Avoiding common mistakes when buying a property to renovate in Italy
Buying a renovation project in Italy is a common scenario. It is also a common scenario for these projects to end in heartache.
At De Tullio Law Firm we often don’t meet these buyers until after they have purchased a property. They have usually spent way more than they expected and need to fix problems.
The best advice we can give you is to engage an Italian lawyer before buying a property to renovate in Italy. It will save you time, money and anguish.
A Renovation property in Italy: the right project for you?
No matter how experienced you are, a renovation project anywhere can be a stressful and time-consuming process. Even more so if you live overseas, can only visit Italy periodically and you are not a fluent Italian speaker. Unless a project is guaranteed to give you your dream home, or make you money, think carefully. You may be taking on the wrong property.
Make sure you know exactly what you are buying
Don’t wait to discover major legal issues such as lack of planning permission until after your purchase is complete. Having a lawyer means you have someone to work on your behalf to conduct thorough due diligence. Any legal non-compliances will be detected before you complete the purchase.
In addition, your lawyer will assist you in obtaining a structural survey. A survey of the property will reveal important information about construction and building materials. It will highlight problems and remedial actions. Moreover, it will give you a good indication of the likely cost of renovations. It is also worth commissioning a measured survey of the building. This will give you a detailed set of floorplans and elevations on which to base your proposed renovations.
Even minor renovations can turn into a nightmare if your builders or subcontractors fail to do a good job.
Always ask for references, and speak to previous clients. Your lawyer can help you hire reputable builders and can act as project manager on your behalf throughout the project.
Buying a renovation property in Italy: costs
Work always costs more than you expect. This is because you can’t foresee some problems until renovations start. You may have to change your mind or alter designs or specifications.
Always include a budget contingency of 10 – 20% to cover unforeseen costs and fully expect to spend it.
Make sure your plans are as detailed as possible; list all the tasks and materials and, who is going to do the work. Don’t forget to allow for skips, scaffolding, tools and plant hire. Estimate costs by comparing similar projects in the area. Make sure you, and/or your lawyer, get builders’ quotes.
We would recommend that you instruct your lawyer to draft a building contract with your chosen builder. A building contract makes the builder’s quote legally binding.
Heed Italian rules and regulations when buying a property to renovate
Under no circumstances, should you ignore requirements of the Italian law, as it will eventually catch up with you. Do not undertake any work without first checking whether you need to satisfy requirements such as planning and building permits.
You may also need to notify neighbours or others regarding your renovation plans. Your lawyer can advise you if property deeds contain restrictive covenants, leases or other overriding interests in the property and land.
What are the penalties if you don’t follow the Italian law?
You may think that you can obtain the required planning permission retrospectively. However this is not always possible. Even if you can make a retrospective planning application, it may be rejected. Your illegal work could then constitute a criminal offence. In this case, the Italian State may seize your property. Getting your property back will likely be a very lengthy and costly process.
Failure to obtain the relevant approvals, you will have to prove compliance. This may mean undoing completed work.
Breaching a restrictive covenant or the terms of a lease can lead to a court injunction, you may have to pay fines or even have to undo your renovations.
Before you can start renovations, you will probably need to do some demolition. As building materials need careful disposal, demolition work is a procedure that will also require authorisation.
With over 55 years of experience as specialist property lawyers throughout Italy, we strongly recommend that you seek independent legal advice before purchasing any property in Italy. If you have already purchased a property but have run into trouble and would like to discuss your situation, please get in touch. We can help!
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What is an Italian Energy Performance Certificate?
If you are purchasing a property in Italy, an Italian Energy Performance Certificate (EPC) – Attestato di Prestazione Energetica (APE) is an essential document.
In Italy, only an accredited engineer or surveyor can issue an EPC. As well as describing various aspects of the property such as its dimensions, condition and age, an EPC estimates energy costs for an average household. For instance, costs for lighting, heating and hot water.
An EPC provides an assessment of energy efficiency on a scale ranging from A to G. Category A is the most efficient and G is the least efficient.
Is an Italian Energy Performance Certificate mandatory?
Italian law made EPCs mandatory in 2013.
An EPC helps inform the sale or purchase price of an Italian property.
When buying a property in Italy, we highly recommend that you ask to see its EPC as part of your due diligence. You should see the EPC before you sign a deed of sale.
An EPC is valid for 10 years and the onus is on the seller or landlord to provide a potential tenant or buyer with an EPC.
How do you get an EPC in Italy?
In order to obtain an EPC, you need to engage a technician accredited by the relevant Italian Regional authorities. By law, only accredited technicians can issue an EPC certificate in Italy.
In order to issue an Italian EPC, the technician performs a site inspection of the property to assess it. The technician evaluates heat transfer and the health and safety of indoor environments.
Following a thorough analysis, the professional determines which category the property falls into and enters this on an EPC form. The EPC is then delivered to the new owner or tenant of the property.
Do I need an EPC to rent or buy an Italian property?
When buying or renting a property, it is important to view its EPC so that you can budget for heating and power. This way you can estimate future costs of your utility bills.
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What is a PEC?
PEC stands for posta elettronica certificata. It is essentially a certified email, which has a legal value, like a digital version of a registered letter (lettera raccomandata).
A PEC guarantees legal certainty of the sender’s identity as well as the date and time the email was sent.
A PEC also guarantees that the recipient receives the email and its contents. When the recipient opens and reads your PEC email, you will receive notifications.
Why is a PEC address useful?
PEC is widely used in Italy to send official documents to public administration organisations and private companies. In fact, it is mandatory for Italian companies, public administration organisations and professionals such as lawyers, notaries and accountants to have a PEC address. You can check an organisation’s or professional’s PEC address here.
Although there is no obligation to have one, a PEC email is useful if you have an urgent matter, particularly if you are abroad. The recipient will receive your PEC email almost immediately. You will therefore get a faster response.
Certain Italian public administration bodies must respond to correspondence within thirty days of receiving it. Whereas it might take several days for a recipeint to receive a registered letter, sending a PEC email will speed up the process yet, it has the same legal value as a registered letter.
In Italy you can use a PEC for a wide variety of official matters such as, requesting official appointments, information or documents. You can also send legal contracts and invoices.
How do you get a PEC address?
To send PEC email, you need to set up a PEC account. Italian providers include LegalMail, ArubaPEC, Postecert, Register.it, Libero.
To obtain a PEC address, you will need to visit your chosen provider’s website and follow the instructions to open your PEC account. This consists of inputting your personal information and uploading a copy of your identity document. Sometimes you will need to add your Italian tax code (codice fiscale). You then choose an address such as firstname.lastname@example.org and a password – just like any other email account.
Costs start from a few Euros a year for a basic PEC account, which usually includes limited storage. The more services you require, for instance you might want additional storage, the more you will pay.
If you need help setting up a PEC address, we are here to help. For over 55 years, De Tullio Law Firm has been providing international clients with independent legal advice. We offer services in all the major fields of Italian law
Get in touch at email@example.com
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Should you use a one size fits all preliminary contract for your Italian property purchase?
Before you sign a preliminary contract for an Italian property purchase, it is crucial to think about your personal situation. For example, is your purchase contingent on getting a mortgage or do you need to sell another property in order to complete this purchase? If your purchase is subject to certain circumstances, you should personalise your preliminary contract by adding conditions precedent.
Italian estate agents often use a standard preliminary contract template. This type of one size fits all preliminary contract may not be appropriate for your situation.
In fact, generally speaking, this type of standard preliminary contract may expose you to legal risks and financial penalties. In a worst-case scenario, you may end up in court.
Tailor the preliminary contract to fit your specific needs by adding conditions precedent
Conditions precedent protect all parties when buying and selling property in Italy. However, to provide protection, conditional clauses must actually be written into the preliminary contract in order for them to be legally binding.
During the due diligence process, if you find you are unable to meet the conditions precedent in the preliminary contract, you may withdraw from the purchase process. Examples of conditions precedent include:
- a property purchase being contingent on the buyer obtaining approval for a mortgage
- a buyer needing to complete the sale of another property to free up funds for the deal to proceed
- a buyer agreeing to purchase a property if it passes a property inspection and/or survey
- an offer hinging on approval from the local authorities for zoning and building permits for improvements such as changing the internal layout, an extension or installing a swimming pool.
What sort of conditions are valid in an Italian preliminary contract ?
Any condition precedent must be objective and cannot depend exclusively on the will of one of the involved parties.
According to Italian law, a condition is null and void if it is considered as merely potestative, i.e. it is considered as being in the sole interests of only one of the parties to the contract.
The most frequent and important example of a condition precedent in Italian preliminary contracts relates to mortgage approval. It is clear that all parties to the transaction stand to lose out if the buyer cannot obtain a mortgage. Under Italian law, this condition precedent cannot be classified as a purely potestative condition.
If you are not fully certain of having the financial means necessary to complete your real estate investment and you are negotiating with a bank to obtain a mortgage or, if you need to sell another property to finance the purchase, we strongly advise that the preliminary contract should indicate this as a condition precedent.
We would recommend that you seek independent legal advice if you are buying property in Italy. Have your lawyer examine all paperwork before you sign anything.
If you are looking at a real estate investment in Italy, why not talk to us? De Tullio Law Firm can advise and guide you throughout your Italian property purchasing journey. We have over 55 years of experience working with clients on their Italian and cross border property, family and inheritance matters. Get in touch.
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The Italian property market
Dreaming of buying property in Italy? The country’s rich heritage, magnificent buildings, cities steeped in history and regions with landscapes are as sublime as they are varied. This territorial diversity and widely different prices per square metre of property make the Italian real estate market very interesting.
The average price per square metre for Italian property was around €2,300 at the end of 2019.
However, it was much lower in southern Italy. In Puglia for example, it is possible to buy a house for 1,300 €/m².
If you’re looking for a property in Florence or Venice, prices are much higher: expect to pay more than 5,000 €/m² for an apartment in Venice.
Fees and taxes
Before committing to the purchase of a property in Italy, it is essential to consider the inherent costs.
First of all, as a foreign national, you are more likely to use a real estate agent. Estate agent fees vary and can be as much as 4% of the selling price, i.e. €12,000 for a property worth €300,000.
In Italy, a notary public (Notaio) must oversee the transaction on behalf of the Italian state. The notary’s fees are also variable: allow for between 2% and 4%.
However, in Italy, the most important fees are the registration fees, which represent 9%, or €27,000 for a property worth €300.000. That said, these costs should be put into perspective, as the rate is based on the land registry (cadastral) value of the property, which is generally lower than the actual value.
As for property taxes, they vary between 0.46% and 1.06% per annum. Nonetheless, these are costs that should be anticipated before buying a property in Italy.
Purchasing property in Italy: the legal steps
It is crucial to clarify the situation before buying. Italian property law is complex and may differ from your own country. You should always seek independent legal advice before signing any paperwork.
Once you decide to purchase a property, you and the vendor will sign a reservation offer. This is an irrevocable letter of intent to purchase (proposta irrevocabile d’acquisto) and means the vendor agrees to remove the property from the market for a defined period of time – usually two weeks.
While the property is off the market, you should conduct legal checks and searches into the property. This includes verifying property ownership, planning permits, zoning regulations and mortgages on the property. In addition, we would recommend that you have a property survey conducted.
Following your due diligence if you decide to proceed with the purchase, you will have to pay a deposit. If the sale falls through, you will get your deposit back in full. If on the other hand you continue to completion, the deposit will form part of the agreed purchase price.
It is advisable to sign a preliminary contract (contratto preliminare di vendita), even though it is not a compulsory step in the process. Having a preliminary contract allows you to fix terms and conditions of the sale based on your due diligence.
Deed of Sale
Any conditions contained in the preliminary contract will be included in the deed of sale (atto di vendita), which you sign when you complete the transaction.
It should be noted that when one of the two parties does not understand Italian, a second draft of the deed in your language is required, but the Italian version of the deed will prevail in a court of law.
For more comprehensive information about the Italian property purchasing process, you might like to read our guide. If you would like to discuss your situation or, if we can be of assistance, please get in touch.
1 Euro houses in Italy: too good to be true?
In recent years, to combat dwindling populations in rural areas of Italy, a number of Italian villages, have been launching charm offensives by putting a number of houses up for sale for the symbolic sum of 1 Euro.
The aim of local municipalities is to attract Italian and foreign investors to revitalise their areas. Cinquefrondi in Calabria is the latest Italian town to launch 1 Euro houses in Italy for sale.
Although these 1 Euro property schemes seem attractive, it may be wiser to pass on them. The €1 schemes are widely advertised and, with so many people expressing interest in these homes, there are always more applications than homes available.
How do you buy 1 Euro houses in Italy?
Whereas other towns selling homes for 1 Euro have required a deposit of up to €5000 that buyers forfeit if they fail to renovate the house within three years, Cinquefrondi is requesting an annual €250 fee for an insurance policy, payable until renovation works are complete.
Located in the historical centre of Cinquefrondi, properties are roughly 40 – 50 square metres in size. New owners will be liable to a fine of €20,000 if they do not complete their renovation projects within three years.
1 Euro houses at auction
It’s impossible to tell what you are taking on just from looking at a few photos of a property.
In some countries house auctions are common. In Italy however, they are not. The vendor’s lawyer does not prepare a set of documentation known as a, “legal pack”. Legal packs contain essential information including official titles and searches, property information and planning permission are therefore not available. In effect, you are responsible for conducting property-related searches.
To avoid buying what seems like a bargain but subsequently turns out to be a money pit, it is advisable that you go and inspect the property before you decide to make a bid. Obviously, this may not be possible because of time constraints and it can become costly. As you may not speak fluent Italian or have the expertise to assess what you are bidding for, we would recommend that you seek independent legal advice and professional expertise in Italy to evaluate the property before you submit a bid.
1 Euro is just the opening bid for properties
In fact, usually properties end up costing at least €20.000 at auction. On top of this, there is the legal requirement to renovate within a specific time frame. These properties therefore often end up costing a minimum of €50.000.
There are plenty of other reasonably-priced houses in Italy without the terms and conditions attached to €1 property schemes. These properties may be a better option for you.
If you are thinking of applying to buy a 1 euro house in Italy, or any other property in Italy, at De Tullio Law Firm, we can help you with everything from property checks and searches, to facilitating the transaction, liaising with construction companies, obtaining Italian residence and providing tax and inheritance advice.
Italian Property: The Importance of Cadastral (Land Registry) and Zoning Compliance
A great deal of Italian property is either completely or partially illegal.
Even slight discrepancies in plans, such as distribution of internal spaces can expose you to civil or criminal repercussions. The minimum penalty for the seemingly most trivial of matters is at least Euro 1,000. This financial penalty is over and above professional costs to remedy the discrepancy.
Planning discrepancies impact the future marketability of your Italian property
When you purchase an Italian property, due diligence checks regarding Cadastral and Zoning compliance are of the utmost importance. Ensuring your property complies with the law will save you time, money and stress in the long run.
Making sure your Italian property complies with the law isn’t just applicable to sales and purchases. It is also relevant for other cases such as, obtaining a mortgage, planning renovations, accessing tax benefits and subsidies and organising inheritance and asset division.
Cadastral Compliance (legittimità catastale)
This term refers to the compliance between a property’s current condition and its registration in the Italian Cadastre. As such it does not have a zoning relevance.
Italian tax authorities manage cadastral services. Entries in the Cadastre neither prove ownership nor property compliance with zoning legislation.
Zoning Compliance (legittimità urbanistica)
This term refers to the compliance between the property’s current condition and past planning permission. Many property entries in Cadastre do not match with zoning compliance.
It is crucial to verify this element before purchasing or selling an Italian property or if you are considering renovation work on a property.
Checking zoning compliance may reveal the presence of illegal work to the property. This could jeopardise being able to legally market the property. A lack of zoning compliance can generate legal disputes during the conveyancing process.
Zoning and Cadastral Compliance in Notarial Deeds of Sale
Since July 2010 it has been compulsory to prove in notarial deeds of sale, that a property complies with zoning and cadastral legislation.
It is therefore compulsory to list in the deed of sale the various building permits used in order to build, extend or renovate a property.
If the property was built prior to 1st September, 1967, exemptions may apply to omitting the property’s zoning history. After this date however, any renovation work must be listed.
At De Tullio Law Firm we are specialists in Italian property and inheritance matters. Before signing any property-related paperwork, please get in touch with us. We are here to help.
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COVID pandemic impact on the Italian property market
If you own property in Italy or you are planning to buy one, you may be wondering how the COVID-19 pandemic has impacted the real estate market in Italy.
Unfortunately, many people have lost their jobs or have had to halt professional activities during the pandemic. You might think that this will force property prices down so it would be a good time to invest in real estate in Italy.
Is that true?
Will the COVID pandemic negatively impact the Italian real estate market?
This is not an easy question to answer. Because Italian real estate agencies have only recently restarted their activities, it is too early to evaluate price fluctuations.
Generally speaking, no matter the cause of a crisis, properties sell at lower prices if owners need cash in the short term. However, if owners don’t need of cash, it is unlikely that they will sell at lower prices to achieve a quick sale.
How will COVID effect Italian house prices?
In order to understand the impact of COVID on Italian house prices, there is an important cultural aspect to consider. For Italians, investing in the property market and has always been seen as a secure investment. In any period of crisis, property safe havens become even more relevant.
In light of the above, it is hard to say how the pandemic will actually impact Italian property prices. It is difficult to predict whether property prices in Italy will drop or remain substantially the same.
What about pre-pandemic property contracts?
The scenario might be slightly different for property purchase negotiations started prior to the pandemic.
If you signed a contract to purchase an Italian property but the pandemic caused a delay in completion, it is unlikely that your situation has changed. Once it is possible, your transaction will complete according to the terms and conditions of your contract.
In other cases, you may be able to claim a force majeure applies due to the pandemic. It depends on the specific circumstances. For example, the exact fulfilment of the contract, payment timing, breach of contract claims, etc.
If you would like more information about how to price an offer for an Italian property or, if you need advice on the impact of the pandemic on a property contract, please get in touch.