When purchasing a property in a foreign country, it is very important to have a solid understanding of the key words that will be used in the real estate transaction. In one of our previous articles we discussed the main differences between the Proposta (“purchase offer”) and the Preliminare or Compromesso, (“preliminary contract of sale”). This article will focus specifically on the latter and it will explain what it obligates the parties to, and its implications.
What is a preliminary contract of sale?
A preliminary contract of sale is a true contract that obligates the parties involved to sign the final deed of sale. In particular, the parties are named “promissario acquirente” (“prospective buyer”) and “promittente alienante” (“the seller of the property”).
What does a preliminary contract of sale stipulate?
A preliminary contract of sale specifies the sale price, the kind of property being sold, its location, and a thorough description of the property’s grounds. The contract also specifies the property’s cadastral information and the deadline for the sale. Both parties agree on the date that the final deed must be signed, which takes into consideration the time needed for the buyer to obtain a mortgage, if applicable, or, in the case of properties that are still under construction, the period when the property will be available for sale.
The parties can decide to add additional clauses called “clausole accessorie”, which specify important terms and conditions, such as the amount of the deposit to be paid and the deadline by which the payment should be made.
Paying a deposit
When the preliminary agreement is signed by both parties, the buyer must pay a deposit, which ultimately results in both parties committing to signing the final deed of sale. The amount requested by the seller is usually between 10 and 20% of the purchase price. Depending on what the parties agree, the payment made by the buyer can either be an amount which goes towards the payment of the purchase price, in which case the payment is referred to as “acconto”. Alternatively, the parties can specify that the down payment constitutes a “caparra confirmatoria”, which is a deposit that entitles the seller to withhold the amount of money if the parties do not sign the final contract due to circumstances that are attributable to the buyer. More specifically, if the buyer withdraws from the agreement after signing it without a valid reason, he/she will lose the deposit. On the other hand, if the seller decides to withdraw, he/she will be forced to pay the buyer double the amount of the deposit paid.
What is the difference between a public deed or an authenticated private deed?
A preliminary contract of sale must be drafted by a notary in the form of a public deed, or it must be signed by both parties but it then needs to be authenticated by a notary. In both cases the contract will need to be registered at the “Agenzia delle Entrate” (the Italian revenue agency).
Anyone, including the parties to the transaction, the notary or the potential real estate broker who assisted the parties in the sale/purchase process can register the preliminary contract of sale.
It is worth pointing out that the preliminary contract needs to be registered within 30 days from the date on which it is signed.
Is a preliminary contract of sale mandatory in Italy?
It is worth pointing out that entering into a preliminary contract of sale is not mandatory in Italy as a deed of sale can also be signed directly after the purchase offer is accepted. However, the preliminary contract of sale is widely used in Italy because it has the effect of securing the property for the prospective buyer.
In conclusion, the preliminary contract of sale allows both the seller and the buyer to commit to signing the final deed of sale while protecting their rights and responsibilities. If you are thinking of purchasing a property in Italy and you would like further information about all the steps involved in the purchasing process, feel free to contact us at email@example.com.