A real estate agents’ role is to connect vendors with buyers
The first step in purchasing a home in Italy is to look for properties that you like. For this, services of a licensed real estate agent provide invaluable support.
Real estate agents facilitate property transactions. They provide relevant information to buyers and vendors. However, Italian real estate agents have no legal obligation to undertake searches of a technical or legal nature (due diligence).
Clearly, a lack of due diligence could in the first instance impact the transaction itself. Further down the line, if you didn’t conduct due diligence prior to buying, you might run into issues. You may discover the property lacks of full or partial planning permission or that renovations do not conform with building regulations. Crucially, a lack of due diligence may effect the future saleability of your property.
Real estate agents in Italy are of course required to disclose information based on the principles of a professional duty of care. This implies an obligation to provide information on any circumstances or issues that potential buyers should know about. Imparting incorrect or false information to an interested party is illegal.
Real estate agents have a duty of care
In 2012, the Milan Court of Appeal heard a case regarding an estate agency’s duty of care: ruling no. 307 filed on 27th January 2012.
Clients of a real estate agency took them to court on the grounds that the agent had failed to provide relevant information on adverse encumbrances on a property the clients wished to purchase.
The clients sued the real estate agent for a refund of the €6,000 commission fee they had paid to the agency. They argued that the real estate agency had been derelict in their duty of care. The clients claimed that the real estate agency should have communicated the existence of two mortgage transcriptions on the property. They maintained they would not have signed a reservation offer or a preliminary contract had they known. Signing the latter triggered the commission payment to the real estate agent.
The court dismissed the case.
The onus is on potential buyers to conduct pre-purchase due diligence
In support of the court decision, the judge stated that legal searches did not form part of a real estate agent’s responsibilities. In other words, technical and legal investigations, including land registry, planning, zoning and mortgage searches on a property do not form part of a real estate agent’s remit.
What does Italian law say about the scope of real estate agency services?
Article 1759 of the Italian Civil Code requires real estate agents to notify parties of all known circumstances concerning a property transaction.
In this case, the real estate agency had done this. They argued that as they had no prior knowledge of the encumbrances, they could not have informed the clients of their existence. The real estate agency had only become aware of the mortgage transcriptions when the clients informed them. The clients had only learned of the encumbrances when they were about to complete the sale.
There was no evidence that the real estate agency had any knowledge of the mortgages. The judge ruled they had not wilfully omitted to advise the clients about the adverse encumbrances. The responsibility for ascertaining this information did not lie with the real estate agent but, with the purchaser.
Article 1176 of the Italian Civil Code states that performance of checks and searches related to a property is not part of the agent’s professional duty of care. Furthermore, estate agents are neither legally responsible, nor qualified, to conduct in-depth due diligence.
Anything pertaining to the legal and technical due diligence of Italian property purchases should therefore be handled by legal and technical professionals.
Real estate agents facilitate the search for an Italian property
However, Italian real estate agents do not provide due diligence services.
When buying or selling a property at home, most people wouldn’t dream of entering into a transaction without the assistance of a lawyer and a surveyor. These are the professionals who conduct legal and technical searches and checks. Yet all too often, we meet foreign buyers who have decided to rely on what an estate agent tells them about a property.
The reality is that a property transaction in Italy is an investment. It can quickly become costly – both financially and emotionally if things go wrong. In addition, there are the complexities of the Italian legal, tax and administrative systems. On top of this, there are the language barriers.
Essentially, in order to avoid any problems and before you sign any paperwork, you should engage an experienced, independent lawyer. The need for legal advice is far greater for an overseas transaction than when buying property at home.
De Tullio Law firm specialises in cross-border residential and commercial property transactions in Italy. We recommend that before you sign any paperwork with an estate agent that you seek independent legal advice.
Get in touch if you feel unsure about anything property-related and need advice.
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