The Italian real estate market offers a great variety of investment opportunities; however, if you do not speak Italian you might find the language barrier challenging, especially when reading contracts, deeds and other legal documents that have very specific terms that might not have a direct translation into your native language. Drawing from this, it will be the aim of this article to provide you with an explanation of two words, namely usufrutto and nuda proprietà, and to shed light on the broader context in which they are used.
When you search for a property you want to purchase you might come across the term “nuda proprietà”. Buying a nuda proprietà means acquiring the ownership rights of a property but not the rights to use and economically exploit it until certain conditions occur. In other words, buying a nuda proprietà means that the seller keeps the right to use the property, a right which is called “usufrutto”. The “nudo proprietario” (= the purchaser of a nuda proprietà) can normally use the property after the “usufruttuario” (= the seller of a nuda proprietà) has passed away. Alternatively, the nudo proprietario can determine a date from which he or she can use the property.
It is worth pointing out that one can sell a property as nuda proprietà even though there are tenants living in the property at the time of the sale. In this case, the tenants can continue living in the property and the usufruttuario will continue receiving the rent.
This type of real estate transaction has great advantages for both the seller and the purchaser. In particular,
- the seller (usufruttuario) can cash the capital immediately and continue enjoying his/her property, or he/she can rent the property;
- the buyer (nudo proprietario) can purchase a property at a lower price compared to other properties in the same area. Furthermore, the value of the property might increase when he/she can use the property. It is worth mentioning that the buyer will not need to worry about any repairs to the property as they will be part of the seller’s obligations unless otherwise agreed. Finally, the nudo proprietario does not need to pay taxes on the property after the purchase because the usufruttuario will still be liable to pay taxes. Therefore, this type of purchase is generally recommended for young people who want to invest in a property for the future or for parents who want to purchase a house for their children.
As the sale occurs between individuals, the price of the property can be negotiated by the parties. Usually, a professional surveyor determines the price of a nuda proprietà which is calculated on two factors:
- The market value of the property, which takes into account several factors such as the price of similar properties in the area, the conditions of the property and the local supply and demand for properties;
- A coefficient set by the Italian Ministry of Finance that is multiplied by the age of the seller in order to determine the fair price of the property. It logically follows that the age of the seller is critical in this type of transactions: the older the seller is (and thus the shorter the life expectancy and his/her stay in the property), the higher the purchasing price will be.
On the other hand, when parties agree to a temporary usufrutto the price of the property is calculated by deducting the number of years on the contract from the average life expectancy of the seller, which is a figure provided by ISTAT (Italian National Institute of Statistics).
In conclusion, it appears that in recent years, more and more people have decided to purchase a nuda proprietà. As a matter of fact, the interest rates for those who sell and buy a nuda proprietà are favorable at the moment thanks to the positive trends in the real estate market. Since this type of transaction may not be common outside of Italy, it is important to have a good understanding of the process and of the legal and bureaucratic requirements in order to invest money safely.
If you are thinking of buying a property in Italy and you are interested in this type of investment, our team of real estate professionals would be glad to assist you throughout the process. Feel free to contact us at email@example.com for more information.