Italian ghost property

Question: What is a Ghost Property?

Answer: A “Ghost Property” is a property that, although exists, does not appear on any tax record. Similarly, you could call a “ghost room” a portion of a property that was added without the required permit.

A recent research study shows that approximately 1.2 million Italian properties are not accounted for in any Italian tax record.

Additionally, more than 50% of the residential units reviewed by banks during a mortgage approval process are found to have compliance issues preventing the mortgage from going through. This could be something as small as a “ghost veranda”.

Banks do not finance the purchase of a “ghost property”, or of a property that is not fully compliant.

The reason for this is that, one of the legal requirements for a property sale is that the property is compliant with building regulations. Although some compliance issues can be fixed by paying a fine or by acquiring a building permit after the fact, others cannot be rectified and require the construction to be taken down.

Therefore, in the event of borrower’s default, it would be expensive, or even impossible, for the bank to foreclose and sell the property

How do you Protect your Italian Property Investment?

During the mortgage approval process banks hire a professional to survey the property.

In most cases, when compliance issues are detected, sellers were not even aware of them before the property survey. For example, they might have purchased the property without a compliance check, trusting that everything was in order.

If you are a buyer who does not want to do a blind purchase and prefers to make an informed decision, before you complete the purchase, you should hire a surveyor (for example, a geometra, architect or engineer) to confirm that the physical property complies with what is on record.

The most critical stages of such process are:

1) Include detailed compliance terms in your purchase offer to regulate the compliance check process, extent, timing and deposit refund;

2) Provide the surveyor with specific instructions tailored to the target property, your needs, and future plans (remodeling, bed and breakfast business, rezoning, etc.);

3) Negotiate with the property owner how to resolve any issues that the compliance report might have brought to surface.

Here is a list of some of the compliance services we provide:

1. Select, appoint and instruct a local surveyor for compliance check and compliance report;
2. Liaise with owner and/or intermediary for survey compliance inspection;
3. Review compliance surveyor’s report;
4. Draft English summary of relevant aspects highlighted in the survey and legal comments for Client;
5. If compliance issues are detected, provide advice for remedy options;
6. Negotiate with owner to fix compliance issues, price reductions, completion deadline extensions, etc.;
7. Advice regarding contract termination, breach of contract claims, deposit refund and compensation.

All activities above can be offered as a stand-alone service or included in one our Property Service Plans.

Read this article for more information on property compliance.

Discuss your specific case and concerns with an Italian property lawyer.

Related information

• Italian Real Estate
• Italian Property Purchase Tips
• Italian Real Estate Taxes