The Second Stage

The second stage is usually spent in negotiating, drafting, signing and exchanging the contract (“Compromesso”).  It is also recommended that the contract be explicitly subject to the property being in compliance with all applicable laws and to the satisfactory results of the due diligence, activities such as searches, surveyor’s report and other investigations. We are able to provide a written report setting out our findings.

When all searches have been satisfactorily completed, it will be necessary to agree the terms of the Contract, such as the price, the amount of the deposit payable on exchange of contracts, and the date of completion.  Special terms may have to be introduced to deal with particular problems disclosed by the searches or the documents submitted by the vendor.  A draft contract is normally produced and considered.

It is important to consider in whose name the property will be registered. Getting this wrong could mean paying out expensive, unnecessary fees and taxes during your lifetime and after your death. At the International Law Centre we are able to advise on the most advantageous method for you.

Normally, in Italy, a contract for the purchase of property (“Contratto Preliminare di Compravendita” or “Compromesso”) is a legally binding agreement to complete the purchase and to pay the balance of the agreed price on a specified, future, date.  It is a complex legal document, which should always be submitted to the Italian Property Department of the International Property Law Centre for advice or considered with great care before signature, to avoid pitfalls that plague the property market, in Italy as anywhere else.

Basically, you should ensure that the contract:

  • specifically defines in detail the property sold.  Reference should also be made to the parcel numbers of the relevant Local Land Registry (“Catasto”) and possibly a scale plan of the property sold should also be attached to the contract, and
  • states the deposit paid, including a receipt for any payment made, indicating the actual, agreed total price for the property, and
  • states without reservations, restrictions and doubts the legally binding and unconditional commitment of the vendor to sell the property in question on or before the agreed date of completion, and
  • deals with any existing mortgage or third parties’ right (“diritti di prelazione”) or other problems discovered on effecting the survey/searches or on examining the documentation submitted by the vendor, and
  • deals with the stage payment if the property is a new build.  You should ensure that you receive bank guarantees for each payment (new law since July 2005). These will protect you if the builder has financial problems before completing the building.

At the time of signature of the contract, a deposit (“Deposito” or “Caparra”) will be payable, ranging between 10% and 30% of the price of the property. Under Italian law the legal definition of this deposit can have serious implications for you.

  • If the deposit paid is defined as “Caparra Confirmatoria”, it means that in case of default in completing on the agreed terms, you will automatically lose the whole of the deposit paid.  Conversely, if the vendor is to be blame, he will be under a binding legal duty to pay you twice over, the sum originally received as a deposit.  In addition further sums may be payable, if it is proved that the damages actually exceed the amount of the deposit.
  • if the deposit is defined as “Caparra Penitenziale” then, subject to the actual wording of the contract, it will enable either or both parties to the contract to withdraw from the transaction, by:

A. allowing the vendor to keep the deposit paid, in the case of you withdrawing, or
B. compelling the vendor to return the deposit received, where the vendor wishes to terminate the contract.

Where the property is subject to a mortgage (“Mutuo Ipotecario”) or the purchase is to be completed with the assistance of a mortgage, it is essential to deal with all the necessary arrangements before signing the contract.  In Italy bank mortgages may cover up to 85% of the price of the property, and will be agreed in Euros, or any other foreign currency.  Repayment may be fixed or by floating installments.

Obviously, where the property to be bought is already subject to a mortgage, it will be necessary to agree with the vendor that the existing mortgage be redeemed, and the corresponding entry at the Local Land Registry be cancelled before completion. The assistance of a notary is required, and the procedure may be expensive and time consuming. Alternatively, it is possible to agree with the vendor and the bank that the buyer will “take over” the mortgage (“Accollo del Mutuo”), but in this case it is essential to check the state of the past repayments and the terms of the original mortgage agreement. In the alternative, if the property is bought with the assistance of a mortgage, it is advisable to finalise all the arrangements (expensive and frequently protracted in time) before committing oneself to the purchase of the property.

When all the arrangements have been completed, and the draft contract agreed, signature of two identical original contracts should take place, both by the buyer and the vendor. The two original signed contracts should then be exchanged. At the same time a cheque (“Assegno”) or a banker’s draft (“Assegno circolare”) for the deposit will be handed over to the vendor, finalising the formalities of this stage of the transaction.

Where a substantial time is likely to lapse between exchange of contracts and completion of the sale, it may be necessary to protect your interest in the Italian property, by “registering” the “Compromesso”.

This will prevent the multiple disposal of the same Italian property to several prospective buyers, by fraudulent vendors. In practice, a copy of the “Compromesso” will have to be lodged with the local Registration Tax Office, and a small fee paid. The benefit of this procedure is that any other prospective buyer, on effecting the ordinary searches against the particular property, will be informed of the existing, pending agreement to sell/buy the same.

The first prospective buyer to register his/her “Compromesso” will acquire a good right to complete the purchase, also against third parties.

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