Late delivery: one of the risks in buying Italian off-plan properties
This article is part of a series about the risks of buying off-plan properties in Italy. To read more on the topic, please use our search tool to look for off-plan properties in Italy.
Significant delays in delivery of Italian off-plan properties is one aspect that investors report as being particularly irritating.
Developers and builders can be very persuasive. Whatever you do, don’t feel obliged to sign anything without first seeking independent legal advice.
Penalty clause for late delivery of off-plan properties
Broadly-speaking, a penalty clause is a contractual provision which levies a monetary sum in the event of a breach of terms in the contract. It does not include any compensation payment for actual damages.
Buyers often try to insert a late delivery penalty clause into their contracts for off-plan properties in Italy. However, penalty clauses are generally unenforceable and ineffective under Italian law.
Generally, the off-plan developer or builder draws up a contract. Often these are major companies. The buyer is therefore unlikely to be able to mutually agree a penalty clause. The agreement will therefore unilaterally favour the company.
The importance of a preliminary contract
The Preliminary Contract (Compromesso) is key in off-plan property purchases. If they are fortunate, off-plan buyers may manage to insert a penalty clause in the compromesso. This would see the refund of a buyer’s deposit. However, in accordance with binding terms of the contract, the buyer would still have to wait for the developer or builder to deliver the property.
Termination clause for late delivery of off-plan properties
A more effective legal safeguard would be to integrate an express termination clause in the compromesso. In effect, the termination of the preliminary contract would automatically occur – whether or not the buyer notifies the seller of the intention to terminate.
To make the clause enforceable and effective, the compresso must explicitly reference the length of delay.
If the seller exceeds the delivery date, either party can negotiate an extension and a new compromesso. Or, the buyer can claim a refund of deposits and/or any other advance payments.
Unfortunately, buyers of Italian off-plan properties sometimes sign a compromesso which promises more than it can deliver. Then, when delivery day arrives and buyers do not receive the keys to their property, the buyer discovers that the Italian law does not provide much protection.
If a compromesso does not include an express termination clause, the buyer can send the developer or builder a formal request to respect terms and conditions. Italian law calls this particular provision an, “essential term”.
The buyer’s formal request should warn the vendor that failure to respect terms and conditions will terminate the contract. The vendor must fulfil contractual obligations within a certain time, which cannot be less than 15 days.
In a recent court case, where the vendor had failed to comply with an, “essential term”, the Court of Vicenza (judgement n.187/2016) ruled that:
“whenever a delay is considered unbearable, it is possible to start legal proceedings against the builder, or the building company, and to obtain a refund of any advance payments. Furthermore but, only in the case of proven damages, the purchasing party can claim additional compensation”.
Either way, before taking legal action to resolve the situation and/or to make a claim for compensation for damages, an amicable settlement is always preferable. Because legal action through the Italian courts can take at least 5 years and can be very costly, an amicable settlement is likely to be quicker and more favourable. It is the route we would recommend.
There are a number of risks involved in off-plan purchases. At De Tullio Law Firm, we are property law specialists. We are present throughout Italy. We would always recommend that you engage a lawyer you choose to ensure that you protect your interests. If the vendor recommends a lawyer, we would caution against it on the grounds of conflict of interest. Before signing any off-plan property-related paperwork, including a preliminary contract, you should seek independent legal advice. If you are unsure about any aspect of purchasing off-plan properties in Italy, we are here to help.
You may also be interested in Off-Plan Property in Italy: Insurance And Guarantee