Tag Archive for: Off-Plan

Leasehold or Emphyteusis in Italy: What You Should Know

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Emphyteusis is a type of leasehold arrangement

The closest Common Law legal term to Emphyteusis is a leasehold.

The landlord retains the ownership of property. However, a tenant has the right to use it for a contractually agreed period of time. In this type of leasehold or Emphyteutical arrangement, the tenant must both maintain and improve the property.

Leasehold or Emphyteusis is a contractual arrangement which has its roots in Roman Law. It formed part of the feudal system and has connections to the agricultural economy. Farmers had the possibility to cultivate land thereby sustaining themselves. In return, farmers paid an annual ground rent or canon in money and or in kind.

Italian leasehold or Emphyteusis arrangements are applicable to all types of physical assets

Contractual arrangements exist between two parties. On the one hand, the Dominium Directum, the freehold owner the (dominus) or landlord of the property. And, on the other hand, the Dominium Utile – the tenant (emphyteuta) who has the right to use property on a leasehold basis.

Emphyteusis is applicable to both land and buildings, including villas and apartments.

For the duration of an Emphyteusis contract, where land is involved, the tenant has the right to alter the surface of the land. This includes ploughing up pastures to cultivate a crop or plant trees.

Where the arrangement concerns buildings, a tenant may alter these. However, alterations must not cause any deterioration of the building. Therefore, if the tenant wishes to build an extension or add to existing structures, the tenant may do so.

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The contract between the ‘landlord’ and the ‘tenant’ must be in writing. Rent payments are recurring and the duty to pay rent only ceases if the estate is destroyed. Destruction may either be due to human causes  such as a fire or through natural events for example, an earthquake.

Duration and obligations of leasehold or Emphyteusis contracts

Emphyteusis can be in perpetuity or limited to a minimum of 20 years. In either case, entitlements are the same.

In other words, a tenant may sublet the property, receive compensation for improvements made and even retain the property until full payment of his credit is rightfully received. These things, as well as those previously mentioned, do not require the consent of the landlord.

If the Emphyteusis has a duration of 20 years, the tenant cannot contractually transfer rights to another party. The right of pre-emption does not apply to the tenant in the same way it does to farmers. This means that the tenant in a leasehold or Empyteutical contract arrangement does not have right of first refusal to purchase land.

The tenant has a very broad right to dispose of the property held under perpetual Emphyteusis. Thus a tenant may dispose of the emphyteutical property by means of a deed in compliance with Italian Civil Code. This can either be an act inter vivos, i.e. made during the tenant’s lifetime, or causa mortis, i.e. after death. In the event of death, disposal is by means of a will.

Redemption of leasehold or Emphyteusis contracts

A tenant can acquire full ownership of Emphyteutical property through the payment of a price corresponding to fifteen times the annual rent. A tenant can make use of this redemption right at any time.

This redemption right prevails as an equivalent right accorded to the landlord in case of breach of contract by the tenant, known as the “devolution” (devoluzione).

Redemption may be settled either out of court, by means of an agreement between the landlord and tenant. A notarised deed must reflect the settlement. Where the landlord and tenant cannot reach agreement, the dispute can be settled in court.

Check the title deeds of an Italian property before you buy

A tenant must increase the productivity, the usefulness or the value of the estate, rural or urban. This obligation lasts for the duration of the term of Emphyteusis and must be in writing. Annual rents to the landlord are payable annually.

The landlord has the right to request the end of the Emphyteusis due to a breach of contract by the tenant. The landlord must refund any improvements the tenant has made. Payments should be proportional to the increase of value of the estate when it returns to the landlord.

Finally …

Acquiring, redeeming or disposing of property subject to leasehold or Emphyteusis arrangements can present challenges. Other types of leasehold arrangements also exist in Italian law. It is advisable that you contact an Italian lawyer to ensure you understand all the implications of such arrangements.

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. We are here to help.  Get in touch with us.

For more comprehensive information about the Italian property purchasing process, you might like to read our guide. You may also like to watch our info videos about Italian property law.

Off-Plan Properties in Italy: Delivery Delays

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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.

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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.

Essential Term

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.

Case law

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.

Finally …

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. You may also like to watch our info videos about Italian property law.

Italian House: Structural Issues. Where Do You Stand?

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I bought an Italian house then discovered big cracks in the walls 

According to your email, you have just moved into the Italian house you purchased three months ago. Unfortunately you have discovered some serious cracks in the living room and kitchen walls.

You immediately called in a surveyor (geometra), who has informed you that there’s a serious structural problem. In effect, the problem means the property is uninhabitable. You expect to receive a full written report from the surveyor within the next few days. 

What legal action can you take regarding the defects in your Italian house? 

In this case, you have a legal entitlement to dispute the legality of the deed of sale (atto di vendita). However, you will need to take prompt action.

According to Italian Civil Code Sales Contract Law, the vendor is only liable for a short period.

Article 1495 of the Italian Civil Code provides that the purchaser must take legal action within one year from the delivery date of a product. In your case this would be the date you signed the deed of sale for your Italian house.

In addition, you can only take legal action if you, the purchaser, have declared the defect to the vendor within 8 days of discovering the issue.

What does Italian case law say about latent defects in an Italian house?

A ruling by the Court of Caltanissetta in May 2016 stated that if a vendor hides serious structural issues from a purchaser, this constitutes a breach of contract.

Structural defects, such as big cracks in the walls, significantly reduce the value of real estate property and may even render the property uninhabitable.

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If a buyer discovers defects in an Italian property after signing the deed of sale, the buyer has the right to reverse the property transaction. This must however take place within the previously mentioned time frame.

Under Italian Civil Code, if the buyer and vendor cannot reach an amicable resolution, the buyer can institute legal proceedings against the vendor. This is with a view to obtaining restitution of the price the purchaser paid for the property. In exchange, the purchaser must return the property to the vendor.

The buyer has the right to rescind the transaction regardless of the cause of structural defects

In essence, a purchaser has the right to rescind the deed of sale either on the grounds of construction defects, namely the builder’s responsibility, or because of external factors such as subsidence.

This is valid even if the buyer had the property inspected by a surveyor prior to purchasing it. Structural defects are deemed latent. In other words, they are hidden or difficult to see with the naked eye. Therefore, even if a surveyor inspected the property, the defects may not have been visible.

It should be pointed out that patent defects would not entitle a buyer to rescind a deed of sale. Patent defects are those that are easy to see or visible, such as a window that does not close properly, or missing tiling.

Litigation is the traditional process for resolving legal disputes on civil matters

Litigation involves a party starting court action. The plaintiff or claimant is seeking a legal or equitable remedy. By law, a defendant must respond to the plaintiff’s complaint. If the plaintiff is successful, a court will find in the plaintiff’s favour.

In Italy, court cases are generally costly and protracted processes. We would advise you wherever possible, to settle out of court. Parties can settle at any stage. If the dispute cannot be resolved through negotiation, as a last resort, it will need to go to court.

Litigation is tried and tested with a vast body of case law. The court will impose a final decision that parties must respect. The outcomes of litigation are, without exception, legally binding and enforceable, while being subject to appeal.

Ruling by the Court of Caltanissetta

The case we previously mentioned, involved the purchase of a newly constructed apartment. Shortly after moving in, the new owners noticed some cracks on the walls and floors. They spoke to neighbours in their building and discovered that other neighbours had similar problems.

The owners got together and started a litigation against the vendors. The plaintiffs were seeking reversal of their purchase contracts and compensation for damage. The plaintiffs accused the vendors of deliberately hiding the real condition of the properties. For their part, the defendants claimed the buyers had seen the properties before signing the deed of sale.

However, the purchasing parties had only noticed, “a few little holes”, maintaining that, “the real problem hadn’t yet emerged.” Despite the defendants’ declarations, the court ruled that the vendors knew the true state of the apartments because they had participated in a meeting at the Town Hall’s Technical Office, to discuss geological issues related to the site.

The court ruled in the plaintiffs’ favour.

Vendor’s duty

Anyone who sells a good – a mobile phone, a garment, a pair of shoes, or any other item including an Italian house or property – has to guarantee that the good has no inherent flaw. In effect, this guarantees that the item is fit for purpose.

Italian Civil Code states that a vendor of any item must guarantee that the item has no faults, which would make it unusable or unsuitable for its intended use, or would significantly reduce its value.

In the Caltanissetta case, the property presented defects which could cause instability. That would entail a huge risk for the new owner’s safety.

Finally …

Italian contract law is complex. In the case of a litigation, the deed of sale is of great importance. It is vital that you understand the contractual terms and conditions. The deed of sale affects your options to make claims against the vendor. You should always seek independent legal advice when you purchase an Italian property. In order to avoid any conflicts of interest, this should be a lawyer who is not involved with any other parties (vendor, developer).

At De Tullio Law Firm, we have over 55 years of experience managing property transactions throughout Italy. We are always pleased to hear from our readers. If you have a question that you would like us to answer, please get in touch with us.

If you are looking for more information about the Italian property purchasing process, please read our free Guide To Buying Italian Property. You may also like to watch our info videos about Italian property law.

A Home in Italy: Voices of Experience

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Having a home in Italy is a dream for many

Buying a home in Italy is also a major investment. There are many aspects that need careful consideration before taking the plunge: buying structures, tax and inheritance to name but a few.

If you are considering buying a property in Italy, think long-term. Make sure it’s for the right reasons and that you have done your research absolutely thoroughly. We asked some of our clients who own Italian property, what tips they would give to prospective buyers in Italy. Here’s a selection of what they said:

If you think an Italian property is potentially an easy, passive income generator, think again …

To be a success, you will need to work hard to create, market and operate an attractive holiday rental business. If you need to borrow money to finance the purchase of your Italian holiday property and you already have a mortgage at home, you’ll have two debts to service and in reality, your rental income may not cover repayments for your Italian property.

Remember too, that all the maintenance and running costs will be your responsibility and unless you are living locally, you will probably need a management company – or very understanding local friends – to deal with the property on a day to day basis for you.

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“Identify your reasons for buying a home in Italy …

… for example: are you looking at retirement, relocation, holiday home or a buy-to-let investment? Always use a licensed, unbiased real estate agent who can work with you to achieve your objectives. Don’t feel pressurised to buy. Take your time – it took us over five years before we committed to our purchase”.

“Ask lots and lots of questions

When choosing a home in Italy, the priorities are about personal preferences, choices and taste. We bought our property for investment purposes, which is totally different. When you are buying a property for buy-to-let purposes, you are starting a business so you need a plan. There are so many things to consider: exit strategies, growth forecasts, potential rental incomes, neighbourhood, property taxes, amenities, infrastructure, transport and future developments in the area. This is where it pays to get professional advice and second opinions from good real estate agents, lawyers and financial advisors”.

“Get your sums right. What can you really afford?

It’s not just about the cost of buying a home in Italy, you might need to add renovation costs or there may be extra costs for shared areas. Not to mention running costs. Investigate and understand the Italian property market. It’s totally different to the US property market. When it comes to selling your property later, even if it’s a really attractive proposition, you need to understand that it’s not likely to get sold fast.”

“Bring in the professionals to help with buying a home in Italy.

Seek legal advice early on. Use your own independent English-speaking solicitor, who has absolutely no links to your seller, estate agent or developer. Do not sign anything prior to your lawyer’s review. Do not make any money transfers until they have been checked and signed-off by your lawyer. If anybody uses terms like capital growth or rental yields when viewing a property, be very sceptical. Ask to see evidence. Before deciding whether it’s a good buy, factor in all the likely costs, taxes and above all, don’t forget maintaining the property and managing the rentals. Think carefully about the pros and cons of different ways of buying the property and check for the best deal on mortgages and currency”.

“Viewing the property at different times of day is important.

For example, we viewed a property during afternoon siesta and it seemed perfect … a really attractive property in a quiet location. But, when we revisited the place another day around mid-morning, we discovered we could hear the loud rumble of traffic on a nearby main road. Consult a good property lawyer before making any final decision. Many lawyers will offer a free consultation to discuss your general situation. Ensure you double-check everything with your lawyer and a tax advisor before making any decisions. The person at the local bar or the village shop might know a thing or two from experience, but those experiences shouldn’t inform your decision-making.”

“Research is key when buying a home in Italy.

When we were researching properties online, the maps on website listings were not always 100% accurate and showed the nearest village rather than the property itself. This is for safety reasons as houses used as second homes are often empty for long periods of the year and can become targets for burglars. Contact the estate agent and get coordinates for a satellite view of the property and surrounding area. Study it closely. In many parts of Tuscany, for example, it’s difficult to find a country house within walking distance of a village. It means that you, or your rental guests, will have to drive to the nearest shops, bars and restaurants.”

“Understand the rules regarding Italian tax …

… so that you know what you are in for. Remember that when purchasing property in Italy, you need to take into account agents’ commission, notary fees, and registration fees as well as future property tax and other costs. If you are planning to live in Italy, find out about residency rules. Have your financing in place and get a good international residential conveyancing lawyer.”

“Always negotiate on the price …

… use a reputable real estate agency and engage an Italian lawyer. Never part with any money unless you have the express approval of your lawyer. If, like us, you are buying off-plan or during construction of a new build, getting independent legal advice is even more important. Your lawyer will make sure that all the necessary contractual, bank guarantees and insurances are in place to protect you if something goes wrong like the completion of the building does not occur on time.”

“Get a good lawyer to represent you in the purchase.

If possible agree legal fees up front. Find a reputable estate agent to assist you in your property search. But don’t rely on the agency to put together contracts and handle the conveyancing. Make sure your professional team speaks your language. Make sure that they fully understand your requirements and that they don’t waste time showing you properties or areas that don’t match your brief. Ensure that you fully understand all the costs, taxes and fees involved with the purchase. It can impact hugely on your budget. Always instruct a surveyor to carry out a survey to ensure that there are no structural, planning, zoning or geological issues with the property. Take your time. Don’t rush into the first deal presented to you. If it sounds too good to be true, it probably is. Take a step back and get a second opinion.”

“Start by asking yourself: how easy it’ll be to sell this property should you need to?

Location, location location! If you want to make money, this will only actually materialise when you rent or sell the property. Until then it’s all just a theoretical paper profit. If you are looking at the property as an investment, think about the property. Why would people want to rent it? Why would people want to buy it from you? The reasons will tell you whether the property is likely to be a good investment.”

Finally …

De Tullio Law Firm has been guiding overseas buyers with their Italian property investments for over 55 years. If you need any advice about buying or selling a property in Italy, if you need an independent second opinion or, if you would just like to discuss your options with a specialist, we are here to help.

You may also be interested in Buying property in Italy. You may also like to watch some of our info videos on Italian property, succession and family law.

Buying Italian Property. Advice for Expats

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If you are buying Italian property, never sign any paperwork without fully understanding the implications

The most important piece of advice for expats buying Italian property is that they should never sign any paperwork without getting it checked.

If you don’t fully understand all the legal implications of paperwork, your signature could result in potential financial and/or legal problems. In addition, your signature may negate any possibility of complaints at a later date.

We would always recommend that you use an experienced, independent property lawyer to safeguard your Italian purchase. A surprising number of expats buying Italian property don’t use a lawyer. Instead, they take a DIY approach or use someone unqualified such as the estate agent or vendor. It is not uncommon that this ends up being a stressful and expensive mistake.

Get Your FREE Guide to Buying Property in Italy

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Expats buying in Italy may encounter language barriers

If you are not a fluent Italian speaker, it’s important to engage a lawyer who speaks your language. This ensures you not only have crucial legal advice but also a someone who can act as a legal translator. As previously mentioned, the issue of signing paperwork is critical. Expats should only sign documents that they fully understand, which may mean that documents need translating. In fact, when you complete the purchase, the Italian notary may require a translation of the deed of sale. In addition, you may also have to engage an interpreter at completion. However, if you have a lawyer who speaks your language, this will not be necessary.

In order to avoid conflicts of interest, the lawyer should be independent of the estate agent and/or the vendor.

Make sure your lawyer has a license to practice. In other words, your lawyer should be a member of the Italian Bar Association. The lawyer should also have public liability insurance.

Estate Agents

It is worth bearing in mind that regardless of how charming and friendly an estate agent is, at the end of the day, an estate agent is a sales person working on a commission from the sale of the property. They are not qualified to provide legal advice and do not conduct due diligence on properties. The base their sales information on what the vendor tells them.

An estate agent may ask you to sign an agent’s brokerage contract, which could include up front fees.

Make sure that your estate agent is from a reputable company. Italian estate agents must register with their local chamber of commerce. They should have a certificate issued by the local town hall as proof of their professional registration.

Surveys

Many expats buying Italian property decide not to invest in the knowledge and expertise of a professional surveyor.

Construction quality varies hugely in Italy and you cannot know everything about a property just from viewing it with the vendor or estate agent. Buyers should ensure the property they want to purchase is actually worth the money they are paying. This means checking there are no fundamental problems. Amongst other things, structure, planning, zoning, ownership and geological location.

Certificate of Habitability

It’s also surprising how many expats buy a property that has neither electricity nor water connections. If a property has no utility connections, it may indicate a problem. It suggests that the property may not have a Certificate of Habitability. If this is the case, the property may never gain mains utilities despite what the vendor or estate agent claims. When it comes to reselling the property, later on, it is likely to be a struggle to find a buyer.

Buying an Italian off-plan property

Expats should exercise caution if buying an off-plan property. There are many risks entailed with buying Italian off-plan property. One of the major risks is that a developer becomes insolvent during the build. Never make large payments as a deposit to secure what appears to be a dream home.

Ensure, amongst other things, that the developer or building company has a building licence for the property before parting with any cash. Don’t be afraid to ask the property developer about their portfolio, their history of delivering quality buildings, on time. Ask for references. If you are buying a resale property, check that there are no hidden fees or legal complications.

Take your time. Don’t be rushed

When buying a property in Italy, don’t rush into a purchase and, never buy a home on impulse. Think long term. Always assess the pros and cons, research the area and understand all the present and future legal and tax aspects.

Familiarise yourself with the process of buying Italian property

Because the process of buying a property in Italy can move quickly and expats should be prepared for the purchase completion taking between four to eight weeks on average.

The purchasing process in Italy is completely different to the UK, the USA and many other parts of the world. First, the buyer makes an offer on the property. If it’s accepted, then the buyer and vendor will sign a reservation offer and the buyer will pay a small deposit. Second, the buyer and seller will sign a preliminary contract at which point the buyer will pay another deposit, usually a minimum of 10% of the sale price. Finally, at completion, the new owners pay the balance of the sale price, along with other costs and taxes.

It is important that expats appreciate all the financial and legal implications of each stage of the process.

Finally …

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. Our particular expertise is in cross-border real estate, family law and inheritance matters. If you would like more information, or you need advice and support with your Italian property purchase, please get in touch with us.

Usucapione Property Rights in Italy

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What are usucapione property rights?

Usucapione property rights in Italy date back to Roman law. The closest terms to Usucapione in common law are limitation of rights and adverse possession.

According to Roman law, so long as someone didn’t take possession of an asset through theft or force, usucapione allowed them to become the lawful proprietor of the asset. The legal owner had a certain period of time to re-claim the asset, but if this didn’t occur, the title passed to the possessor.

Later, Napoleonic law also incorporated Usucapio laws. Today, elements of the legislation still exist in Italian law.

Current usucapione property rights concern the uninterrupted and unchallenged use of an immovable asset by someone who does not actually own the title. This may be land or a building.

Adverse possession is one of the most contentious ways of acquiring a property. Generally, in order to apply to register a title to a property, the adverse possessor of the land or building will have been in possession of, or using the property for 10 years, although there are provisions which extend this to 30 years.

Legally, at the end of the relevant time period, the adverse possessor can apply for a court judgement to become the registered owner of the land or building in question.

Basic requirements of adverse possession

There are five basic requirements that an adverse possessor must meet to successfully claim usucapione property rights:

1. Actual Possession

The adverse possessor must have actual, physical control over the property.

2. Open and Notorious Use

The use and possession of the land must be visible and apparent. This gives notice to the legal owner that someone may make a claim to the property.

3. Exclusive Possession

The adverse possessor cannot occupy the land jointly with the owner or share possession in common with the public.

4. Hostile Possession

Adverse possession must be hostile to the title owner’s interest in the property. The word “hostile” in an adverse possession claim does not mean showing ill will or that the adverse possessor and legal owner are enemies. Rather, it means that the adverse possessor maintains that he or she holds the property as an owner against all other claims to the land.

5. Continuous and Uninterrupted Use

All elements of adverse possession must be met at all times through the relevant period of time. Occasional activity with long gaps in activity therefore fails the test of continuous possession.

Usucapione property rights case

In 2001, a US national inherited a house and land in Italy from an elderly Italian aunt. The nephew had spent many enjoyable summer holidays on the property when he was growing up. He remembered a strip of land between his aunt’s house and the neighbouring property. When his aunt was alive, a neighbour used to cultivate vegetables there. The nephew assumed that the vegetable plot belonged to the neighbour, who was a distant cousin.

Following the aunt’s death, the neighbouring cousin offered to look after everything for the nephew. For many reasons, this seemed like a good idea at the time.  The nephew therefore entrusted the property’s maintenance to his distant cousin. The cousin looked after the American nephew’s property well and continued to use the strip of land between the properties. In fact, the cousin had it fenced and built a patio, barbecue area and a gazebo.

In the summer of 2013, the American nephew retired. He and his wife decided to move to Italy. The nephew decided to have his property surveyed. He discovered in fact, that he owned the land between his and the neighbouring cousin’s property. The question was, did the nephew really own the land anymore? Because of  his cousin’s open and unchallenged use of the property for over 30 years, if the case went to court, it would likely rule against the nephew’s property rights.

Do you find yourself in a similar case?

If you are an Italian property owner, and you do not dispute the use of your property, where do you stand? You, as the legal owner, may well be deemed to have abandoned your property rights. There are several elements needed for adverse possession to apply for title transfer and registration:

– Length of time (10 – 30 years depending on the case).

– Use of the property must be open for all to see.

– Possession must be hostile to the legal owner of the land.

– Gaining a title to property through usucapione requires a court judgement.

As we have seen, usucapione can have a dramatic impact on land ownership rights. An encroachment could result in the title of your property being transferred to an adverse possessor. Under these circumstances, you might have to bring a lawsuit for trespass in order to prevent someone from obtaining the title to your property.

For example, someone who has no legal entitlement to a parcel of your land may have been openly using that land to cultivate vegetables for a decade or more. You, as the legal owner of the land, may even have periodically received some of the produce as a gift. From a legal point of view, this could imply your tacit agreement to the cultivator’s adverse possession of a piece of your land.

Conducting appropriate property searches is vital

If you are considering purchasing property or land in Italy, it is important that you don’t sign any documents or paperwork before conducting appropriate searches. Amongst other things, you should check whether there are any usucapione issues. It is vital to understand exactly what you are buying, where the boundaries are and what type of easements, such as rights of way exist.

Finally …

Purchasing a property anywhere is a major financial commitment for most people. Make sure you safeguard your conveyancing. We would always recommend that you seek independent legal advice before making any legally-binding commitment.

For over 55 years, De Tullio Law Firm has been providing international clients with independent legal advice throughout Italy. We are specialists in cross border property, inheritance and family law.

If you would like further information about buying an Italian property, we are here to help. We can guide you through the whole process or even organise the whole process on your behalf. Get in touch with us for a free preliminary consultation.

For more comprehensive information about the Italian property purchasing process, you might like to read our guide. You may also like to watch our info videos about Italian property law.

Italian Property Survey – Need One Or Not?

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Should you have a survey before you buy property in Italy?

Because for most people buying a property is a major expense, not commissioning an Italian property survey is a false economy.

A surveyor, “geometra”, will provide you with invaluable information and support during the property purchasing process. This information will help save you money both prior to and after completion.

Buyer beware!

In Italy, property is purchased under the principle of ‘caveat emptor’ or ‘buyer beware’. In other words, the onus is on the buyer to ensure that there are no issues with the property. This includes land purchases.

If you purchase an Italian property and subsequently discover a problem, it is always time-consuming, frustrating and costly to resolve.

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Amongst other things, an Italian property survey will reveal hidden defects, illegally built structures, planning and zoning issues. In addition, a geometra will highlight any areas of the property that require repair or maintenance. It is important to be aware of all these issues. After completion, you will have to pay to rectify any defects. You may even have to take legal action through the Italian courts to get a refund from the vendors.

An Italian property survey can save thousands of Euros

It is important to make sure you are not overpaying for your Italian property. A common misconception is that the vendor’s or estate agent’s valuation is based on Italian property market prices. Obtaining a valuation as part your survey will give you the true value of a property. The valuation will take into consideration any defects uncovered and repairs needed. This will ensure you pay a fair price for your property. A survey can therefore save thousands of Euros.

The importance of an Italian property survey

The support of a surveyor during the home buying process is invaluable, but it can also be extremely useful after completion. Depending on the type of survey you commission, the report will give detailed information about parts of the property that may require attention in the future thus allowing you to budget those costs going forward. In addition, a surveyor can give you preliminary advice on any plans you may have to extend or alter the property in the future.

Finally …

For over 55 years, De Tullio Law Firm has been providing international clients with independent legal advice throughout Italy. We are specialists in cross border property, inheritance and family law.

We can guide you through the whole purchasing process or organise the whole process, including an Italian property survey, on your behalf. Get in touch with us.

If you would like further information about buying an Italian property, you may find our buying in Italy guide useful.

 

The Italian Rent to Buy Scheme. Information And FAQ

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Introducing the Italian rent to buy scheme

In September 2014, the Italian parliament introduced measures to revitalise the property real estate sector. Measures include an Italian rent to buy scheme as part of the Sblocca Italia – Unlock Italy – decree (Article 23 of Legislative Decree 133/2014).

The Italian rent to buy scheme has two main aims. Firstly to help people purchase a property and secondly to support builders and developers sell property stock.

The Italian rent to buy scheme is similar to the UK model

It allows a promissory purchaser to immediately start living in a property as a tenant and provides the option to purchase the property at a later date.

As a tenant, the promissory purchaser pays a regular rent. In effect, this postpones the purchase of the property until a specified future date. Purchase should take place no more than 10 years from the start of the rent to buy contract. Rental payments reduce the overall property price.

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Decree 133/2014 addresses and resolves problems that stemmed from the lack of specific legislation in this domain. Notably, the decree provides for the legal transcription of a rent to buy contract in the land registry for the duration of the contract.

Essentially, the land registry transcription counts as a full and proper reservation of the purchase of the property. Consequently, the owner of the property cannot sell it to anyone else for the duration of the contract.

No mortgages or easements or any other prejudicial rights can be held on the property. Creditors of the property owner / vendor will neither be able to register a mortgage on the property, nor foreclose on it.

As soon as a rent to buy contract is in the land registry, this guarantees that the property is reserved for the promissory purchaser. Any other transcription or registration will be unenforceable against it.

Frequently asked questions about the Italian rent to buy scheme

What is a rent to buy contract?

The contract combines a rental contract and a preliminary contract of sale for a specific property. This means that from the outset of the contract, the owner/vendor gives the promissory purchaser the right to buy the property. The promissory purchaser is able to live, as a tenant, in the property and pays a regular rent. After a contractually agreed period of time, but not more than 10 years, the promissory purchaser may decide to buy the property. The owner must deduct rent paid during the term of the rent to buy contract.

Example: Consider the sale of a villa for €100,000. The monthly rent is €1,000 per calendar month. A part of this rental payment, €500, is the rent payment for living in the property, as if it were a normal rent. The remaining €500, counts toward the purchase of the property. In effect, this portion of the monthly rent constitutes a down payment on the sales price.  If the term of the rent to buy contract is 5 years and at that point, the promissory purchaser decides to buy the property, rather than pay €100,000, the promissory purchaser pays the outstanding EUR 70,000. This is because €30,000 has already been paid as part of the rent to buy scheme.

Is the promissory purchaser obliged to buy the property at the end of the rent to buy contract?

The law provides for an option to buy the property. However, there is no obligation. Obviously the parties may agree that the tenant must purchase, but that contract would not be subject to rent to buy legislation. It is merely a private arrangement.

How long does a rent to buy contract last?

The parties to the rent to buy contract establish the period within which the tenant may decide to buy the property. According to legislation,  this must be within 10 years from the start of the rent to buy contract.

What are the benefits of a rent to buy contract for property vendors?

The main advantage is the ability to find a larger number of potential buyers.

What are the risks of a rent to buy contract for property vendors?

There are a couple of risks. Firstly, a tenant may decide not to buy the property. In this case, however, the owner can retain part or all of the rent payments. These should be a sum greater than a normal rental income.

The other risk is that the tenant doesn’t abide by contractual terms, becomes insolvent or causes significant damage to the property. This may mean the property owner has to go to court to evict the promissory purchaser, regain possession of the and free the property from contractual obligations in order to sell it to others.

What does an eviction order entail in terms of time and cost?

The procedure is not strictly-speaking an eviction, but the release of a property. Generally, this is a much shorter and less costly process. Just how long the release of a property takes very much depends on individual courts.

In order to use a property release procedure, the rent to buy contract must contain legally compliant and watertight clauses. You should always seek independent legal advice in structuring the entire rent to buy contract. It is crucial to ensure that you cover everything.

Are there any measures in place to safeguard the owner /vendor?

It is imperative that the rent payments are higher than a normal rent contract. In the event that the sale does not conclude, the retainer payment that the property owner retains serves as compensation.

Commitment to retainer conditions also serves as an indication of the promissory purchaser’s commitment to conclude the transaction at term.

What protection does rent to buy provide for promissory purchasers?

The law provides for the transcription of an Italian rent to buy contract in the land registry. In the same way a deed of sale is managed. A notary – an official of the Italian State –  must oversee the rent to buy contractual process. The contract must be legally compliant. The transcription in the land registry guarantees that the promissory purchaser has agreed to buy a property free of mortgages, liens, foreclosures, or any other detrimental matters, which might arise following the transcription of the rent to buy contract. The land registry transcription is valid for a maximum term of 10 years.

This protection holds even if the property vendor / owner is declared bankrupt during the term of the rent to buy contract.

What type of property can be included in rent to buy contracts?

Rent to buy contracts are valid for any type of property. This includes apartments, houses, farms, garages, vineyards, shops, offices, factories, land.

Are rent to buy contracts also applicable to buildings under construction?

Yes. Rent to buy contracts are applicable to buildings under construction. For contractual purposes, any pre-existing mortgage on the construction must be repaid. If after careful consideration and having taken independent advice, the promissory purchaser wishes to assume a pre-existing mortgage, it is however possible to provide a clause to that effect.

For building and development companies, rent to buy contracts can represent an interesting way to finance mortgage payments for property construction.

Regarding rent to buy contracts for buildings under construction, does the promissory purchaser lose money if the builder or developer goes into administration?

No. The buy to rent contract continues even if the property vendor / owner is declared bankrupt. So long as there is a price agreement in the rent to buy contract and the property is the main residence of the promissory purchaser or close relatives, the owner / vendor’s insolvency will not impact the sale.

Can the promissory purchaser confer a power of attorney to sign the rent to buy contract?

Yes. Legislation provides the right to confer a power of attorney on a third party to sign the rent to buy contract, and the final deed of sale, where applicable, on the promissory purchaser’s behalf.

You should be extremely careful about who you chose for your power of attorney. You are delegating the management of your legal and financial affairs to someone else. Hence, it is extremely important that you entrust these matters to a reliable and competent person, preferably a professional. Appointing anyone who does not have enough experience or who has a vested interest is highly inadvisable.

What taxes are applicable with a rent to buy contract?

Tax depends on whether the owner / vendor of the property is a private individual or a company. Direct tax is chargeable to the owner / vendor and indirect tax is levied on the promissory purchaser.

As a rule of thumb, for the duration of the rent to buy contract, as with any Italain rent contract, tax related to the property ownership is borne by the vendor / owner.

The promissory purchaser pays costs pertaining to the transcription of the contract in the land registry. And, where applicable, the promissory purchaser is liable for any subsequent costs, expenses and tax liabilities and/or costs associated with completion of the property sale.

For tax calculation purposes, each rent to buy contract requires case by case assessment regarding advantages and/or disadvantages. This is another reason to involve an independent professional from the outset when considering a rent to buy scheme in Italy.

Finally …

If you do not find your question relating to the Italian rent to buy scheme here, please contact us and we will be happy to answer it for you.

At De Tullio Law Firm, we specialise in Italian and cross border legal matters. If you are buying any type of property anywhere in Italy and you need advice or you would like to discuss your purchase, please get in touch with us. We are here to help.

For more comprehensive information about the Italian property purchasing process, you might like to read our guide. You may also like to watch our info videos about Italian property law.

Self-Build Projects in Italy

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Dreaming of building your own place in Italy?

In pursuit of their Italian dream home, some people decide on self-build projects in Italy.

If you are thinking of building a house in Italy, we would always advise you to seek independent legal advice before signing any paperwork to do with a land-purchase.

Even, if on paper, it looks as if the land you are contemplating buying has outline planning permission, actually getting a building project off the ground in Italy is extremely complex.

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Italian self-build projects are complex. They need a team

Self-builders will need to navigate a maze of red tape. Zoning and planning laws, environmental restrictions, building permits and regulations – to list but a few.

Self-build projects in Italy really do require the help of a specialist team including an architect, surveyor, lawyer and a notary.

All-too-often, those who go it alone run in to trouble. This jeopardises or ends their self-build dream. Unfortunately, without a team, self-builders often don’t obtain all the relevant permits. This and spiralling costs, may mean that the project never gets off the ground.

Living on site during Italian self-build projects

When self-build projects in Italy do go ahead, living on-site whilst building the property is something many wish to do. Obviously there are advantages such as saving on travel time, being able to keep a close eye on progress and security.

We are often asked by self-builders if they can site a mobile home, RV, or caravan on their land without obtaining planning permission. Essentially this will depend on the designation of the land in question. Self-builders should ascertain this from local authority urban and rural plans (Piano Regolatore). Siting and installation of accommodation on land will also play a role.

Temporary accommodation

The Italian “Building Legislation and Regulation Consolidation Act” (Testo Unico dell’Edilizia) does not permit ground anchor systems for mobile homes, RVs and caravans without a construction permit. In other words, a ground anchoring system on mobile accommodation would legally classify the accommodation as a, “new building”.

However, according to the Decreto Casa, anchor systems are permissible where a temporary installation is within a proper outdoor accommodation setting, such as a camping site.

Anchoring must be temporary. It cannot be seasonal, which would imply a long, possibly permanent stay. The mobile accommodation would therefore contravene the requirements of temporariness. Also, connecting the mobile accommodation to utilities  (power, water, gas etc.) implies the intention of extended or permanent use.

A construction permit with regard to mobile homes, RVs and caravans, is not necessary if the mobile home is on wheels. It must have a roadworthiness  certificate and motor insurance. Installation of accommodation on a mobile support, such as a trailer, unsuitable for road transport is not permitted. The mobile accommodation must fulfil the requirements of temporariness. It must be immediately movable. This means it must be roadworthy so the owner can move it elsewhere. Anchoring is therefore prohibited. The mobile accommodation must also be autonomous in terms of utilities. This means it must have its own water, toilet and electricity.

Permanent accommodation

If the mobile home, RV or caravan is for permanent use, such as residential use during a self-build project, self-builders will require a construction permit.

Under Italian law:

“the siting and installation of accommodation during the building phase of a project does not constitute temporary status. If the accommodation has power, water and gas connections this implies long-term residence. In addition, the same principle applies to anchoring with removable devices to ensure the stability of the mobile home, RV or caravan”.

A construction permit is also necessary even if the structure is not for residential use. For example, if a self- builder uses the mobile home to store building materials or as a site-office during self-build projects. In fact, if there is evidence of regular and long-term use by the owner, the installation will be considered as permanent.

Finally …

Buying any type of property in Italy is a serious investment and often the fulfilment of a dream. Italy real estate, planning and construction laws are complex. We recommend you engage the right team of advisors in place to make your experience successful.

At De Tullio Law Firm, we have over 55 years of expertise managing cross border property law matters throughout Italy.

If you are contemplating a self-build project in Italy and you need any advice, guidance or support, please contact us. We are here to help.

Buying Italian Property at Auction

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In some parts of the world, buying property at auction is routine

Buying Italian property at auction, however, is not quite so straightforward.

There are two types of auction in Italy. Vendita con incanto and vendita senza incanto. In both types of auctions, the  actioneer sets the minimum sale before the auction.

Vendita con incanto 

These auctions happen publicly and openly. The highest bidder buys the property on the condition that the bid is at or higher than the reserve price.

Vendita senza incanto

Prior to a vendita senza incanto auction, participants must submit their bids by a certain date – in sealed envelopes. Sealed bids cannot be under the reserve price for a property.

In Italy a voluntary property sale by auction is highly unusual

Unlike in the UK or USA, where voluntarily selling property by auction can be an attractive way to fetch a good sale price, in Italy a voluntary sale by auction is rare.

Generally in Italy, people sell property at auction for two reasons. Firstly, the owner declares bankruptcy and has to sell off the property to pay creditors. This type of auction is an asta fallimentare.

The second reason for an auction in Italy happens through a court order. This is an asta giudiziaria. The property is seized or sequestered by the Italian State. This happens because the owner is part of a criminal prosecution or because the State has decided to raise funds to pay off the owner’s outstanding taxes, debts and/or mortgage payments, or it could even be that the courts order the auction to resolve an inheritance dispute.

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Buying Italian property at auction requires a cautious approach

If you are considering buying an Italian property at auction, you need to take even greater care than buying property through conventional channels such as through a real estate agency or from a private vendor. 

While the owner of a seized property cannot participate in an auction, someone the owner knows can. It is not unheard of for a relative, friend or associate of the previous owner to participate in an auction.

Participation in an Italian property auction involves registering to participate, which means amongst other things that you must have an Italian tax code, codice fiscale, and you need to obtain a receipt proving that you have paid a 10% deposit on the estimated value, or starting bid price of the property that interests you. You can also elect a third party to bid for the property on your behalf. This requires giving your nominated party a limited power of attorney, procura speciale.

Top 10 tips for buying Italian property at auction


1. Bargain?

Don’t take it for granted that you are getting a bargain at an Italian property auction. Even if you purchase a property at a much lower price than its market value, it may not necessarily turn out to be a good deal. You may be better off buying a property another way.

2. Timing

Assess the timing. Consider how urgently you want to move into the property. The amount of time required to actually obtain a property at auction is not always predictable.

3. Paperwork

Read all the available documentation very, very carefully. Then read it all again. It is critically important to conduct in-depth due diligence. Study and investigate the notice of sale, the survey report, estimates, plans and maps, photographs and all the documents published on the relevant web site at least 45 days before the auction. Individual courts advertise Italian properties for sale by asta giudiziaria on their websites. www.astagiudiziaria.com is a portal providing access to judicial auction sales across Italy.

4. Due diligence

You should engage your own lawyer to put together a legal package. Make sure you understand the implications of the property’s legal status. The onus is on the bidder to obtain legal paperwork. It should specify, amongst other things, titles, covenants, liens, debts and charges attached to the property. All these legalities will become the responsibility of the purchaser.

5. View before you bid

As part of your due diligence, visiting the property is absolutely vital. View the property before the auction with a court appointed official. You should take your own professional team with you – a lawyer, a surveyor, a builder. There are likely to be issues not in the aforementioned sales and legal packs – aspects such as, environmental, zoning and planning permissions. And, do ask about anything that concerns you. If your bid is successful, you will be held legally responsible for everything.

Also, bear in mind that quite a lot of time may have elapsed between the property documentation being prepared and your visit so, the property when you visit, may have deteriorated and conditions could be worse or zoning laws might have changed. This means that the situation described in the property packs may no longer be relevant.

6. Budget

Set yourself an auction budget and stick to it. Prior to the property auction, decide the absolute upper limit of the sum you are willing to spend on the purchase. Participating in an auction requires calm rationality. Prior to tackling your auction purchase, perhaps attend a couple of other Italian auctions to understand how they work.

7. Associated costs

Always ascertain auction and additional costs before participating. Find out exactly how much you should budget on top of the property purchase price. Costs might include, registration tax or VAT charges pending, any professional fees for the title transfer.

8. Payment

Payment methods require attention. How are you planning to pay? You will have already paid a 10% deposit to participate in the property auction. You will need to be able to access the remaining funds quickly if your bid is successful, generally between 10 – 60 days of purchase.

If you need a mortgage, you will need to have a promissory note from your provider in place in advance of the auction. 

9. Tax

Take tax in to account. There may be tax benefits available to you on the purchase of a property at auction. Normally,  property transfer tax is due on top of the property purchase price. However, the rule on “price-value” does not apply to property purchased through court enforced procedures and bankruptcy. If you want to take advantage of any available tax benefits, you must express this ahead of the property auction. You must be ready to put everything in place by the end of the auction if your bid is successful.

10. After the auction

A purchase transfer signed by a judge is enforceable and allows the immediate release of the property. However, it is not unusual in Italy for the previous owner to appeal in court to have the auction annulled. In other cases, a property may be subject to adverse possession (usucapione), or a sitting tenant. As the new owner, you will have to take eviction action – at your expense.

Finally …

We have set out a few facts and tips regarding Italian property auctions. However, as this is a vast and complex subject, it really just skims the surface. There are many potential pitfalls and legal ramifications to consider when buying Italian property at auction. We would always recommend that you seek independent professional advice before participating in an Italian property auction. 

Buying Italian property at auction can be done safely but, it is definitely not for the faint-hearted. if you would like to discuss your situation, please get in touch.

At De Tullio Law Firm, we have over 55 years of experience managing all types of Italian property transactions. We have in-depth expertise of Italian and international legal systems and processes. We understand the way things work in Italy, which is often different to the way things work elsewhere.