How to Avoid Making Mistakes When Buying Property in Italy

Considering buying a dream property in Italy? Let us be your guide when balancing your desires with the more practical realities. Due to the diverse legal, developmental, fiscal, and financial traditions, buying real estate in Italy is significantly different from purchasing property in the US. 

For example: Not all properties for sale in Italy comply with the law. Some may have record discrepancies or illegal constructions not recognized in municipal archives. This isn't always clearly stated in sale offers. Not all Italian real estate agents conduct thorough due diligence. Some properties are even offered directly by owners on sites like Immobiliare.it, Idealista.it, or casa.it, without prior appraisal.

The ViaMonde team has successfully navigated through situations where a property was registered as storage but used as living space, and a terrace was covered and used as a living room. While this might not affect personal use, the legal implications could limit options like renting it as a holiday home or selling later can leave the new buyer on the hook for expensive renovation costs to bring the property up to code. In another case, a prime property was listed at a remarkably cheap price because the owner received it as a donation from an heir, leaving the buyer at risk of potentially losing the property to claims made by other heirs within the 20 year time limit protected by Italian inheritance law.

Other issues can include unclear rights of passage or view for adjacent properties. Let’s say you find a property with a fantastic sea view next to an empty plot. You will want to know if the other property can build and block your view, and to what extent before you buy. Or you might find a plot of land by the sea perfect for your dream house, only to discover it's "terreno rustico" (likely agricultural land) where building isn't permitted. Changing this status is a long and unpredictable process. This is why “due diligence” is so important.

It's crucial to seek professional advice rather than acting alone to avoid costly mistakes when selecting a property.

For example, purchasing costs vary based on factors like:

• Taxes: These depend on whether the property is your primary (2%) or secondary (9%) residence. If buying from a company, you might pay VAT ranging from 4% to 10% (primary vs. secondary residence). Luxury properties (e.g., apartments over 240 sqm) can incur 22% VAT (or only 9% stamp duty if bought from a private individual).

• Notary fees: Typically between 1% and 2.5% of the cadastral value.

• Real estate agent fees: Between 2% and 5% of the selling price, sometimes negotiable, especially with an attorney.

• Legal and technical fees: For attorneys, architects, or surveyors who conduct legal and technical due diligence.

While local Italian residents may not always hire representatives, foreigners buying property are strongly advised to conduct thorough due diligence. Local property caveats are often difficult to foresee and check independently. 

Here are some avoidable risks when buying property:

Legal risks, especially title risks, mitigated by due diligence by an Italian Real Estate Attorney:

• Property title and ownership: Public real estate registers show the chain of title, ensuring the seller is the rightful owner with a clear title.

• No burdens on title: A legal search evaluates existing encumbrances, liens, and easements. Some are obligations, while others are rights, like easements of right and air, or view. This also applies to mortgages, liens, legal disputes, or bankruptcies affecting the current owner.

• Inheritance issues: Properties can pass through generations to multiple individuals. Some may relinquish rights, while others accept. Even without explicit acceptance, ownership can be pending for 10 years or until all heirs explicitly accept or relinquish their rights.

• Donations affecting heirs' rights: If a sale is affected by a previous donation that could impact heirs' rights, they can claim the property within 10 years of the donor's death and concurrently 20 years from the donation's registration. Banks rarely mortgage donated property until these limits expire. Insurance or agreements among heirs can reduce, but not eliminate, this risk.

• The Nuda property sales offer is a bare ownership without the right to possession of the property. The new bare owner cannot use or live in the property nor rent it, could only sell it or mortgage it but not exercise full possession while this condition remains. During the time of the Nuda, you will remain liable for property maintenance and taxes. Typically these properties usage is established for a lifetime, ending by the death of the seller (there could also be a fixed term but this is less likely) when possession is finally granted to the buyer.

• Property linked to a rental agreement with a tenant living in the property. These are typically offered at a discount as it may be difficult to end the lease agreement and the tenant to leave the property. In extreme cases where tenants have stopped paying rent the discount is even greater as the litigation to recover the property may take years with an uncertain result given tenants protections.

• Preliminary contracts and deposit risks: Preliminary contracts and offers to purchase are legally binding, involving an advance of 10-20% of the selling price. To mitigate backing out, an escrow account under an independent party (like a notary) and suspensive clauses in the preliminary contract (linked to due diligence of legal title, building conformity, condominium status, etc.) can be included.

Urban planning and cadastral risks:

• Cadastral conformity: A cadastral survey ensures the property's size, layout, and purpose match the plan on file.

• Urban planning conformity: The original building permit in municipal archives and subsequent permits, extensions, renovations, or changes should be checked to ensure the property's physical state matches approved urban planning records.

• Identify illegal construction: The seller must regularize any abuses or illegal constructions before the sale (e.g., unauthorized veranda, new room, altered window). Some abuses can be corrected and legalized, while others require demolition. Identifying the degree of abuse and available remedies is key before finalizing the acquisition.

Technical risks:

• Structural risk: Older buildings or rural properties may show signs of structural problems like foundation issues, dampness, roof damage, or cracks.

• Systems and utilities risk: Old electrical systems, plumbing, heating, and cooling systems should be checked for regulatory compliance and working order.

• Energy performance certificates: This is a mandatory requirement checked by the notary before transferring the deed.

Financial risks:

• Tax verification: The property's cadastral value is verified to calculate correct purchase taxes. Local property taxes (IMU and TARI) must be paid up to date. Proof and a seller's declaration are required by the notary at the time of sale.

• Condominium financial status: Ensure all past and pending condominium fees are paid. All extraordinary expenses approved by the condominium must be paid by the seller before transmission.

A due diligence process should include detailed checks as outlined above: Legal, Urban planning, Technical, and Financial due diligence. This better positions a prospective foreign buyer against unforeseen consequences when acquiring a new property.

It’s also important to remember, like most things in Italy, the process of buying a house in Italy can be slower and more bureaucratic. Transactions that typically take a month in the US can take at least three months in Italy due to additional checks and documentation. A Codice Fiscale (tax code) is also required to track financial flows in Italy; this is something you can get before you begin your search to help expedite the process later.

Additionally, court-certified translations of documents, like a power of attorney (which must be apostilled) can elongate the process. International transfers are also slow and require extra time and precautions when sending significant amounts of money.

If you negotiate independently, you might find negotiation styles, language, and local customs differ considerably. Involving local professionals can help bridge these cultural barriers. It is often difficult to get a response from Italian realtors and homeowners if you are not a local resident who speaks the language fluently. 

One of the most important misconceptions is that buying a house in Italy does not automatically grant long-term residency. As a citizen of the US, Canada or Australia, without a visa or citizenship in the EU, your passport will only allow you to visit Italy for 90 days out of every 180 day period. Keep this in mind when considering purchasing a home abroad, and keep in mind as your secondary home you will pay the higher 9% tax.

Ultimately, buying property in Italy can be a rewarding experience, offering a unique lifestyle and investment. However, navigating the complexities requires careful planning and professional guidance. By understanding the potential risks—legal, urban planning, technical, and financial—and conducting thorough due diligence, foreign buyers can confidently avoid common pitfalls and successfully acquire their Italian property. Remember that patience, local expertise, and a clear understanding of Italian regulations are your best assets for a smooth and successful purchase.