Buying a Property in Italy? Don’t Make Your Offer Without Reading These 10 Tips
During the past 17 years of working on over a thousand international real estate transactions nationwide we have seen many instances where some key planning up front made a lot of difference. In the current market, the sale prices are at their lowest in 9 years, the euro is historically weak and Italian mortgages are finally accessible to foreign investors. These factors combined with tax credit measures for property renovations just renewed on January 1st, 2019 and a tourism rental market that is booming create a very enticing moment for foreign investors to purchase in Italy. But, don’t get caught up in the momentum! Read our top 10 tips below prior to making that Italian property purchase.
1. Retain Your Advantage. Once you sign an offer and pay a deposit you lose most of your leverage. Waiting to sign and transfer the money retains your advantage, so hold onto those pens! Prior to signing, make sure you fully understand the purchase details and any changes or requests you have can be put directly into your offer.
“Sellers are more willing to make concessions prior to receiving the deposit.”
Also, once your offer is accepted, the real estate agent (who in most cases represents the seller and the buyer) is entitled to claim the commission from both parties, thus getting paid at that early point in the transaction. This also means that you have to pull money out of your pocket for the commission before you even own the property. The parties can negotiate that the commission be paid totally or partially at completion.
2. Check Ownership. Expressly ask the real estate agent to see a current title record showing that the seller owns the property. Believe it or not, more times than you would imagine, a real estate agent lists properties without checking title and doesn’t know who legally owns the property.
“We have even had cases where the owner was genuinely unaware of other joint owners being on tile!”
In Italy properties have often been passed down within the family and multiple family members are on title. All of these people need to sign off on putting a property on the market and sometimes this does not happen. You could potentially put a deposit down on a property that isn’t actually for sale.
3. Check Building Compliance. The property plan filed with the local municipality needs to be consistent with the actual property status (location, layout and use of internal rooms, bathrooms, etc.). Due to a new compliance law issued in 2010, Italian properties built prior to then do not meet the new requirements, even if the owner never did any renovation work on the property. Most owners are not even aware their property is not compliant to current rules, so when they swear on their mother’s grave that it is compliant, they believe they are speaking the truth.
“Once a property is sold without property compliance, it becomes the buyer’s responsibility to meet compliance.”
Meeting compliance is typically time consuming and expensive and it might even imply altering the property structure. A local surveyor can be hired to assess the property and issue a compliance assessment report. To give an idea of cost for the report, for a property up to 150 square meters it would typically cost under EUR 400.
4. Confirm Occupancy Status. Whether you buy land, a house or an apartment, make sure it is not occupied at the time of your purchase. It is not advisable to put a deposit down on an occupied property unless you are fully aware of the implications. Lease agreements are highly regulated in Italy, mostly in favor of tenants. For example, residential leases are a minimum of 4 years and the tenant has the option to renew it for 4 more years unless the owner himself moves in.
“Even if the parties agree to shorter rental terms in writing, a tenant can disregard them.”
Even if the parties agree to shorter lease terms in writing, a tenant can disregard them and rely on the minimum term set by law. Basically, residential landlords are locked in to 8-year lease contracts, with no rent increase allowed, except for Cost Of Living Adjustments. The minimum lease term for commercial property is 6 + 6 years, and for land it is even more. A new buyer, even if unaware of current occupancy, would automatically take over these agreements and have to abide by them, so for most foreign buyers it is essential to ensure the property is unoccupied.
5. Check What is Included. In Italy, it is not common practice to hand prospective buyers detailed specifications of what is included in the sale, other than the four walls.
“Some owners will remove everything from the property, even stoves and kitchen cabinets!”
Some owners will remove everything from the property even stoves and kitchen cabinets! It is smart to attach a written list of everything you expect to be present on the property when you purchase it. You want that kitchen sink? Make sure it is included!
6. Check Apartment Building Debts. If you are going to purchase in an apartment building, you want to make sure to have formal confirmation from the condo association that the seller is current on all fees.
“The buyer is responsible along with the seller for the seller’s condo debts.”
The buyer is responsible along with the seller for the seller’s condo debts. It should also be confirmed that apartment building owners have not approved any extraordinary expense that has not been paid, as the buyer is responsible for all work approved and not paid prior to purchase. This could be something like a façade renovation, elevator installation, new roof, etc. which can turn out to be quite costly
7. Check Transaction Costs. Purchase price is not your only cost as a buyer. Taxes can vary substantially from property to property as the taxable basis depends on zoning and who the seller is (e.g., developer or private owner). Tax rates also vary, from 2% to 22%! Additionally, there are several flat taxes that range from about EUR 100 to 600.
“While you are still in the planning stages you can check with a tax expert for any options to reduce completion costs.”
The notary fees which average from 1% to 2% of the purchase price are also on the buyer. Combine this with the real estate agent’s commission (average 3.66%) and you can be looking at a significant increase in your total costs. While you are still in the planning stages you can check with a tax expert for any options to reduce completion costs, or perhaps defer payment of a good portion of it (up to almost 80% until 20 months after completion).
8. Check Financing Options. Whether you have the cash to buy or need a mortgage, it is worth checking if the property you like has an existing loan.
“The new owner can typically take over the loan very easily.”
If it does, in Italy the new owner can typically take over the loan very easily: no appraisal, no bank approval and no cost. If an existing mortgage is not available, it might still make sense to get a free quotation from one of many brokers offering mortgages to non-Italians.
9. Set up Escrow Account or Currency Exchange Account. There is no need to open an Italian bank account for your property purchase, saving you time and additional expenses. You can set up an escrow account option with your real estate agent, notary public or a lawyer who offers this option.
“Most money transfer institutions of them offer much better rates than regular banks.”
If you need to send funds from an overseas non-Euro bank account, open a free account with a money transfer institution. Most of them offer much better rates than regular banks and you can save up to 5% of the transferred amount.
10. Customize the Purchase Contract. Italian law requires the purchase deed to be signed before an Italian notary who typically uses a standard purchase contract template. Especially for foreign buyers, this is not advantageous.
“Factors to consider: matrimonial status, inheritance consequences, tax reduction options.”
Well prior to purchase, ask the notary for a draft of the final purchase contract to review in advance. There are many factors to be considered when customizing the purchase contract such as: your current matrimonial status, inheritance consequences, and requirements to save taxes. Doing this prior to the completion meeting without the pressure of everyone around the table waiting for your signature on the contract can save you money as well as avoiding problems down the road.
The items listed above give some great guidance for moving forward with your Italian property purchase. We do however have one further tip of how to make sure your interests are protected: Hire a Lawyer! To have someone looking after your exclusive interests from the first step through completion is the best way to ensure a safe transaction at the best price. Select a legal professional who can advise you in advance about tax options, international estate planning and other crucial factors based on your nationality and country of residence. Our lawyers have extensive experience in international real estate, have worked on hundreds of property purchases throughout Italy and have assisted buyers from all the continents. Our organization is set up specifically to assist foreign clients. Contacting us you will get advice from a skilled consultant who can help you predict what is going to happen before, during and after the transaction. This gives you a smoother, safer and cost-effective experience. Start protecting your investment before you make it!
Our team of bilingual lawyers assists foreign clients buying and selling Italian properties nationwide.
We tap into a large network of surveyors, real estate agents, mortgage brokers, notaries and legal associates throughout Italy, giving our clients full coverage of their needs. We offer a comprehensive and competitive service from start to finish including the negotiating of the purchase price and any commissions, carrying out extensive property checks and record searches, liaising with all involved parties, customizing documents, acting as Power of Attorney, make and receive payments, offer escrow account service with a competitive international currency exchange program.
Our team frequently handles the transaction on behalf of the client so that the purchase can be fully completed with no need for the client to travel to Italy. All documents and information can be exchanged via email or courier without any need to involve consular offices.
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- Italian Notary
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*The information presented in the Studio Legale Metta web site has been written and reviewed by Italian lawyers. However, it should not be construed to be legal advice, nor promotion of the establishment of a relationship between lawyer and client. The case studies and answers contained in this web site pertain to the specific situation referenced and should not be understood to generally apply to other circumstances. Persons accessing this web site are encouraged to seek independent counsel for advice concerning their individual needs for legal assistance.
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