Buying a property in Italy may be your first experience with the Italian legal system
Investing in Italian real estate requires long-term planning. It should be an exciting process. However, it can be stressful if things go awry. Unfortunately, foreign property purchasers in Italy often throw caution to the wind and do things that they would never dream of doing when buying a property at home. If you’ve ever bought a property at home, you probably didn’t opt for DIY conveyancing. You most likely instructed a lawyer to manage all the legalities on your behalf. Italian property law is complex, probably unfamiliar to you. It raises special issues of practice not present in other transactions and jurisdictions. An Italian property lawyer is a qualified legal specialist, experienced at dealing with these problems.
Italian property purchases proceed through three stages. Each stage has legal and financial implications
Firstly, in a typical Italian home purchase, the buyer enters into a brokerage contract with a real estate agent. This is usually in writing. Acting as an intermediary, the estate agent conducts negotiations with the vendor. The buyer and vendor then conclude a formal reservation offer. This is usually time-limited. Often a vendor agrees to remove the property from the market for a period of two weeks. A buyer pays a first deposit and conducts preliminary due diligence.
Secondly, assuming the buyer and seller agree to continue the process, they enter into a preliminary contract and agree a completion date. The buyer pays another deposit at this point. Between signing and completion of the sale, the buyer has a further opportunity to conduct more in depth due diligence. By law, it is the buyer’s responsibility to check the legalities. As a minimum, due diligence at this stage should include checking ownership through title deeds. Also, searches pertaining to property plans and planning permission.
In the third and final stage, all parties to the transaction sign the deed of sale. On behalf of the Italian State, a notary public draws up this deed, oversees signing and exchange of the outstanding purchase price. The notary also collects purchase tax and registers the transfer of ownership.
Mistakes when buying a property in Italy can become costly, time-consuming and heartbreaking
We often meet people who find themselves in trouble because they didn’t seek legal advice when they bought their Italian property. It is not uncommon to discover after the purchase that an Italian property is wholly or partially illegal. On top of this, many legally built properties in Italy harbour significant liabilities that are not compliant with the law.
Mistakes when buying a property in Italy can become costly, time-consuming and heartbreaking to rectify. Issues have the potential to derail plans for a new life or impact the saleability of Italian investments later on.
The best way to protect yourself against problems is to engage a specialist Italian property lawyer
This will ensure you stay safe when buying an Italian property. In addition, it often saves time and money. An Italian property lawyer will be able advise and guide you through the whole journey.
During the first stage for example. A buyer may sign a brokerage agreement with a real estate agent that does not deal with a number of legal problems. In the absence of an agreement to the contrary, the buyer may therefore become liable to pay a brokerage commission even if a sale does not take place. If a buyer uses multiple estate agents, they may find themselves paying more than one brokerage commission.
In addition to explaining the ramifications of estate agency contracts, a lawyer can manage negotiations on your behalf. On the one hand with the estate agent regarding their fees and on the other hand, terms and conditions. For instance, what happens if the vendor withdraws the property from the market, or can’t deliver a title to sell the property?
A lawyer can also advise on issues such as tax implications of a cross-border transaction.
The preliminary contract is the single most important document in the transaction
Estate agents often use standard forms for preliminary contracts. Although standard printed forms are useful, it can be helpful to consult a lawyer for explanation and clarification. You may need to make changes or add conditions to the form to reflect your personal circumstances.
The preliminary contract should also contain conditions of your purchase.
– Existing alterations, additions, extensions. Are they legal?
– If you plan to change the property, can you do this lawfully?
– Do you need a survey?
What happens if the survey finds termites, asbestos, radon, or lead-based paint or hazardous waste on the land?
– What are the legal consequences if completion is delayed? And, what happens to the deposits in this case? This question raises related questions: Who holds the deposits? The vendor, the estate agent, a lawyer or a notary?
Again, it is important to remember that pre-printed contract forms are generally inadequate to incorporate conditions to which your purchase may be subject.
The onus is on the buyer to conduct thorough due diligence
An Italian property lawyer can execute a title search, explain the title and determine whether the legal description is correct and whether there are problems with co-owners or previous owners. A lawyer can also check for mortgages and debts on the property. In addition, a lawyer can check municipal records and land registers for property plans.
It is vital to check that the plans match the property footprint and that the whole property has planning permission. A certificate of habitability is also important.
An Italian property lawyer can explain the effect of any easements and agreements or restrictions imposed by a prior owner, and whether there are any legal restrictions which will impair your ability to sell the property later on.
The title search does not tell the buyer anything about existing and prospective plans in the area. Having your own Italian legal advisor will enable you to obtain this type of information more accurately, thoroughly and easily than trying to do it yourself.
Signing the deed of sale is the most important event in the purchase and sale transaction
When you purchase a property in Italy you must do so through a notary. A notary is a government official. Their main tasks are to ensure that all documents are genuine, draw up the deed of sale and collect tax and fees.
Although the role of notary is to ensure that the transaction meets all legal requirements, this does not mean that the notary is acting on the buyer’s behalf to ensure the buyer gets the best deal. Furthermore, contrary to what many people believe, the notary cannot guarantee the absence of legal issues such as illegal work and features (abusivi). While a notary will check planning permission for example, a notary will not make a site inspection of the property to ensure the absence of illegal work. An Italian property lawyer will work on your behalf to guarantee that your property conforms to Italian building legislation and regulations.
Having your own Italian property lawyer is helpful in explaining the nature, amount, and fairness of closing costs. A lawyer can assure that the deed of sale is correct and explain it to the buyer. The notary will in fact require the presence of a translator at closing if buyers are not fluent Italian speakers. So having an Italian lawyer who speaks your language makes sense. A buyer benefits not only from translation ability, but also legal know-how and expertise.
Those present at the closing often include the buyer/s and seller/s, their respective lawyers, and the real estate agent. There may be last minute disputes about delivering possession and personal property or the adjustment of various costs. If you are the only person there without a lawyer, your rights may be at risk.
Choose your own Italian property lawyer
Perhaps the most important reason to have your own lawyer is conflicting interests of the parties. Throughout the process, the buyer’s and seller’s interests can be at odds with each other, and even with those of professionals involved in the sale. The estate agent generally serves the seller. Both seller and estate agent want to see the deal go through, since that is how they will make money.
It may seem cost effective to use the services of a solicitor recommended by an agent or the seller. However, to avoid any conflict of interest, you should choose your own lawyer to act in your interests and your interests only.
At De Tullio Law Firm, we specialise in property law. We have decades of experience advising clients on buying property in Italy. Our team of solicitors, associates and professionals combine international legal experience and knowledge with local know-how. We pride ourselves on our personal service so that you can make your plans a reality without any hidden surprises.
Let us guide and protect you through the whole process of buying an Italian property, as well as advise you on issues such as how owning property in Italy will impact your tax affairs and inheritance plans and other important issues that you should think about to safeguard your family assets long term.
We can also help you with Italian residence and other paperwork if you plan to live in Italy. If you are unable to reach Italy in person, we can act on your behalf by organising a power of attorney for you.
What are the principles of Italian inheritance law?
The national law of the deceased party at the time of death determines succession rules.
The Italian legislator adopted the principle of “unity of inheritance”. This principle differs substantially from the one adopted in other countries. Notably common law countries. Unity of inheritance makes a distinction between between movable and immovable assets.
If the deceased was resident in Italy at the time of death, Italian Inheritance law applies to the deceased’s worldwide assets.
Whereas if the deceased lived outside Italy, Italian inheritance law is only applicable to assets in Italy.
The law of the last domicile or last citizenship of the deceased party is applicable to movable assets.
The national law of the location of immovable assets is applicable. This is the so called, “lex rei sitae” (law of the country where the property is located). One of the most important consequences is that, if the deceased’s estate includes properties located in different states, the succession of each property is subject to the law of the country where the property is located.
The inheritance law that regulates succession is the national law of the deceased at the time of death
Italian conflict of laws considers the possibility that the national law of a deceased foreign national might defer to the law of another country. Such deferment is however, only effective if the law of the third State accepts the deferment. For example, if an English citizen owned a property in Italy, succession will be regulated by the law of England and Wales. However, according to the conflict laws of England and Wales, the law applicable to overseas property is“lex rei sitae”. In other words, Italian inheritance law is applicable to the Italian property.
The testator has the right to submit his succession to the law of the country where he resides. Such choice has to be formally expressed in a will and shall not be prejudicial to the rights that the Italian law provides for, “legittimari” or forced heirs. These are close members of the family who have the right to receive a fixed part of the estate. Whether the deceased had a will or died intestate, legally, the deceased’s spouse or registered partner and children for example must receive a portion of the estate.
If you own property in Italy, it is advisable to make an Italian will
It is highly advisable to make an Italian will in order to limit the consequences of “testamentary succession”. This also applies where the deceased has not left a will, in such case the Italian law determines which relatives of the deceased have a right to succeed (primarily the spouse, the legitimate and natural children, and the ascendants).
Where there are no heirs, Italian inheritance law assigns Italian assets to the Italian State.
EU Regulation 650/2012 simplifies cross-border inheritance matters
Also known as Brussels IV, EU Regulation 650/2012 came in to effect on 17th August, 2015. The regulation harmonises succession rules in participating EU States, which is all of them except Ireland and Denmark. In an effort to simplify cross-border succession, the EU adopted a single, unified connecting factor – habitual residence.
Brussels IV provides an opportunity to elect a country law to apply to your succession
Brussels IV allows individuals to make an election for the country of their nationality to apply to the devolution of their entire estate. Or, where individuals have multiple nationalities, a testator may choose to apply one of these nationalities.
Testators do however need to take action. If you own a property in Italy, you can nominate a country law in your will. This is known as a Choice of Law codicil.
If you are in the process of making or reviewing your will, it is therefore worth considering including a properly drafted Choice of Law codicil to apply to cross-border inheritance. You need to carefully consider matters such as foreign matrimonial regimes, usufruct, tax consequences, joint ownership structures and other foreign proprietary rights with respect to your estate.
Another benefit of Brussels IV is the European Certificate of Succession (ECS). This allows heirs, legatees, executors of wills and administrators of the estate to prove their status. The certificate is then valid in all other EU Member States.
Brussels IV also provides potential benefits for non-EU nationals
Interestingly, there are also potential benefits for non-EU nationals resident in an EU Member State. Again, you need to make an appropriate Choice of Law in your will. For example, US nationals could nominate US law to apply to the succession of their property in Italy. An Australian with property in Spain could nominate Australian law. A Canadian citizen with property in France could elect Canadian law, and so on.
Cross-border inheritance law is a complex matter. We recommend you seek independent legal advice regarding your personal situation.
At De Tullio Law Firm, we have over 55 years of experience managing cross border succession and estate planning matters throughout Italy. We are a full member of STEP, the world’s leading association for trust and estate practitioners. If we can be of assistance, please get in touch.