CORTONA INTERNATIONAL'S GUIDE
TO PURCHASING A PROPERTY IN ITALY

The procedure for buying a property in Italy may differ from other countries, but it is a logical process which foresees all verifications and checks undertaken by a notary whose specific role is to ensure the safe exchange of title deeds and completion.

If you’ve found a property you wish to buy, the very first phase is to reach an agreement on price. This will be negotiated by your agent.  Once price has been agreed, your agent will also establish methods of payment and timelines between the initial deposit and the final notarised contract which is when you legally take possession of the property.

STEP 1 – FORMAL OFFER OF PURCHASE OR PRELIMINARY CONTRACT OF SALE

(proposta di acquisto irrevocabile o contratto preliminare di vendita/compromesso)

In order to facilitate sales where one or even both parties live overseas, Cortona International (CI) tends to begin with a formal offer of purchase that sets out everything that has been agreed and is made conditional to the results of your independent survey – which we strongly recommend you have done. 

Generally speaking CI doesn’t request a down payment for this initial phase, but other agencies may request a 5%-10% binding deposit.

(This deposit, unless otherwise specified is non-returnable, so it is important there be a clause in the offer which states that should the findings of the survey be unsatisfactory, the deposit monies will be automatically reimbursed and the contract between the parties become null and void with no legal consequences to either party.)

With CI this is an automatic procedure, the offer being more than anything else, a letter of intent to buy/sell; establishing price, methods of payment and timelines for completion.

STEP 2 – Should the results of the survey be satisfactory, CI’s formal offer of purchase will automatically become a Preliminary contract of sale as and when the notary, chosen by the buyer, is in receipt of the following documentation and funds:

• original signed copies of the contract from both parties
• signed anti-money laundering and privacy forms,
• a mandate for the notary to hold all funds in escrow until completio
• the agreed sum of money for the down payment

The down payment (caparra confirmatoria) which can be anything from 10%-30% (an amount agreed between the parties) is a non-refundable deposit unless otherwise stated in the Preliminary contract.

Should you withdraw from the sale because you are unable to fulfil the legal obligations cited in the contract, these monies would be forfeit i.e. the vendor would be entitled to keep them.

In the same vein, should the vendor be unable to fulfil the legal obligations cited in the contract, you would be entitled to the return of your down payment plus a penalty of the same amount.

Once the Preliminary contract has been signed it will be formally registered by the notary with the relevant authorities. 

Monies payable at preliminary contract

• Amount equal to the down payment (to be held in escrow by the notary until completion).

• Registration fees - circa E.350

• Stamp duty amounting to 0,5% of the down payment (which is deducted from the total due at final contract).

• Translation fees if applicable (circa E.300-E.700)

• Agency fees which are generally 3% + VAT of the agreed purchase price are also legally due at the signing of the Preliminary contract. CI’s general policy is to wait until completion before invoicing you, but other agencies may expect partial or total payment

STEP 3 – FINAL NOTARISED CONTRACT – COMPLETION

This usually takes place 2 or 3 months after the Preliminary contract, unless otherwise stipulated. The Final notarised contract, once undersigned by both parties, gives you the legal possession of the property.

• If you are unable to be present in person for the final contract you will require a power of attorney.

• Doing a power of attorney is simpler if done in Italy with the notary who is presiding over the sale.

• It costs circa E.180 + translation costs of E.150 and can be done in 1 hour.

If you are unable to draw up a power of attorney in Italy, you will need to acquire one from a notary in your country of residence. The POA will then need to be legally translated, authenticated by the relevant government authorities and given an Apostille.

The final contract is done only when the notary has ascertained that the property has not been used as collateral for any loans and that there are no outstanding taxes to be paid.

It is the owner who is legally responsible for the compliancy of the property and declares its conformity in the contract (hence the importance of having a personal survey done to have this verified).

Monies payable at the Final notarised contract

·  the balance of the purchase price,

·  the remainder of the purchase taxes/stamp duties (less the 0,5% already paid)

·  the notary’s fees and the agency’s fees.

After the signing of the Final Contract, the contract will be transcribed and registered by the notary in order for the title deeds to be officially transferred into your name.

CI will immediately change all utilities into your name and alert the local council to the change of ownership.

COSTS NORMALLY INCURRED WHEN BUYING A PROPERTY

• One of the strange idiosyncrasies of buying a property in Italy is that the purchase tax, which is calculated by the notary using official tables, is based on the cadastral value of the property.
• This is based on the rendita catastale of the property (the property’s accredited income) as opposed to the actual purchase price.
• The cadastral value of older properties which have not had building interventions in recent years can often be as much as 50% or 60% less than the actual price you’re paying for the purchase, but new builds and properties recently upgraded or modernised will have an updated cadastral value.
• If the property is to be a second home (ie. non-resident) you will be liable for a purchase tax of approximately 9% of the cadastral value + E. 100 (approx.) for various stamps.
• If the property is to be your main home (i.e. for which you would be legally bound to apply for residency within 18 months after completion), the purchase tax would be approx. 2% of the cadastral value + E.100 (approx.) for stamps.
• The above is applicable for private parties where the property does not result as being "a luxury home".
• A property registered as "luxury home" will be taxed at a higher rate.
• When buying from a developer or construction company in place of the purchase tax VAT (IVA) can be applied at 4% (for resident), 10% for non-resident and 22% in the case of a property that falls into the category of a luxury home.
• The reasons for the former being subject to IVA are various and on occasion, not applicable. In such instances, it would be best to have the situation analysed and request a specific calculation be made for the property in question.
• Agricultural land is taxed at 15%.The notary’s fees on average are between E.2000 to E. 5000. All payments however can be calculated before the purchase takes place. 

TAXES

• Since 1992 a new system has been introduced whereby one no longer has to pay a lump sum on the net gain of the property when it is sold unless it has been in your possession for less than five years from the day of purchase. Instead, one now pays an annual tax calculated on the property’s cadastral value. This does not apply where a property is owned by a company or if it results as uninhabited.
•  If you are NOT a resident and wish to sell your property within five years of having bought it, you will be taxed 26% on the net gain.
• If you are a resident or have passed at least 50% + 1 day of the 5 year period as a resident,you will not be liable for paying capital gains should you sell.
• As a resident you have the option of either buying another property within a year, as principle place of residency, or paying the 7% difference on the original purchase tax and interest on this sum; again calculated on the property’s cadastral value (albeit re-evaluated) and not on its price. (This tax usually amounts to a few thousand euro)
• After five years of ownership there are no impositions.

IMPORTATION OF FUNDS

LAWYERS

NOTARIES

SURVEYS

We strongly recommend you carry out a survey before committing to buying a property. We can either recommend a geometra or are happy to work with one of your own choosing.  A survey costs, on average, between E.500 to E.1000 + IVA depending on what needs to be verified.

A compliancy report should verify:

•    that the property conforms to all town planning and building regulations

•    has permissions for any/all works undertaken

•    is registered correctly at both the Land & Building registry

•   has (where applicable*) compliant gas, electric, plumbing, sewage and heating systems

With this in hand a purchase can be done swiftly in a matter of 1-2 months.

The survey should also include the following:

•  The structural condition of the property

• That all utilities are certified and/or attached and functional (water, sewage, electricity, gas, boiler)*

•  Pool and pumps functional

•  If there are any disputed access roads

•  If there are rights of use/rights of way on or through the property

•  The property has been de-ruralised and is a civic habitation

•  Condition of the roof

•  Condition of doors and windows

•  Damp assessment

• Compliancy of gas installation (GPL tank or mains), both inside and outside the house

CONDITIONAL CONTRACTS OF SALE

CLAUSES TO INSERT

• That the deposit - usually low in these instances - be held in escrow by the notary until completion
• That the deposit be automatically refundable, in the event the regularisation not be granted and/or not granted within the defined timelines (which can, by mutual consent, be extended).
• That it is clearly specified: should regularisation not be granted and/or not granted within the defined timelines, the vendor has no right to legal recourse regarding the reimbursement of the deposit monies.
• That the notary, in this instance, is authorised by both parties to automatically return the deposit monies to the buyer at the moment the defined timelines expire.
• As per Italian law, the vendor would technically also owe a forfeit of the same again, but this is often difficult to enforce without taking legal recourse.
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The CI team will always ensure you are fully aware of all pros and cons before committing yourself to any purchase. We are also more than happy to make introductions to English speaking geometras, lawyers and notaries with whom you can consult directly.