Country Overview | Key Property Facts

Types of Tenure:

All property in Italy is bought on a freehold basis.

Forms of Ownership:

It is possible to own property in Italy as a sole owner or jointly with others. A common way of jointly owning property in Italy is through co-ownership where all owners own and share rights to enjoy the whole real estate. An alternative arrangement is that proportional shares of the property are assigned to co-owners, which they can dispose of exclusively.

The condominium (“condominio” in Italian) fuses co-ownership and sole ownership concepts. A condominium development consists of one complex housing a number of discrete apartment units. Owners will own apartment units in their sole name but co-own with the other owners the shared parts of the development.

An alternative is to buy your property through a company structure, such as forming a “company with limited liability” (Societa a responsabilita limitata, SRL). The main reasons for doing this are for potential tax benefits and to limit your liability. However, stringent bureaucratic requirements make this a high maintenance option. Foreign companies used as international property-holding structures are no longer common in Italy.

Restrictions:

The right to own and use real estate in Italy is limited by easements (right to do or prevent something of third parties), respective rights of occupiers in neighbouring properties and charges on the property (such as a mortgage). In certain areas, there are also limitations aimed at protecting the environment, cultural heritage or setting land aside for military use.

There are various restrictions on the sale and acquisition of real estate in Italy including restrictions under family law and the matrimonial property regime. In special circumstances, given parties have the right of pre-emption (i.e. the property must be sold to that party).

Italians apply a principle of reciprocity whereby foreigners can in general purchase real estate and establish companies in Italy so long as Italians are afforded similar rights in the foreigner's home country; purchase through a company can often be the only way to get around restrictions stemming from the principle of reciprocity. There are no such restrictions for EU nationals.

Property Rights:

Italy scores 50% in the Heritage Foundation's assessment of the security of its property rights and 5.7 out of 10 in the 2007 International Property Rights Index. The Heritage Foundation states, “Property rights and contracts are secure, but the delivery of justice is extremely slow, and many companies choose to settle out of court. Corruption is more common than in other European countries, and many judges are political oriented.” (See www.heritage.org for details.)

The proof of ownership of real estate in Italy is obtainable from the registers of the Italian land registry, the Conservatoria di Registri Immobiliari.

Mortgage Finance:

As a foreign investor, you have several options: You can take out a mortgage against your Italian property from an Italian lender, a UK lender or an offshore lender; alternatively you can remortgage your UK property to release equity to buy your Italian property in cash. If you use an Italian lender your mortgage will be in euros, if you remortgage your UK property it will be in sterling, and offshore lenders offer a wide range of currencies.

Italian banks will normally lend up to 85% of the assessed value of the real estate, although for overseas buyers the maximum amount is usually about 70%. Italian mortgages are normally repaid over 15 years with fixed or variable interest rates that are relatively high. Italian mortgages can be difficult for foreign investors to obtain.

Most UK lenders will loan between 75% and 96% of your UK property as equity release to purchase a home overseas. UK residential remortgages are offered over 5 to 30 years with 25 being the norm. Offshore lenders will loan up to 75% of the bank valuation or purchase price of your Italian property - whichever is lower. UK lenders offering mortgages secured against your Italian property normally offer a maximum of 80% LTV.

Your mortgage options are explored in more depth in the Mortgage Finance section below.

Local Practices:

Fractional ownership schemes such as timesharing are well established in Italy. There is a local practice of “under-recording” whereby sellers declare a lower price than the actual sales price in the rogito for tax avoidance reasons; this practice is illegal and there are severe penalties (see issues and risks section below for details).

Issues & Risks:

Buying property in Italy is relatively straightforward. The Italian property market is highly regulated and things are done in a fixed way. Nonetheless, it's essential to engage the services of an English-speaking lawyer versed in the Italian property law to guide you through the process and ensure your interests are protected.

One of the key issues to bear in mind when buying property in Italy is the common local practice of “under-recording” whereby the price declared to the notary and registered in the rogito on completion is lower than the actual price paid by the purchaser. This is a tax avoidance scam and is illegal with strict penalties (including up to two years in prison). Moreover, if you buy from a company which goes bankrupt within two years of completion of your sale and under-record, the receivers could challenge the validity of the your purchase and potentially even repossess your property.

Another important consideration is the issue of pre-emptive rights of third parties to buy your property. At the time of original purchase, it's important to get any third parties who have pre-emptive rights of purchase to sign a declaration to the effect that they are not interested in buying the property at any price. Anyone with pre-emption rights who was not given first refusal at the time of purchase, could assert their right to buy the land at the value declared in the rogito at a later date. Third parties with pre-emptive rights will often demand a small payment in return for signing such an agreement, but this as a small price to pay compared to the alternative.

Regulations:

Various regulations apply to property transactions in Italy. Firstly, your lawyer – through searching the land register – must check that the seller is authorised to sell the property in the first instance. All parties must also be considered to have the capacity to conduct their own legal affairs independently under the law (e.g. they must not be minors under 18 years old or mentally infirm). In the case of companies owning property, capacity to act is established from the commercial register or from relevant documents (certificate of incorporation, certificate of good standing, etc.) Third-party claims on the real estate must be honoured (e.g. from creditors) and unpaid taxes must be paid before the transaction can be made. It is the duty of the seller to notify the authorities of the change of ownership within 48 hours of the sale; failure to do so will result in a financial penalty.

Warranty clauses are seldom stipulated in the sales agreement meaning that statutory regulations apply instead. The Codice Civile stipulates that sellers warrant that the real estate is free of faults that would limit or prevent its use; buyers, for their part, are obliged to declare any faults within eight days after they have been identified.

There are several provisions that protect the environment and cultural heritage in Italian law which must be observed. There are also strict rules concerning the transfer of real estate upon death or by way of donation and regulations in relation to new construction. There are still no specific regulations regarding timesharing in Italy.

Key Property Markets:

Italy is the fifth most popular tourist destination in the world, and, with its world-beating combination of countryside, cuisine, culture and climate, it's not hard to understand why. It's long been a popular place for Brits and other nationalities to buy holiday homes.

Italian property prices have risen steadily over a number of years, albeit at fairly modest rates. Property investors can also take heart from the fact that, in spite of the poor performance of the Italian economy as a whole in recent years, short-term rentals in key tourist hotspots seem unaffected. Renting to locals is a very different issue, however, and domestic markets are strongest in the northern industrialised cities.

To date, the most popular region for Brits buying holiday homes in Italy has been Tuscany , with its gently undulating countryside and balmy summer evenings. Its neighbour Umbria is now fast catching up, boasting similar delights but at cheaper prices. Other popular holiday home markets include Sardinia, Puglia, the Amalfi Coast and the Italian lakes in the north. Italy also has a ski market based in the mountains of the north and Turin is worth investigating on this front.

The major industrial cities of the north – Rome, Venice, Florence and Milan – have enjoyed highest price growth in recent time and also have strong domestic rental markets. Most Italian property markets are well established but in the less well known regions of Abruzzo and Calabria in the far south, investors may be able to snap up some bargains and benefit from faster rates of capital growth.

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