to residents, as most of the advantages don’t apply. If you plan to own a property through a company, the company should be set up before you sign a contract, as it will be more expensive to do it later.
Before buying a property through a company, it’s essential to obtain expert legal advice and carefully consider the advantages and disadvantages.
This article is an extract from Buying a Home in Italy from Survival Books.