Keeping Your Money Safe in a Holding Account until the Completion of Your Italian Property Purchase
On 29th August, 2017, the holding account was introduced. The new legislation governing payments for the purchase of Italian residential and commercial real estate property came in to effect as part of the Law of Competition. The legislation is retroactive, which means that it also applies to ongoing property purchases started prior to 29th August 2017.
New rules aim to give better protection to both buyers and sellers. Funds for the completion of purchase of Italian property real estate will now be held in a holding account by the chosen notary to the transaction. Deposits connected with a reservation offer and preliminary contracts are not subject to this new legislation.
Completion funds can be bonded although there is no obligation to do this. It is up to the buyer to specifically request the notary to hold funds in a bonded client account. As this may generate problems with the seller, it is highly advisable in the preliminary contract, to include a clause that all parties authorise the notary to hold completion funds in a bonded client account.
How does it work?
While the buyer acquires legal ownership of the property when the deed of sale has been signed, the notary will now hold funds until completion of the sale has been registered. Following signature by all parties to the transaction, the notary has 30 days to register the deed of sale. Once registration of the deed has been finalised, the buyer can be certain that the purchase has been completed smoothly and the transfer of funds to the vendor will occur. This provides protection to the buyer between signing the deed of sale and its registration in case any adverse entries pertaining to the property come to light between signing and registering the deed of sale. Adverse issues might include outstanding debts, mortgages, encumbrances, court applications for seizures and foreclosures.
As established by the Law on Competition, when purchasing property, all monies to be paid by the buyer to the seller should be collected in a dedicated account held by the notary. This sum will also include any amounts required to settle liabilities imposed on the vendor. A typical case of this might be where the vendor is still paying off a mortgage on the property. In this case, the buyer would pay the entire amount in to the holding account so that a part of this can be paid to the mortgage lender for redemption and cancellation purposes once the purchase is completed.
The notary’s duties
Amendments to legislation stipulate that the notary:
- must have a bonded client account in which the notary can receive funds from customers for the payment of property real estate;
- has no entitlement to any interest accruing to bonded client account;
- can not use funds for any other purpose than the payment of a designated property.
If the notary has debts, creditors can not foreclose on the money deposited in the holding account; should the notary die, funds in the account will not constitute part of the notary’s estate; if married, funds do not enter in to the notary’s matrimonial property regime.
If you are looking for further information about the Italian property purchasing process, you might find our comprehensive guide useful, or if you need independent legal advice, please get in touch with us. We are here to help.