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Introduction:
Italy is a popular country for Britons to purchase property abroad and over 22,000 Britons have already emigrated there according to a recent Italian census. Buying a property in Italy can often be a complicated and drawn-out affair but the right support and planning will keep stresses to a minimum. The Italian property market is highly regulated and things are done in a fixed way.
However, Italian legal and tax concepts are very different to those in the UK and it's essential you engage the services of a good lawyer versed in both UK and Spanish law. Above all, you should to obtain sound, independent legal advice before you sign anything or part with any money to ensure your interests are protected. Your lawyer should be bilingual to ensure that both advice and translations of contracts are accurate.
Before you even start to consider the financial and legal complexities of buying a house in Italy, you should make sure you have the money to cover all potential costs. Your first move should be to visit an accountant versed in overseas property purchases to discuss all potential costs with her. It is worthwhile to obtain a tax report of the property in the first instance in order to ascertain the most tax efficient way to structure the purchase.
1. Finding the right place
The first step in the purchase process is to consider what kind of property you are looking for, what purpose will it serve and which areas you're prepared to consider. Other than price, a key question is the issue of how much work you are willing to undertake. At one extreme, you could take on a renovation project requiring a lot of hard work, at the other end of the spectrum you could purchase a modern apartment in a serviced complex with all amenities on site.
Once you have an idea of the kind of place you're looking for, you can start your search. With the explosion of media specialising in property – magazines, websites, even TV channels now – it's relatively easy to get a flavour of the kinds of property that are available in your chosen areas without leaving the comfort of your home. However, ideally you should also visit your selected area and meet with estate agents who will show you round a selection of properties which match your criteria.
Important things to check for when looking round properties include damp, subsidence, access and boundaries. It's useful to go in prepared with a checklist, then take notes and photos as you walk around. It's also always a good idea to talk to other British owners in the area.
2. Organising legal representation
Once you have found a property you're interested in, the next thing to organise is legal representation to ensure your interests are properly protected. There are several professionals you will probably deal with:
- A public notary – Conveyancing is strictly governed by Italian law and can only be performed by a qualified public notary (notaio). Unlike traditional lawyers, Italian notaries are neutral government legal representatives who are governed by a strict code of conduct and must remain impartial at all times. Notaries act as witnesses to and registrars of property transactions and only deeds of sale (rogitos) witnessed and authorized by a notary can be registered at the land registry (catasto). He or she will prepare all the appropriate paperwork and ensure this has been filled out correctly according to the wishes of both parties. The notary also has a responsibility to make sure the appropriate property taxes are paid on completion of the sale.
- An Italian estate agent – In addition to finding buyers for sellers, many Italian estate agents also now can arrange your mortgage, conduct legal searches and help you agree a preliminary contract (compromesso).
- An Italian “geometra” - The agent may appoint a geometra to carry out legal searches on your behalf. The geometra's role is a fusion of the duties of a surveyor and those of an architect. Alternatively you can appoint a geometra directly.
- Independent legal advice – Given the notary's neutrality, you would be well advised to engage the services of a further legal professional to ensure your interests are protected. Key issues to consider include ownership rights, debts on the property, planning regulations, tax and inheritance, although this is by no means an exhaustive list. Although you may be able to find a reputable, independent Italian solicitor who speaks good English, this solicitor is unlikely to be versed in UK law so it can be advisable to engage the services of a UK specialist who will also be able to advise on the international dimensions of the transaction. Specialist UK solicitors can be contacted via the International Property Law Centre (see www.internationalpropertylaw.co.uk for details).
3. Obtaining an Italian tax code number and opening a bank account
On completion, you will have to provide an Italian tax code number (codice fiscale) so it may be useful to get this organised early on. This is very similar to your National Insurance number in the UK. You can obtain a codice fiscale from the Italian consulate in the UK (allow up to three weeks for this), your UK specialist solicitor or in person at the local tax office in Italy (your agent can usually help with this).
You'll also need to open an Italian bank account. To open the account, you'll need a copy of your passport, your personal details and the address of your future property in Italy. You can open an account from the UK although due to EU anti-money-laundering laws, you'll only be able to activate the account by visiting the bank in Italy in person with your passport.
Always make sure you allow plenty of time when transferring funds plus a little extra money to cover bank charges. Using a foreign exchange specialist can save you money.
4. Making an offer
Once you've found an Italian property you're interested in buying, the next step is usually to make a written offer. This document (known as a “proposta d'acquisto irrevocabile” in Italian) sets out the price and terms of your offer (for example, that the property must be sold as seen and free of encumbrances, etc.) and is binding on your part for a set period - normally from seven to fifteen days. Property prices in Italy are negotiable to a certain extent and it's generally advisable to offer 5-10% less than the asking price to see how the land lies.
The proposta usually comes as a standard form supplied by the estate agent that you then sign; however, it's also possible to set out your offer by writing a letter yourself. You or your agent must send two copies of the proposta by recorded mail. If the seller agrees to the terms set out, he or she signs both copies and returns one to you. At this point neither party can change their mind about the price, so before you go ahead it's sensible to take legal advice.
It is normal practice at this stage to pay a deposit of 2-5% of the purchase price. It is vital to make clear in the proposta that this money is being paid as an “acconto”, meaning it will be deducted from the purchase price and returned to you if the sale does not go ahead. Italian law requires all parties to act in good faith and relies on everything being written down. So while it may seem premature handing over money before the surveys and searches have been completed, so long as the proposta is correctly filled out, you are protected.
5. Arranging your mortgage
Once you have an offer accepted it's advisable to set about arranging for the appropriate funds to be in place immediately. Mortgages can take up to 12 weeks to be secured and normally take at least 6 weeks. In any case, it's essential all the necessary mortgage arrangements have been made before signing the preliminary contract (see below).
To process an Italian mortgage, you will usually require a copy of the signed preliminary contract (see below), passports, Italian fiscal codes, recent tax returns, bank statements and all other documents proving your income.
Processing an Italian mortgage can take some time but these days it's usually anything from 4 to 8 weeks.
See the section of “mortgage finance” below for full details about eligibility, availability, terms and rates, etc.
6. The survey
Although a survey is not a compulsory part of the purchase process in Italy, a survey is nonetheless advisable for your own peace of mind before you sign any official documentation. A survey will also give you an idea of what to budget for in terms of renovation and repairs. If you are taking out a UK mortgage then you will need to have a survey carried out in any case.
Ask your estate agent whether there have been any previous surveys and if so, whether they can be made available. The agent should also be able to recommend a local “geometra” or architect who will be able to carry out a survey. An Italian geometra is different to a UK surveyor and has a role that is a fusion of the duties of a surveyor and those of an architect.
Italian surveys are very simple and can often cover just a single page. The basic survey will comment on the structure of the property including the roof, ceilings and walls. A more detailed survey will be more in depth, covering factors such as sewage, heating systems, registrations at the town planning department and compliance with regulations. It's important to clarify the scope of the survey with the geometra, highlighting any areas you would like to be included.
Important things to check include:
- The plan of the land at the land registry and the plan of the building, which should be included with the property details
- The land boundaries and whether there is any construction work planned on the land neighbouring the property
- It's useful to measure the living space in square metres as this will give an idea of the selling price per square metre, which is a common yardstick used to negotiate on price in mainland Europe
If the property is a new build or has recently been totally renovated, then a survey may not be necessary.
7. Legal investigations
Once the condition of the property has been established through the survey, legal investigations are undertaken by your estate agent, independent lawyer or geometra (whoever you instruct). They will carry out legal searches not only on the building but also on the vendor, through a detailed credit search known as a “visura ipotecaria”. (If you are taking out a mortgage on the property, your lender will do a visura ipotecaria automatically.)
The searches will check various things including planning regulations, ensuring that the property meets various legal requirements, that it can be sold to you without breaching anyone else's rights, and that there are no debts attached to it (which would automatically become your debts on transfer of ownership if not dealt with). These searches will be repeated by the notary before completion of contracts, but it's nonetheless well worthwhile to investigate all potential problems before signing a compromesso; if you have to pull out after signing the compromesso, you will risk losing the large deposit you put down at this stage or the nightmare of a lengthy legal battle.
8. The preliminary contract
Once your finances are in place and all the searches have been satisfactorily completed, both parties normally sign a preliminary contract (“compromesso”), although this isn't obligatory. The compromesso is a legally binding contract which commits both parties to the transfer of ownership on the terms and conditions set out. It outlines certain obligations which both parties must fulfil and, crucially, it will commit the vendor to transfer the real estate free from encumbrances.
The compromesso can include as much information as the contracting parties wish to include and, if necessary, special terms can be inserted to deal with specific issues raised by the searches. However, there are a number of basic points the compromesso should always stipulate including:
- The property details
- The names of buyer and seller
- The purchase price and the terms of its payment
- The date of completion
- The size of the deposit payable on exchange
The compromesso is usually drawn up by the estate agent. It must be in writing although it doesn't have to be notarised. You should have the compromesso translated to make sure you understand exactly what you're signing. The document can either be signed with the vendor in Italy or signed in the UK then posted or faxed (although it's not binding until received in Italy ).
The buyer can choose to have the preliminary contract registered at the land register to ensure the real estate cannot be sold twice.
The deposit (“caparra”) paid by the buyer on conclusion of the compromesso will range between 10 and 20% of the agreed purchase price. This will be in addition to the down payment made at the offer stage although both will be deducted from the outstanding purchase price due.
There are two different ways of agreeing a deposit:
- Caparra penitenziale: If the buyer decides not to go ahead with the sale after signing the compromessa, the seller gets to keep the deposit paid. If the vendor decides to renege on the deal, on the other hand, he/she must return the deposit to the buyer and pay the same amount again as compensation.
- Caparra confirmatoria: A caparra confirmatoria is identical to a caparra penitenziale but crucially gives both parties the right to take the other to court to force the deal to go ahead.
In a situation where a buyer's mortgage isn't approved, there is normally a clause in the compromesso which releases the purchaser from the sale without losing their deposit.
9. The notary's checks
Once the notary has received the signed compromesso, the formal conveyancing process begins. They will conduct all the necessary final legal checks in order to prepare the “rogito” (the final purchase deed). Notaries' searches will often duplicate those already carried out before the compromesso and include:
- Checking exactly what is being sold, to whom, and with what authority
- Verifying the building is not in breach of any regulations and is fit for habitation
- Ensuring the property is unencumbered by debts or claims of third parties
- Checking whether there are any restrictions over the use and future resale of the property (you should ask your lawyer to check that this has been done)
- Two days before completion the notary will do a final check to confirm the seller has not raised any finance using the property as security
It is also possible to instruct a notary to simply witness the final contract without performing all these checks. This is a very risky strategy, however, as a notary would do so on the basis that purchaser and vendor accept full responsibility for any problems resulting from the final contract.
9. Completion
Once the notary's checks have been successfully completed, buyer and seller meet to sign the final contract at a pre-agreed time. Whilst the compromesso forms a private contract between buyer and seller, for ownership to be transferred from vendor to purchaser, the deal must be made public. This is done by the completion of a purchase deed (“atto di compravendita” or “rogito”) which must then be authorised a notary (notaio).
The purchase price declared in the notarised contract must not be below the cadastral value of the property entered in the land survey registry. The notary will advise if this is the case.
The rogito is drafted by the notary and then signed by both parties. If you are not fluent in Italian you must by law pay for a translator, so that you fully understand what you are entering into. If you are unable to be present in person you can appoint a representative (such as your Italian-speaking independent legal representative) to sign the contract on your behalf but you must have already granted power of attorney (procura).
Once both parties have signed the notarized contract, ownership of the property passes from the vendor to the buyer. The buyer must then pay the balance of the purchase price, all professional fees and transfer taxes. Once this has been done, the notary will issue a certified copy of the deed of sale and register the original document with the Land Registry; expect to wait anything from three week to three months to receive your copy of the deed…
10. Registration of title
On completion, the notary will register the sale at the local land registry (ufficio dell' agenzia del territorio) to make the purchase public. This entry will protect the buyer from claims by third parties. Copies of the deeds are also sent to the tax office.
Special situations and exceptions:
- Off-plan property: If a property is purchased off-plan, it is normal practice for payments to be made in stages, with the balance being paid on completion of construction.
- New build property: If you are buying a new-build property, at the offer stage you may be asked to make a “booking” (prenotazione) and pay a deposit. This is extremely rare but if you are asked to do this, make sure you have a written contract explicitly stating that the deposit you have put down is an “acconto” and is therefore refundable if the sale doesn't go ahead.
Sources & Resources:
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