Real estate contract law in Italy
If you are considering buying real estate in Italy, Italian civil code in art. 1470 governs sales and purchase contracts for Italian real estate.
A contract is a consensual transactional instrument through which one party (the vendor) transfers the ownership, or a right, to an assets to another party (the buyer).
Contractually therefore, a buyer is under obligation to pay the agreed fee to the vendor for an asset or right.
Acceptance of a reservation offer for real estate in Italy
If you are not familiar with the legal and financial implications of the three-step property purchase process in Italy, you may wish to read our guide to buying property in Italy.
The first step to purchasing a property in Italy is a reservation offer.
In effect, when buyers find an Italian property they like, they make a written offer on the property. Amongst other things, the reservation offer identifies the property in question and makes a price offer.
For the offer to be valid, first a vendor must accept the reservation offer in writing. This acceptance must then reach the potential buyer within a time frame stipulated in the reservation offer.
Contractual obligations of a reservation offer
Until written acceptance of a reservation offer reaches potential buyers, no contractual obligation exists between the parties. In other words, the reservation offer is revocable.
However, buyers may stipulate they wish to keep their reservation offer firm for a specified amount of time. If a vendor accepts the time frame, it means the vendor has an obligation to remove the property from the market. Because the vendor will not be able to market the property for the duration, the offer is known as, an irrevocable reservation offer.
Italian real estate agents: roles and fees
As in other countries, vendors in Italy often put their property in the hands of a real estate agency. The role of Italian real estate agents is to market the property to potential buyers. When a potential buyer makes an offer for a property, the real estate agent passes the offer on to the vendor. The estate agent does this through a reservation offer.
At this point, vendor and buyer are usually looking to move towards the second stage of the Italian purchasing process. This is where both parties sign a preliminary contract. If the vendor does not progress the sale to a preliminary contract stage, the reservation offer elapses and neither party has any obligation towards each other.
At the reservation offer stage, another aspect to consider is the estate agency commission. It is always worth asking if a real estate agent’s fees are negotiable. Generally however, commission ranges from 3% to 8% of the property sale price. Some agencies work on a fixed fee. To put that another way, fees are based on a percentage of the total sale price.
A reservation offer may not end in a sale
Between the reservation offer and signing a preliminary contract, buyers should carry out property checks and searches (due diligence). This may highlight problems or irregularities related to the property. These issues may subsequently lead to buyers withdrawing their offer.
The acceptance of a reservation offer between the seller and buyer is not therefore a guarantee it will end in a sale.
You should therefore be wary if the estate agency requests their commission at this stage.
At what stage should you pay Italian estate agency commission?
To clarify when exactly estate agents should receive their commission, a 2010 Supreme Court case is pertinent. In order for a real estate agent to be entitled to their fee, it is not sufficient that a broker merely puts vendors and buyers in contact. It is not enough to hope that the transaction concludes successfully.
In other words, commission is only payable to a real estate agent once a preliminary contract is in place between the vendor and buyer.
Difficulties linked to successful completion of a real estate transaction arise because there are so many pitfalls between the reservation offer and preliminary contract.
Contractual risks of real estate in Italy
To avoid risks, it is wise to seek independent legal advice before you sign any paperwork relating to buying property in Italy. To avoid any conflicts of interest, make sure you choose your own lawyer rather than a lawyer recommended by an estate agent or a vendor.
Your lawyer will guide you step by step through the intricacies of the Italian property purchase process.
De Tullio Law Firm is an Italian Inheritance and Real Estate Law Firm present throughout Italy. We specialise in cross-border residential and commercial property transactions and inheritance matters in Italy. Should you need any further clarification concerning this or other property-related topics, De Tullio Law Firm will be happy to help. Get in touch with us at: email@example.com.