In our previous article we talked about Real Estate Due Diligence. But what happens next? If you have decided where to buy a house in Italy and are sure about your purchase, these are a few phases you will need to go through.
First of all, the buyer will have to make a purchase offer. Once the seller accepts it, the deal will become binding for both parties. At this point, the parties will have to sign a Preliminary Contract of sale (Contratto Preliminare or Compromesso).
This is a crucial step and nothing must be left to chance. This contract outlines the terms and conditions of the sale and the requirements that have to be met. It has to be noted that this is contract obligates both parties to sign the final contract.
The Preliminary Contract of sale should always include:
- Full name, date and place of birth, national ID number (i.e. the Italian Tax Code), citizenship of both parties. Foreigners will also be required to provide their passport number;
- Property identification details;
- Details relating to the building license or the application for the building license;
- Technical specifications (capitolato) relating to the building that cannot be modified without both parties’ approval;
- Completion deadline;
- Mortgages or any other type of burden;
- Agreed final price and method of payment;
- The seller’s unconditional commitment to sell the property on or before the agreed closing date. Also, the seller’s warranty that no limitations or any pending third-party rights are present.
In case one of the parties is a foreigner, the Preliminary Contract must be drafted in Italian and then translated.
When this agreement is signed, a deposit should be paid (generally 10% or 30% of the value of the purchase price). There are two types of deposit:
- Caparra confirmatoria. If the purchaser fails to fulfil certain obligations, the seller can then rescind the contract (rescissione del contratto) and the purchaser will automatically lose the entire deposit paid. If, on the other hand, the seller’s defaults, then the purchaser will be legally entitled to a refund.
- Caparra penitenziale. Either or both parties can terminate the agreement. If the agreement is terminated by the purchaser, the seller retains the deposit whereas if the seller terminates the agreement, the purchaser receives a refund of the deposit.
Paying a deposit might have consequences in case either party changes his/her mind after having paid it. Therefore, prior to signing a Preliminary Contract, it is extremely important that it is examined by a competent person in order to avoid unpleasant surprises for both the seller and the buyer. We are here to help our clients understand every nuance of how Real Estate in Italy works.
The Preliminary Contract of Sale must be registered at an Italian Tax Office. At this stage, the buyer will have to pay part of the fees in advance but this amount will then be deducted from the total which is due when both parties sign the Final Deed before the Italian Notary Public. At the time of registration of the Preliminary Contract the following taxes must be paid: 0.5% on the deposit and a 3% down payment of the purchasing price (this amount will be refunded once the Final Contract is signed).
As previously mentioned, the Preliminary Contract is binding for both parties. It will be included in the Final Contract of Sale (Rogito), which marks the completion of the property transaction.
If you decided to invest in Italy, we suggest you to seek the help of an Italian professional. At Italian Real Estate Lawyers, we assist our clients throughout the entire property purchasing process according to the specific needs of our clients and without the need for them to be physically present in Italy in any stage of the process.
In fact, we are aware that if you reside abroad you may not be able to travel to Italy to sign the purchasing contract. However, you can sign a Power of Attorney which will enable somebody else (including us) to sign important legal paperwork on your behalf. If you are curious to know about how this works, watch out for our article next week.