Country - Italy
Sale and Purchase
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A. ACQUISITION OF REAL ESTATE
Applicable legislation
Transfer of title to real estate is generally governed by the Civil Code, with supplementary provisions on town planning, building and taxation matters.
Is the purchase of real estate assets by foreign investors subject to restrictions?
There are no restrictions on the purchase of real estate assets by foreign investors.
Do different legal regimes apply to the transfer of title to different kinds of real estate (commercial, residential, manufacturing)?
The regime for the transfer of title is the same, irrespective of the property's use.
Shorelines, beaches and waterways (like harbours, waterfalls, lakes, rivers and other stretches of water defined as "public" by the applicable law) are part of the Natural Domain (Demanio Naturale) in accordance with article 822 of the Italian Civil Code. Title to these assets cannot be sold.
Do mandatory pre-emption rights apply to the sale of real estate assets?
In rare cases, yes. Public authorities have pre-emption rights over properties of historical or architectural significance. In addition, agricultural tenants or neighbouring farmers have pre-emption rights over farmland. Tenants undertaking activities involving contact with the public have pre-emption rights if the property let to them is to be sold.
Is expropriation (compulsory purchase) possible?
If so, under what conditions?
Expropriation is possible but only in accordance with a law, or an ordinance based on the law, granting permission. Moreover, expropriation is only permitted if it is in the public interest; in such cases the state must pay compensation to the party concerned.
Is real estate registered?
If so, is this official information made available to the public?
Real estate is registered in the Cadastre Register. This is held by the municipality in which the property is located and consists of the Land Cadastre, in which undeveloped land is recorded, and the Building Cadastre, in which buildings are recorded.
Both land and buildings must be registered and after registration they are attributed a "cadastral income". The Building Cadastre distinguishes between buildings according to their town planning designation and use (as office space, residential property, warehouses, parking lots, shops, etc.), and attributes a value to them known as the cadastral income.
This is the basis for calculating municipal property tax (ICI). Cadastral income can be subject to review by the relevant authority.
Is transfer of title recorded?
Can other related deeds (for example preliminary sale agreements) be recorded?
Although it is not a requirement for the validity of the transfer, deeds of transfer are usually filed in the "Real Estate Register" (Conservatoria dei registri immobiliari) held in each municipality. This prevents possible conflicts with future buyers and third parties. The register records information relating to the property, including sales and purchases, mortgages, easements and rights of use, as well as any pending disputes. Records are accessible to the general public.
Preliminary sale agreements relating to an existing property, or a property under construction, can be registered with the Real Estate Register to protect the buyer against any subsequent filing of third party rights (such as mortgages or law suits against the property) or a second sale of the same real estate. This protection ceases one year from the execution date specified in the preliminary sale agreement and, in any event, after three years after the registration of the preliminary sale agreement.
Do buyers usually carry out due diligence?
If so, what due diligence is typically conducted and what is its timing (i.e. before or after contract execution)? Is there any protection for the buyer during the due diligence period (for example, an exclusive right to negotiate or buy)?
Investors usually carry out technical and legal due diligence on title, building permits, leases and contracts relating to the property. Due diligence is carried out before purchase and normally takes about two to three weeks. An agreement (such as a letter of intent or heads of terms), providing the potential buyer with an exclusivity period during due diligence, is normally signed by the parties to the transaction.
Is title insurance available?
Foreign insurance companies have only recently started to offer title insurance in Italy, but this is still not common practice.
Normally, public notaries carry out a search on title in the Real Estate Register.
The notary's report is normally part of the legal due diligence and investigates the existence of any third party rights (such as easements and mortgages), as well as the seller's title.
How are deals typically structured?
Deals take the form either of a direct acquisition of the real estate (asset deal) or of an acquisition of the company holding title to the property (share deal). The choice between these structures is mostly tax-driven. A transfer of shares rather than of real estate avoids the payment of VAT (which can be recovered but only after some time), and of registration tax (in the case of retail property). Often, the parties agree to enter into a preliminary sale and purchase agreement specifying certain conditions which must be fulfilled prior to completion.
In such cases, the seller normally requests a deposit (caparra confirmatoria) of 10% to 30% of the purchase price as security for the signing of the final deed.
Since 1998 it has been possible to file preliminary agreements with the Real Estate Register to protect the buyer against any subsequent filing of third party rights (such as mortgages or law suits against the property) or a second sale of the same real estate.
B. STRUCTURE OF THE CONTRACT
Are there formal requirements regarding the content and structure of the sale and purchase contract?
The deed of transfer must be made in writing (art. 1350 Italian Civil Code). The deed must also be authenticated by a public notary in order to be recorded in the Real Estate Register.
Preliminary contracts must take the same form as the final deed of transfer and therefore must also be in writing.
Transfer of title is effective immediately on the signing of the sale agreement.
What is a typical contract like?
The content of the contract is negotiable, however, essential elements include: the price; the exact identity of the property (including cadastral data); details of the relevant building permits, and the rules regarding the allocation of risk and benefits relating to the transferred property. Certain formal requirements must be met when the contract is signed in front of the notary. According to Law 248 dated 4 August 2006 the means of payment (cheque, bank transfer, etc.) must also be indicated in the notary deed, as well as details of the real estate agent and information about the agency fees.
Are special consents required for certain transactions (for example consent by a spouse)?
In specific circumstances certain consents may be required. If the seller is a minor the approval of the court may be necessary. If the sale concerns a property which belongs to a married couple the consent of both spouses is needed.
What seller’s warranties are provided under statute (for example the state of the building, asbestos, etc.)?
Can they be excluded or varied by contractual agreement? Is there a deadline for claims to be made?
According to statutory law (Italian Civil Code), the seller warrants that he has title to the property; that the property is free from any third party rights (art. 1483 – 1489); and that the property is free from any defects or lack of qualities that might prevent the agreed use of the property or have a negative impact on its value (art. 1490).
If these warranties are breached, the buyer is entitled to ask for termination of the sale and purchase agreement (upon refund of the purchase price and payment of any additional damages by the seller), or for a reduction of the purchase price.
The buyer must notify the seller of any breach of warranties within eight days of their discovery.
A one year statute of limitation applies from the date the buyer takes possession of the property.
The statutory warranties can be negotiated by the parties except in relation to limitation issues. Current practice in the Italian real estate market is to limit the extent of the warranties and to place more importance on the role of due diligence by removing from the warranties any issues disclosed through due diligence.
If the property is newly built, the buyer also benefits from a 10-year warranty provided under statutory law (art. 1669 Italian Civil Code). This makes the developer liable in the case of collapse or serious defects in the structure.
What are the buyer’s remedies against misrepresentation by the seller?
Remedies available include cancellation of the sale and purchase agreement; payment of damages; a reduction in the purchase price; or, where appropriate, the right to require the seller to rectify any specific defect.
Are there any interests in real estate other than exclusive ownership?
If so, what are they?
Property rights under Italian law include the following:
- absolute freehold (piena proprietà) which is the right to fully and exclusively enjoy and dispose of the property (art. 832 Italian Civil Code);
- right to build (diritto di superficie) which is the right to build and maintain a building on or under the surface of a third party’s property, granted for a specific period of time. When this expires the landowner also becomes the owner of the building (art. 952 Italian Civil Code). It is also possible to sell title to a building without owning title to the underlying land (where the seller is a public authority the sale is subject to a 99-year term);
- beneficial interest (diritto di usufrutto) which is the right to enjoy a third party's real estate for a specific period of time not longer than the life of the beneficiary, or 30 years where the beneficiary is a legal entity. The beneficiary can use the real estate in the same way as an owner would, including having the right to collect interest and to grant leaseholds, provided the original use is maintained (art. 978 Italian Civil Code); and
- right of use (diritto d'uso ed abitazione) which is the right to use real estate in order to satisfy the needs of the person holding the right and those of their immediate family (art. 1021 Italian Civil Code).
Joint ownerships also exist in the form of condominiums (condominio): usually in housing where several units in the same building are owned by different people but some areas and services are used by the owners collectively (comproprietá).
C. PUBLIC LAW ASPECTS RELATED TO THE ACQUISITION OF REAL ESTATE
What are the most important areas of public law for an investor to consider when purchasing real estate?
The following matters should be verified by the buyer:
- the zoning and town planning provisions: the general master plan (Piano Regolatore Generale) and the related implementation rules (Norme Tecniche di Attuazione, NTA) shows the permitted use of the area in which a property is located;
- building permits and licences: the buyer should ensure that the structure of the property complies with the original building permits (according to the designs and plans attached to the permits) and that the building works have been carried out with the necessary prior authorisation (building permit, permesso di costruire or a declaration of commencement of works, dichiarazione di inzio attività);
- fitness for use: all real estate assets require a certificate (certificato di agibilità) confirming that certain health and safety requirements have been met. The certificate can be issued expressly, or by means of a "grant by default" which becomes valid 30 or 45 days following a request for the issue of a certificate, providing that all the documents requested under law 380/2001 have been supplied; and
- fire prevention provisions: certain structures (for example offices with more than 500 employees, parking spaces for more than 50 vehicles, storage and archive buildings, and heating plants) are subject to fire prevention rules. A developer must request a site inspection by the Fire Service, after which a certificate is issued. Before the site inspection a self-declaration can be completed attesting that all the works have been carried out according to the project plan. Once this declaration is submitted the structure can be used legally, even if the fire prevention certificate has not yet been issued. A buyer should therefore ascertain whether a property is subject to fire prevention rules and whether a declaration has been submitted.
Is the buyer of a real estate asset responsible for soil pollution or contamination of the building even if it is not caused by him?
Yes. According to Italian law the buyer is liable for carrying out the necessary remediation and safety work, even though (according to D.Lgs. 22/1997 and D.M. 471/99) the person who originally caused the contamination and soil pollution is responsible for paying damages. The authorities may, at their discretion, require either party to carry out remedial measures. However, if the owner/occupier is required to do this then they can make a claim against the party that actually caused the contamination, unless this is otherwise agreed in the sale agreement.
How can a buyer ascertain the possible uses of an area under the applicable zoning or planning laws?
Can uses be changed?
The General Master Plan and Town Planning policies, as well as local laws, provide a description of the permitted uses in different areas of a city. In order to determine the permitted use of a property, a use designation certificate (Certificato di destinazione urbanistica) can be requested from the municipality.
Is it possible to enter into specific development agreements with relevant public authorities in order to facilitate a project?
Can public authorities make a charge for this?
Yes, developers normally enter into development agreements with the relevant public authorities. Under a development agreement the private developer normally undertakes to carry out certain public works, such as the provision of roads, public parking spaces, green areas, etc.
D. TAXES RELATED TO ACQUISITION OF REAL ESTATE
Are there transfer taxes or sales taxes?
According to Law 248 dated 4 August 2006 the sale of commercial property is generally exempt from VAT, except in the following cases:
- the seller is the developer of a new property and the sale occurs within four years of the property's completion;
- the buyer is a private individual;
- the buyer is not allowed to deduct more than 25% of the VAT; and/or
- the seller opts in the sale agreement for VAT at 20% to apply to the sale.
If the sale is subject to VAT, cadastral tax (imposta catastale) at 1%, mortgage tax (imposta ipotecaria) at 3% and registration tax (imposta di registro) at EUR 168.00 apply. VAT can often be recovered, although the procedure can take up to two years.
If the sale is exempt from VAT, cadastral tax (imposta catastale) at 1%, mortgage tax (imposta ipotecaria) at 3% and registration tax (imposta di registro) at 7% apply.
If the parties agree to transfer the real estate by means of a share deal, stamp duty of approximately 0.14% of the price paid for the shares is payable.
What are the normal transaction costs?
Costs include notarial fees (which are usually calculated on the basis of the transaction value), legal fees, the fees of technical consultants for carrying out due diligence and agency fees.
Agency fees are usually between 1% and 3% of the property value. Unless otherwise agreed between the parties, the estate agent can claim its total fee from both parties.
How are transaction costs shared by the buyer and seller?
Each side will normally pay its own legal costs. Property transfer tax, notarisation fees and the legal costs for the implementation of the sale and purchase agreement are usually paid by the buyer, with the exception of any legal costs incurred in connection with the cancellation of existing encumbrances on the property, which are paid by the seller.
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