Buying or selling a property (a home, office, shop, studio, land etc.) is one of the most significant moments in the life of a person, whether it is an investment or, especially, if the property is intended as the family home.
In order to protect citizens, whether Italian or foreign, the Italian State requires that the contract be drawn up by an impartial public official who is a specialist in this area: the notary.
By law, the notary acts as a third party who is independent of both seller and buyer, ensuring that the conveyance of the property complies with all legal requirements, in accordance with the common interests of the parties and with particular attention to the purchaser.
The role of the notary in this case is seen in all its importance, both for the complexity of the operation and because of the need to protect the parties, from the first moment in which they reach an agreement to proceed with the deal: for this reason it is recommended that the purchaser (almost always the weaker party in the transaction) contact his own notary from the start of the negotiations, before signing a proposal to purchase or preliminary contract, since these already represent a binding commitment; in this way, every aspect of the transaction to be entered into can be considered together with the notary.
So do not hesitate to consult your notary.
The choice of notary is absolutely free (the choice may not be imposed by the estate agent or the bank providing a mortgage or by the seller) and it is up to the purchaser, who is required to pay the fees, unless otherwise agreed with the seller.
The choice of notary, then, should be guided by the confidence the client has in him, the amount of time he is willing to spend and the advice given to ensure a safe purchase. If one does not know a notary, one can go to the nearest one.
It is extremely important to check that everything is in order before signing any binding document and advice requested of the notary, even before the conclusion of the sale, does not have an additional cost.
The parties have the right to consult the notary personally and ask him for all the clarifications and explanations that may be useful for understanding the consequences and legal effects of the deed.
There are numerous activities carried out by the notary for the preparation of all documentation necessary for setting up the transaction. The notary first investigates the intentions of the parties so as to identify the type of deed most suitable for achieving the purpose desired by the client, within the confines of the law.
So the notary must ask the parties for all the information that will enable him to understand fully the result they want to achieve. It often happens that, in conversation with the notary, the client ends up changing what had been the initial idea because, for example, there is a more suitable or more fiscally correct solution.
Let us imagine the case in which the price is not paid in full at the time of the deed and part of the payment is postponed. In this case it is important to ask the notary’s advice on forms of collateral that can be provided to the seller and the corresponding costs. There are in fact various forms of protection: from the preparation of promissory notes to the registration of a legal mortgage, to a sale with reservation of ownership, in which case the transfer of ownership of the property takes place only upon payment of the last instalment of the price.
Lastly, the recent economic crisis has led to the creation of additional contractual forms such as rent-to-buy, in which the purchase is preceded by a period of fruition of the property upon payment of rent, part of which is deducted from the sale price.
Once the deed to be prepared has been defined, the notary must by law carry out a series of advance checks on legality, to ensure the contract will be valid and unassailable over time.
The property may be bought by a private purchaser, by a company or by a construction company.
In any case, the notary will ensure that:
• the seller really owns the property and has the right to sell it:
The notary ascertains the identity of the parties involved in the transaction and their right to act, by verifying the matrimonial property regime applicable between spouses, any power of attorney etc. The notary’s check on the identity of the parties serves to avoid the risk of identity theft, which is widespread in jurisdictions where there is no “Latin” notary.
• the property is not mortgaged:
By law the notary must ascertain that there are no previous mortgages, liens or foreclosures recorded at the Territorial Offices of the taxation authorities. The notary must ensure also that the property in question is not subject to specific constraints e.g. in terms of public housing (existence of particular individual requirements on the buyer, or price constraints), or right of first refusal in favour of certain persons, or covenants regarding assets classified as of historic, artistic or archaeological value.
• the previous owner has paid all service charges:
Upon completion it will be essential to have the managing agent prepare a statement on the payment in full of service charges and levies by the seller, since the buyer is liable for the non-payment of service charges due in the previous year.
• the cadastral plan conforms to the actual state of the property:
The notary must ensure that the cadastral plan exists and must bring it to the attention of the parties; the seller must declare and guarantee correspondence between the cadastral plan and the actual state of the property.
• the necessary checks have been put in place to ensure that the property is in order in terms of building/planning permissions
• the correct fiscal regime is adopted by the parties:
The notary identifies the taxation applicable to the specific case and proposes it to the parties as well as checking, following indications from the parties, the existence of the requirements for any tax benefits (for example, benefits for the purchase of a first home, or a tax credit or exemption in the case of transfers pursuant to separation or divorce proceedings). The notary has specific training in tax matters and is able to suggest solutions resulting in legitimate tax savings.
The notary is obliged to collect from the purchaser the funds needed for thepayment of taxes and duties; upon registration of the deed these will be paid over to the taxation authorities.
• the rules specifically designed to protect those who buy a property under construction have been complied with (e.g. issuance of a bank surety to guarantee any advance payments)
• the energy performance of buildings is certified in accordance with national and regional rules:
For the sale of properties with heating plants it is mandatory to have and often even to annex the certificate of energy performance (EPA) prepared by a registered certifier that shows the class of the property’s energy consumption for heating.
• all regulations have been observed regarding money laundering, traceability of payments and the commissions paid to any real estate agency.
The notary’s checks end with the signing of the deed.
As a rule at the time of signing of the deed of sale, the handover of the property also takes place.
Nevertheless, the parties may agree otherwise, deciding for:
• early handover, it being understood that the seller remains the owner of the property and therefore responsible for it under the law;
• delayed handover to meet the needs of the seller, a clause being inserted in the contract of sale setting a time limit by which handover must be made, if necessary with provision for a penalty for any delay.
To protect the public, the law provides detailed rules for the preparation of the deed, in particular:
a) the notary must explain the entire contents of the document to the parties and any witnesses whose presence is required by law in certain cases (such as when one party is unable to sign or is suffering from sensory impairment), making sure that they understand the contents and legal effects. If he does not do so, he is criminally responsible for the crime of falsity in a public document;
b) the document, once read and approved, must be signed by the parties and any witnesses before the notary and it is then signed by the notary;
c) what the notary certifies in the notarial deed is legally conclusive evidence for all purposes - even in the courts - unless the crime of falsity in a public document can be proved.
The phases of a sale are many and often complex, and do not come completely to an end with the signing of the deed, given that the notary must undertake an important series of steps at the Public Registries, including lodgement and fiscal registration.
The Preliminary Contract (commonly called a “compromesso”)
- This is the first contract that the seller and the buyer must sign. Sometimes, however, the preliminary contract (“compromesso”) is preceded by a purchase proposal (“proposta d’acquisto”). With the compromesso, the party agrees to sell/buy; the total price of the property is set, as well as the terms of payment, the actual timing of the sale and the amount of the advance payment (down payment/deposit) that is paid at that moment to the vendor.
This preliminary agreement (even if it is concluded privately) gives rise to commitments that are legally enforceable. They pose constraints for both the seller and the buyer: if after payment of the deposit the buyer decides not to buy the property, the seller may retain the deposit; but if the seller decides not to sell, the buyer is entitled to receive back an amount equal to double the deposit paid.
It should also be pointed out that if the preliminary contract is made with a notarial deed, the contract can be “transcribed” into the registries: in this way the buyer is protected from any problem that may arise during the period of time between compromesso and completion of the deed, such as mortgages, foreclosures or bankruptcy of the seller. In case of insolvency of the seller, for example, registration of the preliminary contract allows for recovery of all or part of the amounts paid.
This suggested approach offers the best protection for the buyer.
Activities Subsequent to Completion of the Deed:
Even after the signing of the deed, the notary is required by law to perform a series of tasks, within a short time, which will ensure on the one hand that the State receives payment of its taxes, and on the other publicly advising third parties and establishing the certainty of the transaction for the benefit of all citizens.
The notary is obliged to carry out, within a brief time-frame:
a) registration of the deed with the taxation authorities and payment of the relevant taxes on behalf of the client;
b) lodging of the deed – as protection for the whole community - in the Public Registers, making it known and fully effective to all (technically known as third parties). The filing of the deed with the competent authority in the land register is required by law to let everyone know who is the owner of the property and whether it is subject to mortgages or other encumbrances.
c) cadastral registration in order to update the land registry.
How much does the notary cost?
There are no obligatory or predetermined tariffs. The fee is therefore left up to free negotiation between the buyer and the notary. The notary is obliged to provide, upon request, a written estimate with the detailed description of his fees and the taxes payable. As an indication only, the fees charged for the purchase of a property valued at EUR 200,000 may not exceed 1%.
What other costs are associated with the purchase?
Where a real estate agency is involved, the buyer must pay his commission. As an indication only, the fees charged for the purchase of a property of the above-mentioned value is commonly 3%.
Buying a Home: Fiscal Aspects
A) Purchase from a builder/renovator
Puchase from a firm of builders or renovators, except in particular circumstances, attracts VAT which is payable directly to the seller. The VAT rate to be applied on the sale price will be:
- 10% unless it is a first home purchase
- 4% if “first home” assistance applies.
The same tax treatment is applied to the allocation of houses to members of housing cooperatives.
In the case of purchases subject to VAT, the following taxes will be also paid to the notary who will then pay the Taxation Office:
• Registration Tax: Euro 200
• Mortgage Tax: Euro 200
• Land registry Tax: Euro 200
The rates apply on the sale price declared in the deed.
B) Purchase from a private party
For the transfer of property between private individuals the registration tax, mortgage and land registry taxes are paid by the buyer to the notary who, in turn, will forward them to the government Taxation Office at the time of registration.
1) In the absence of incentives
• Registration Tax: 9%
• Mortgage Tax: Euro 50
• Land registry Tax: Euro 50
2) Support for the purchase of a first home
• Registration Tax: 2%
• Mortgage Tax: Euro 50
• Land registry Tax: Euro 50
In the case of transfer of residential property to physical persons the purchaser may apply for payment of the registration tax on the “cadastral value” (price-value) of the property (which is the value obtained by multiplying the cadastral income by the legal coefficient of 115.5), regardless of the actual amount of the sale price, even if it is higher than this value.
The minimum tax is still €1,000.
Source: Italian Notarys' society (Consiglio Nazionale del Notariato)