Should you use a one size fits all preliminary contract for your Italian property purchase?
Before you sign a preliminary contract when buying an Italian property, 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 personalise your preliminary contract with conditions that fit your situation. You should always seek independent legal advice if you are buying property in Italy. Have your lawyer examine all paperwork before you sign anything.
If you are thinking of buying an Italian property, 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.
You may also be interested in Buying property in Italy.