When dealing with the purchase of real estate there are usually three steps involved:
a) Irrevocable purchase offer.
The potential buyer may make an offer for the purchase of a real estate property.
Said offer if it is irrevocable is binding only for the buyer, since the seller could still disagree to the conditions and the price offered by the buyer. The buyer usually puts down a deposit. If the operation is mediated by a real estate agent he is entrusted of the deposit, and will handed it to the buyer only if he accepts the offer.
The seller could also make a counteroffer, and if the buyer accepts the new terms, then an agreement has been reached.
It is highly recommendable to set a specific time limit in the offer, otherwise the buyer could have no control over the decision process of the seller.
b) Preliminary agreement
If the Seller accepts the offer made by the buyer then the agreement becomes binding for both parties. A preliminary agreement (preliminare di compravendita) is then reached between the parties.
A binding offer could be seen as a preliminary agreement if it contains all the information required.
A preliminary agreement must contain: information of the parties (name, surname, fiscal code, place and date of birth), information of the property (cadastral details), selling price and amount to be paid at the signing of the preliminary agreement as a down payment (caparra confirmatoria), the date by which the sale will take place in front of the public notary (definitivo/rogito notarile), verification of the seller’s title of property, energy certificate (attestato di prestazione energetica) indication of the presence of a real estate agent (if any) .
c) Deed of sale
It follows the preliminary agreement and it is signed in front of a public notary. It is a written document through which the property is transferred to the buyer. The final balance is paid to the seller.
Once the agreement is signed the notary will then register it at the Registry Office (conservatoria dei registri immobiliari).
What legal checks should be done before buying a property in Italy?
It is recommended that the buyer verifies the following aspects:
- that the seller is the owner of the property. Verify his title of property
- verify if there are any limitations on the title
- verify that the property complies with all the building and land registry regulations (regolarità urbanistica e catastale)
- verify that there is a certificate for the habitability of the property (certificato di abitabilità);
- state of condominium fees
In compliance with the Italian Money Laundering Prevention Rules, lawyers, estate agents, banks and notaries dealing with a real estate transaction are obliged to investigate the origin of funds to be invested in the purchase of the property. Failure to do so when money laundering is involved exposes these professionals to very serious penalties, both criminal and economic.
Most law firms follow a protocol which involves at least signing a form and providing documentary evidence of the clients’ address, proof of funds in bank account, tax declarations, etc. Should the lawyer detect there is money laundering involved, he shall stop advising the client and report the case to the Bank of Italy.
What are the purchase costs and taxes in Italy?
Purchase costs and taxes incurred in the purchase of a property are divided as follows:
- Notary Fees and Lawyers Fees that can be agreed on an hourly base or on a fixed amount.
- Real estate agent Fees normally 3% + vat
- Registration tax for the registration of the deed with the Estate Revenue Agency
- Imposta Ipotecaria e Imposta catastale
The amount of the last taxes change according to the following condition: who is selling (private person or developer); will it be a first home (prima casa) or a second home.
Buying from private:
- first home (main residence): imposta di registro 2%; imposta ipotecaria fixed 50 euro; imposta catastale fixed 50 euro
- second home: imposta di registro 9%; imposta ipotecaria fixed 50 euro; imposta catastale fixed 50 euro
Buying from developer within 4 years from the construction:
- first home: vat 4%, if luxury property 22%; imposta di registro fixed 200 euro; imposta ipotecaria and catastale fixed 200 euro
- second home: vat 10% if luxury property 22%; imposta di registro fixed 200 euro; imposta ipotecaria and catastale fixed 200 euro
Buying from developer after 4 years have passed from the construction:
- first home: no vat; imposta di registro 2% ; imposta ipotecaria and catastale fixed 200 euro
- second home: no vat; imposta di registro 9% ; imposta ipotecaria and catastale fixed 200 euro
What documentation must the buyer have in place before buying a property?
- For foreigners that do not live in the territory, the condition of reciprocity applies.
- For EU citizens and for foreigners that have a regular residence permit, or that have been living in Italy for three years, no limitations apply.
What precautions have to be taken regarding off-plan purchases?
Under D.Lgs 122/2005 the developer is obliged to hand to the buyer a guarantee that guarantees the reimbursement in the event of a company crisis, of all amounts paid or to be paid before the definitive transfer of ownership.
The developer is also obliged to deliver to the buyer, at the time of the transfer of ownership, a ten year insurance policy (decennale postuma) that guarantees compensation for material and direct damage to the property, deriving from a total or partial ruin or from serious manufacturing defects.
A new law (D.Lgs 14/2019) has granted greater protection to the buyer and it will apply to all contracts (preliminary or final deeds) relating to residential buildings for which the relative building permit has been presented to the municipality (Comune) from 16th March 2019.
Under said new law the preliminary contract must have the form of a public deed or an authenticated private writing, with the intervention of the notary, who is required to verify and certify the correctness of the guarantee (which must comply with a ministerial model).
The notary will not enter into the deed in the absence of a guarantee.
In addition, based on the new rules, the guarantee guarantees the reimbursement of the sums paid by the future buyer even in the event of failure to issue the ten-year insurance policy following the sale of the property.
Tips for clients looking to build their own property in Italy
Verify that the land you intend to buy is building land (terreno edificabile). In order to do so you must check with the Municipality (Comune). The competent office will disclose any limitations existing on the land and they will give you the maximum volume in cubic meters of the new property.
This is only the first step, the buyer will then need to get all proper certifications and permits.
Annual running costs
The owner of a first home does not have to pay TASI (tributo per i servizi indivisibili) and IMU (imposta municipale unica) if the property is not classified as luxury building;
IMU and TASI are calculated on the basis of the cadastral income of the property.
The owner has to pay TARI that is a waste tax.
What minimum legal checks should be done when selling a property?
The seller must assure he can deliver the property in the conditions agreed in the contract.
In the case that the seller does not proceed with the final deed of sale of the property after receiving a sum of money as deposit (caparra confirmatoria), he will have to reimburse the buyer with a sum that is double of that of the deposit.
In case of a hidden defect showing up after completion (regardless of the seller being aware of it or not) the buyer can claim damages and, in case of serious defects, the termination of the contract.
Selling costs and taxes
If the seller, is the owner of a property purchased more than 5 years ago, he is not subject to IRPEF (imposta reddito persone fisiche=income tax) on capital gain, that is, the difference between the overall sum obtained from the sale of the property and its purchase value;
– sales of real estate are excluded from Irpef tax on capital gain, even if they occurred before 5 years from the date of their purchase, provided that for most of the period between the purchase and sale they have been used as the principal home of the seller or his family members.
In the case, however, in which the sale does not concern the so-called “first home” and takes place before five years from its purchase, then the seller will have to pay on the capital gain collected (on the difference between the total sum obtained from the sale of the property and the purchase value of the same increased by the acquisition costs, such as notary fees) Irpef taxes.