AN OVERVIEW OF THE PURCHASING PROCESS
Buying a property in Italy is not generally more complicated than buying a property in your home country; however, it is important to understand that the system and process can be quite different and not always the most straightforward.
Although the objective is the same and the process may be similar (searches, contracts, the property) local customs may be quite different and language barriers may present challenges. Furthermore, terminology which may appear similar to English can have very different meanings in Italian.
Click on each section to learn more about the different phases of the purchasing process in Italy.
Due Diligence & Documentation
Before signing the preliminary Purchase Agreement (“Compromesso”) and undoubtedly before signing the Final Contract our lawyers will check all of the documents related to the property.
The amount and complexity of such documents will depend mainly on the type of real estate that is being purchased. Acquiring these documents is, in most cases, a complicated process as they are issued by a wide range of administrative offices and agencies.
Generally, the documentation to be reviewed by the purchasing party is:
1. Property Deed (“Titolo di Proprietà e/o di Provenienza”)
This document confirms the ownership of the property and includes any limitations, restrictions, easements, mortgages that negatively affect the property. Particular attention needs to be paid when buying property from a seller who has received it by inheritance or as a gift.
2. Certificate of Urban Destination (“Certificato di Destinazione Urbanistica”)
This document provides information regarding the use of the plot of land according to the General Urban Development Plan (“Piano Regolatore Urbanistico”). This certificate is issued by the Italian municipality where the land is located.
3. Permit for Sub-division of Plots (“Autorizzazione alla Lottizzazione”)
According to Italian law, purchasing a plot of land without a Sub-division permit is illegal.
4. Town-Planning Conformity Law (“Liceità Urbanistica”)
If the property was built before 1967, it is necessary to make an explicit reference on the contract to the terms and conditions regarding the property and its building license.
5. Retrospective Planning Permission (“Concessione in Sanatoria”)
This document regularizes any construction or renovation work carried out on a property without having acquired the necessary required administrative permits.
6. Certificate of Housing Suitability (“Certificato di Agibilità)
The certificate of housing suitability attests to a home’s habitability, or to the fact that it satisfies minimal standards required by law. The municipality where the property is located or a different connected organization will issue this certificate.
7. Rights of First Refusal (“Diritti di Prelazione)
Italian real estate properties of artistic and historic value are subject to the Italian Ministry of Cultural Heritage and Cultural Activities’ right of first refusal. Therefore, owners of such properties are legally required to inform the legal office of the Ministry before a potential sale.
8. Cadastral Documents (“Documentazione Catastale”)
“Catasto” offices in Italy hold all the documents regarding all properties located under their jurisdiction. In addition, a “Catasto” issues certificates of ownership and documents regarding any third parties’ rights to the property. Prior to a purchase of Italian property, it is advisable to conduct a thorough research using the cadastral registries of the property of its current and previous owners as well as its compliance to cadastral laws and regulations. Furthermore, it is highly advisable to obtain the property cadastral map (“Mappa Catastale”) and compare it with the actual structure of the property to ensure that there are no discrepancies. In the case of non-compliance, a form notifying any variants (“Denuncia di Variazione”) will need to be filled out in order to obtain regularization of the property.
9. Condominium rules and regulations (“Regolamenti Condominiali”)
Every condominium has its own internal rules and regulations that define common area rights and promote best practices among residents and administrator.
10. Technical – Administrative Documents (“Documentazione tecnico-amministrativa, sicurezza degli impianti, dei cantieri e barrier architettoniche”)
All buildings constructed after 1996 require a building logbook (“Fascicolo del Fabbricato”) for safety purposes and those constructed after 1990 require conformity certificates. Lastly, properties built after 1989 require certificates attesting to the level of accessibility, visibility and adaptability.
11. Environmental Certification
The property needs to be in compliance with Italian environmental laws and regulations issued for public safety.
Italian Tax Code
The Italian Tax Code (“Codice Fiscale”) identifies citizens, non-citizens, residents and non-residents, in all dealings with Italian Public Authorities and Administrations.
There are many benefits to having an Italian Tax Code and, in some cases, it is mandatory to have one.
For example, you need an Italian Tax Code to open an Italian bank account, inherit an Italian property, register a Preliminary Contract for property purchase, complete a Deed of Sale, set-up utility connections and obtain an Italian mortgage.
Having an Italian Tax Code does not imply any tax duty itself. In fact, you may be subject to pay Italian tax duties only if you own certain qualifying assets in Italy, you are an Italian resident or if you earn a taxable income in Italy.
Requesting and obtaining an Italian Tax Code is also relatively easy for non-residents. While the Tax Code is assigned by birth to Italian citizens, it is assigned upon request to non-Italian residents.
Foreign citizens can apply for an Italian Tax Code without incurring any costs at any Italian diplomatic or consular office or at any Italian Revenue Agency office (“Agenzie delle Entrate”). Alternatively, an attorney can apply for it and obtain it on your behalf. Generally speaking, the Tax Code certificate is issued on the same day as application.
If you are not an Italian citizen and need an Italian Fiscal Code, you can apply for it in person or through a representative, directly in Italy or through an Italian consular authority by submitting a valid passport. However, if you are not an EU citizen and you are not a citizen from a country which does not require a visa for short visits, you may in this case be required to previously obtain a visa in order to apply for an Italian Tax Code.
***Checking your Tax Code (“Codice Fiscale”) ***
When you receive the Italian Tax Code certificate we recommend that you check the information fully matches the information on your ID. Misspellings and inconsistencies are quite common especially with foreign names.
Italian Bank account
Documents required to open an Italian bank account are:
- Italian Tax Code (codice fiscale);
- Anti-Money Laundering (AML) directive.
The process to open an Italian bank account is as follows:
a) Opening a Bank Account in Italy
The easiest way to open an Italian bank account is to go to an Italian bank in person with a passport and an Italian Tax Code (Codice Fiscale). In accordance with Italian laws and the anti- money laundering directives (AML), the bank representative will check your identity and ask for your personal information. If everything is in order you will be then be required to sign several documents which, in most cases, are in Italian.
You might also be asked to provide a statement issued by your home country bank indicating that you are a reliable customer. Banks communicate with each other via SWIFT messages so your home country bank can send the information directly to the Italian bank.
Generally, the bank account is set up immediately and within a few hours after all information has been registered, it is possible to start using the account.
b) Opening an Italian Bank Account Remotely
Some Italian banks have branches abroad or strong business relationships with other banks, therefore they are able to perform AML formalities.
If you live abroad and cannot travel to Italy, you need to find a bank that can screen your profile for Italian AML purposes and then pass your information on to the Italian bank. That will allow the Italian bank to set-up your Italian bank account in your absence.
Terms and conditions of the bank account may vary depending on the bank you have chosen. In order to avoid delays, before starting the process, contact the Italian bank to make sure that they are familiar with the process of opening bank accounts for non-residents. This will allow them to check their specific fees and requirements under their own policies in advance.
Many banks operate with foreigners on a daily basis and have specific services and packages for non-Italian residents. Therefore, you will be able to access a wide range of services such as the ones offered to Italian residents: i.e., online banking, chequebooks, direct debit utility payments, credit and debit cards.
Other banks might not be familiar with non-resident accounts and might only offer basic services. Local branches in small municipalities might be unfamiliar with the procedures for non-Italian residents and might refuse to provide them with standard services.
Power of Attorney
A Power of Attorney can be granted in many cases such as purchasing or selling Italian property, carrying out Italian inheritance claims and cross-border successions procedures, formalizing inheritance property transfers and starting a legal dispute in Italy.
If you are in the process of purchasing a property in Italy but do not have time to travel to Italy, you can grant an Italian lawyer or another person of trust the power to represent you and act on your behalf in order to complete the purchase.
The Power of Attorney that you wish to use in Italy can be signed in your home country or wherever you are located. Prior to 2011 it was possible to draw up a Power of Attorney at Italian consulate offices however, this is no longer the case due to budget cuts. As a result, Italian Consulates and Embassies no longer provide notarial authentication services or Powers of Attorney for non-Italian citizens.
However, there are suitable alternative options to draw up a Power of Attorney document abroad. In fact, it is possible to sign a Power of Attorney in front of any foreign Notary Public or solicitor who will authenticate the signature.
Non-Italian speakers are advised to take out a Power of Attorney in situations requiring signing deeds before an Italian Notary Public (i.e., property purchase or property sale).
In fact, the law requires the deeds to be translated from Italian into the language of the non-Italian speaker. Moreover, Italian law requires an interpreter to be present and this will increase final costs. A notary meeting with a non-Italian speaking party may also incur additional charges and finally, higher stamp duty charges will be applied to a lengthier deed.
Having a Power of Attorney allows for more flexibility in the event of any last-minute changes to the schedule.
The Importance Of Language
All the legally binding documents related to the purchase of a property in Italy must be written in Italian, regardless of the nationality of the parties.
Italian legal writing is very technical and it can appear obscure for people who do not have a background in Italian law. Therefore, an accurate understanding of the legal processes involved in purchasing a property is fundamental for translators or interpreters who are involved in such essential transactions.
Many real estate agents use pre-printed contracts and agreements with an English translation when foreign nationals are involved in Italian real estate transactions. However, such translations are frequently not accurate and can lead the buyer to misinterpret the content of the agreement and the duties involved. It is also important to bear in mind that in the case of litigation the Italian version of the contract will always prevail. This is mainly the reason why an Italian legal document should never be signed without the assistance of a bilingual qualified lawyer who can explain the full scope of the commitment and the legal consequences implied in English.
The Role of the Notary Public in Italy
What is the role of a Notary Public (“Notaio Pubblico”) in real estate transactions in Italy?
Italian Public Notaries are public officers who play a fundamental role in Italian conveyance.
In fact, any contract transferring the ownership of a property needs to be signed in front of a Notary Public as well as countersigned by the Notary in order to be legally binding.
The Notary will verify the parties’ identities as well as conduct a review of all the documents concerning the property in question.
In addition, according to Italian Law, the Notary Public is responsible for calculating the fees that are applicable to the transaction, collecting them from those parties on the final signing of the contract and paying them on their behalf.
After the Purchase Contract has been signed, the Notary Public files the property title with the local County Register of Deeds (“Conservatoria dei Registri Immobiliari”) and only then, is the transaction official.
At this stage, the Notary Public will keep the original copies for official records and copies will be made available for all parties involved. It is common practice for the purchaser to pay for notary fees and it is important to remember that a Notary is an Italian officer fulfilling an official role who does not work on behalf of the buyer or the seller but serves as a neutral party.
The Purchasing Process
The purchasing process is a complex process that usually involves several professionals.
Normally, there are three stages in the purchase of a property in Italy:
- The Property Purchase Offer (“Propostale Irrevocabile di Acquisto”);
- The Preliminary Contract of Sale (“Contratto Preliminare” or “Compromesso”);
- The Final Agreement (“Rogito Notarile”), which is signed by the parties before an Italian Notary Public and countersigned by the Notary.
The Reservation Offer (“Proposta d’Acquisto”) is a specific written contract indicating the amount offered for the property and generally includes small deposit of approximately 5 % of the property value, and while basic checks, in-depth due diligence are performed, the property is temporarily taken off the market. Although the purchase offer does not oblige the parties to finalize the final Contract of Sale, it is advisable that the buyer pays great attention before signing the Reservation Offer as this agreement may produce legally binding effects. If the purchase fails due to legal problems the deposit is usually refunded.
The second stage, the Preliminary Contract of Sale (“Contratto Preliminare di Vendita” or “Compromesso”), however, is legally binding and defines the selling conditions which will include a description of the property, rights of way, payments and ownership rights.
The Preliminary Contract of Sale should always:
- Define the property that is being sold;
- State the identification details of both parties (buyer and seller);
- State the agreed final price, the amount of the deposit paid and the payment plan for the remaining instalments;
- State the property complies with all legal and building standards and codes, fiscal laws etc.;
- Affirm the seller’s unconditional commitment to sell the property on or before the agreed closing date and guarantee that there are no limitations or any third party rights pending.
Although this contract does not have the effect of transferring the ownership of the property, it has several legal binding effects between the parties. Indeed, Italian Courts have recently established that Real Estate Agents are entitled to receive their fees when a Preliminary Contract is signed, even if the final contract has not yet been finalized or will not be signed at any time in the future.
According to recent regulations, the Preliminary Contract of Sale must be registered at an Italian Tax Office. At this stage of the process, the registrant pre-pays part of the fees but this sum will then be deducted from the total amount due when signing the final Deed before the Italian Notary Public.
When the contract has been signed, the purchaser pays a deposit of approximately 10%-30% of the property value. Under Italian Law the deposit serves various purposes. If the deposit is defined as “Caparra Confirmatoria” and 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.
Conversely, if the deposit is defined as “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. When the Preliminary Contract of Sale has been signed, in most cases it is essential to perform due diligence of the property to ensure that it complies with all the legal, technical and structural requirements established by state and municipality building standards and codes.
Before signing the Final Contract the purchaser should always check the following:
- If a couple jointly own a property, the sale cannot go ahead without the consent of both spouses;
- If the property has been inherited jointly by multiple heirs, before the property can be put on the market, all heirs must be consulted;
- If the commercial or residential property is leased to third parties, these must be given the choice to purchase the property.
When a construction company or business is selling the property, the buyer should always ensure that they have the legal power to sell the property. In this case the seller needs to request a certificate (“Visura Camerale”) from the Chamber of Commerce (“Camera di Commercio”); this certificate includes all information and data regarding the company and its legal powers.
At this stage of the process, a Notary Public (“Notaio Pubblico”) is appointed. The Notary is an independent official who prepares and coordinates the purchase, drafts the Final Contract of Sale and acts on behalf of both the seller and the purchaser. The Final Contract of Sale (“Atto di Vendita” or “Rogito Notarile”) is signed by both parties at the notary’s office and is countersigned by the Notary.
The buyer has to pay property taxes and notary fees when the contract is signed. When all the documents have been signed and the fees have been paid, the buyer receives the keys to the property.
Tax related costs for the purchase of a property in Italy are usually set between 5% and 20%. Foreign citizens who relocate to Italy can enjoy tax benefits provided that the property is their “first home” in Italy. In particular, if you intend to relocate to Italy you will have to pay between 1% and 2% of the property value; on the other hand, if you only intend to spend your holidays in Italy, you will have to pay 9% of the property value.
Value Added Tax (VAT) on a property is only paid by companies or businesses which buy a property, the amount paid generally stands around 10% of the property’s purchase price.
Other fees related to the purchasing process usually include notary fees (between 1.5% to 5% of property price), legal fees if you use an independent solicitor (between 1% to 2%), mortgage tax/arrangement fee, if applicable, in addition to State/Cadastral taxes, and real estate agent’s commission (1% to 3%).
Foreign buyers will also need to find the safest, easiest and most cost-effective way of moving their money from their home country to Italy. Bank charges and fluctuating exchange rates can both have an impact on the overall cost.