The Third Stage

The third stage relates to the completion formalities, which normally take place at the offices of a local Notary.  Notaries have the special duty of drafting the purchase deed (“Rogito”), to ensure their proper execution, registration and payment of all Italian taxes ancillary to the completion.

The vendor and the purchaser must use the same “Notaio” (a Notary Public who represents the Italian government) to execute the deed.  All registered property transactions in Italy must take place before a “Notaio”.  The “Notaio’s” job is to check that the sale documents are correct, to verify the identities of the parties involved, to collect the tax on the sale due to the Italian government and to ensure that the entries in the Land Registry (“Registro Catastale”) are updated to show the new owner.

After exchange of contracts and before completion the parties and their advisers are usually involved in organising the documentation and the funds required to complete, finalising matters already negotiated before exchange of contracts, and submitting the documentation to the notary.

It is not necessary for you to be in Italy in order to complete the purchasing transaction. In this case, we can prepare a Power of Attorney to authorise another person of your choosing, to sign on your behalf.
Usually, the balance of the agreed price is tendered in the form of bankers’ drafts (“Assegni Circolari”) by the buyer, immediately before completion. Whereas the buyer or his / her Attorney will sign and pay the balance of the agreed price by delivering the “Assegni Circolari”, the vendor will agree to convey the property by signing and delivering the same Title Deed (“Rogito”).

Whereas the vendor should produce his Title Deeds (Purchase Deed, or the Italian Inheritance Tax Return duly lodged with the Authorities, relating to the property), and all relevant planning and building licences/certificates, the buyer should organise a Power of Attorney (“Procura”) and Italian Tax Code Number (“Codice Fiscale”), and ensure the availability of the funds required to complete. We would advise that the Tax Code Number be applied for at the outset to enable purchasers to open a Bank Account.

A Power of Attorney is required when the buyer is not going to attend to the completion formalities in person, and wishes to appoint someone else to attend and sign on his behalf.  A “Procura” may also be required, if you are not fluent in Italian, and therefore will not, normally be allowed by the Notary to sign the completion documents, because you cannot readily understand them.  In either case a third party should be empowered to sign for and on your behalf.

An Italian Tax Code number (“Codice Fiscale”) is required to enable the Notary to deal with all the post-completion formalities, and to comply with the various requirements of Italian tax law applicable to the owners of real property.  It can readily be obtained by applying to the local tax office in person, or by a third party, with a copy of the applicant’s passport.  In the case of individuals, the “Codice Fiscale” is a combination of sixteen letters and numbers.  Usually the tax office issues a card or a passbook with all the relevant details.

As far as the funds are concerned, the foreign buyer should, at an early stage, find out from the notary dealing with the completion, the amount of his fees, the taxes payable and should calculate the amount of the funds payable to the vendor (list of completion expenses).  Normally bankers’ drafts (“Assegni circolari”) are organised, in readiness for completion.  These are special cheques issued by a bank and they are a guarantee that funds are readily available and will be paid on presentation.

Particular care should be taken with reference to any statutory pre-emption rights of neighbours in agricultural areas (“Diritti di prelazione”).  Very old and complex legislation entitles farmers and other neighbours to be notified of a proposed sale to third parties and to have a priority in buying agricultural land offered for sale in their immediate neighbourhood.  Before exchange of contracts a surveyor will, as part of his searches and enquiries, have informed the buyer of these third parties’ rights, and immediately before or if impossible, after exchange of contracts, it will be necessary to serve a copy of the contract on all parties having pre-emption rights, so that a decision can be made within the statutory term (usually 30 days).  Serious problems may result if a breach of these third parties rights is committed. These farmers are entitled to buy the property at the declared price.  Sitting Tenants and individuals who are conducting a business in the property also have a right to buy.

In many countries outside the United Kingdom and Ireland, the Notary plays a key part in the buying and selling process. He is the only professional entitled to transfer legal title to properties in Italy (apart, of course, from transfers ordered by Court Judgements).  Although the Notary is normally selected by the buyer, he is an independent public officer/professional charged with the drafting of the Purchase Deed (“Rogito”) finalising the sale, ensuring that title passes legally between the parties, and registration in the Local Land Register.  A Notary as a public official, is under a specific legal duty to ensure proper payment of all Italian taxes payable on a sale / purchase of property. The Notary will also, before completion, deal with the formalities relating to the discharge / cancellation of any existing vendor’s mortgage.  For ease of reference and economy, he usually deals with any new mortgage application by the buyer.  The property checks made by the Notary are often restricted and therefore the use of the Notary is no substitute for good independent legal advice.

Under declaration of the purchase price is common practice in Italy. It is a method used by both sellers and buyers to reduce the amount of taxes payable.

However, under declaration of the purchase price is penalised in Italy with an administrative fee that varies from 100% to 200% of the not paid tax and the possibility of imprisonment as it is in the UK. Indeed, where the declared purchase price is considerably below the real purchase price, there is a substantial risk of being charged with fraud.

British buyers must take into account another very important issue; under the new UK Anti Money Laundering Regulations 2003, tax evasion related to a purchase of a property is a criminal offence, even if the tax evasion is committed abroad. Money launderers are liable to 14 years imprisonment. The new UK Anti Money Laundering rules also prohibit solicitors from aiding clients to evade taxes in the UK or abroad.

The result is that buyers have to declare the full purchase price, if they do not want to incur any such liability including prison.

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