THE STAGES OF THE PURCHASE AND/OR SALE
The negotiation is necessary for defining the details of a sale, in order to satisfy the interests of both the seller and the buyer. Among the most important elements are: the price and method of payment, the deadlines for the delivery of the property and the stipulation of Estero the deed of sale, the dividing of joint-ownership expenses in the time that passes between the preliminary and the final deed, the extraordinary expenses already decided upon, the buyer’s notification of the possible need to obtain a loan and the seller’s notification of any encumbrances on the property.
The Purchase Proposal
The formulating of a purchase proposal is the most delicate stage of the negotiation, as it binds the proposing party to the purchase for a given period starting from the moment in which it is signed: the signed purchase proposal, which is generally formulated as an irrevocable proposal, is binding for the proposer, but is not yet for the seller, who, until they sign it, is free from any commitment. If the seller has not accepted by the end of the period of validity, the proposal becomes ineffective. For the complete protection of the parties, it is best that mortgages or encumbrances of any kind be indicated in the proposal, as well as the property’s conformity with town-planning regulations. The buyer must analyze carefully all the clauses of the purchase proposal before signing it. At the time of the drafting of the proposal, it is a good rule to have a look at the main documents regarding the property, in particular the deed of provenance and the cadastral sheets; if the documents are not available, it is advisable to indicate in the proposal itself the ways in which the documents will be made available. It is also important to indicate in the proposal if you plan on taking out a loan for the purchase, and especially the terms with which you plan on obtaining it.
Acceptance of the Proposal and Payments
The proposal is usually accompanied by a non-interest bearing deposit in the form of a nontransferable cheque made out to the seller: the cheque is returned if the seller does not accept the proposal; on the contrary, in the case of entering into a contract, i.e. when the buyer learns of the seller’s acceptance, that amount will become the confirmatory down payment. The definition and the significance of the confirmatory down payment are indicated in Article 1385 of the Civil Code: “If at the time of entering into a contract one party gives to the other, as a down payment, a sum of money, or a quantity of other fungible goods, the down payment in the case of fulfillment must be returned or ascribed to the sale price. If the party that gave the down payment defaults, the other party may withdraw from the contract, keeping the down payment; if instead the party that received the down payment defaults, the other party may withdraw from the contract and demand double the down payment. If however the party that does not default prefers to demand the performance or the cancellation of the contract, the compensation for damages is regulated by the general laws.” It is important to know that with the new laws all payments regarding the purchase of real estate must obligatorily be made by means of cheques or bank transfers, with the exception of transactions for a total value of not more than 12,500.00 euros. The essential data of these payments must be kept, because the notary that stipulates the deed must quote them in the deed. After entering into the contract, the parties are both bound to execute it, and thus also to the subsequent stipulating of the notarial deed with the transferring of the ownership of the real property by the seller and the payment of the price by the buyer. With the acceptance of the seller and the entering into the contract, the Real Estate Agent, regularly qualified and registered in the List held at the Chamber of Commerce, has the right to receive the commission.
The Preliminary Contract
The preliminary agreement to sell, which contains the commitment to sell and to purchase, is a document divided into articles created jointly between the parties, in which there is Estero the accurate identification of the parties as well as a precise description of the property to be sold; it is signed by all the parties in question (an especially important element if there is more than one seller, and not to be underestimated is the signature of both spouses, if a husband and wife with legal community of assets are selling, as well as in the case of a company, with the signature of the person who is legitimated). To ensure that the preliminary contract is formally complete and correct, it can be drawn up with the help of a professional, which could also be the notary who will handle the drawing up of the final deed of sale, who in this case will:
- provide consultation regarding all aspects (including taxes) so as to avoid legal disputes;
- do preliminary checks and controls (mortgage register searches, title searches), especially if large sums of money have been paid as a down or advance payment;
- check the validity and importance of the clauses.
The main points that a preliminary must contain are:
- The personal data of the parties;
- the exact identification of the property;
- The agreed price;
- The methods of payment, clearly indicating what part is ascribed to the confirmatory down payment, the advance payments and, if any, the premium. The advances paid with the signing of the purchase proposal, which may be further added to with the signing of the preliminary, may be added to the confirmatory down payment or may simply be ascribed to advance payments. The advance is a deposit paid by the buyer prior to the sale: if the sale isn’t made, it must be returned to the buyer;
- The date on which the parties intend to stipulate the notarial deed, indicating if possible who the Notary Public will be and the terms for the delivery of the property;
- The existence of any mortgages or other encumbrances;
- The taking over by the buyer of any remaining loan amount or its paying off by the seller with the commitment to cancel the mortgage;
- The provenance of the real property and its accessories, and other pertinent data, such as common property, appurtenances, easements, etc.;
- The condition of the systems and installations, certifications, conformities, compliance with town-planning regulations, the possible releasing of the seller’s responsibilities;
- The essential data of any real estate agents or companies that have negotiated the sale and the commissions paid.
A purchase proposal containing the above characteristics is a preliminary contract provided that it is accepted with a written statement by the seller and the buyer knows about it.
The Registering of the Purchase Proposal and of the Preliminary Contract
A preliminary agreement to sell contract, whether done by means of a notarial deed or a private deed, is subject to registration within a fixed time period at the Revenue Office, i.e. Ufficio delle Entrate (only preliminary contracts by enterprises owning developable land without a down payment are not subject to registration within a fixed time period). In addition, Art. 1, paragraph 46 of Law 27 December 2006 no. 296 extends the obligation of requesting registration also to the real estate agent and makes the agent jointly liable for payment of the registration tax.
The registration of the preliminary and of the purchase proposal is done at the Revenue Office and may be done by anyone, within 20 daysfrom the notification of the seller’s acceptance to the proposer for the purchase proposal, and within 20 days from its stipulation for the preliminary.
The registration tax is 168.00 euros. If there is a down payment, it is also taxed at the rate of 0.50%. If there are advance payments, it is necessary to distinguish:
- if the final contract is subject to VAT, the advance payments must be invoiced by the Estero promisor seller at the same rate as that of the transfer (e.g. 4% on a first home);
- if the final contract is subject to payment of the proportional registration tax, 3% on the amount of the advance must be paid.
For both down payments and advance payments, the taxes paid with the preliminary contract will be deducted from the taxes to be paid for the registration of the final sale contract, with the exception of sales subject to VAT.
Transcription of the Preliminary Contract
One should always evaluate the great opportuneness of transcribing the preliminary contract at the Agenzia del Territorio Servizio di Pubblicità Immobiliare (Land Agency – Real Estate Advertising Service), stipulating said contract in a notarial deed, especially if the seller is a contractor, or a company that could go bankrupt, if a fairly long period of time will pass between the preliminary contract and the deed of sale or if the down payment is very large.
Unlike the registration, which is valid essentially for tax purposes, the transcription is aimed at protecting the future buyer:
- it avoids the danger of prejudicial formalities (sale to others, mortgages, distrains…) that could be transcribed or registered before the final contract;
- it attributes to the future buyer a lien in the case of the bankruptcy of the seller: following the compulsory sale of the bankrupt’s properties and the distribution of the proceeds among the creditors, the future buyer is given preference over the bankrupt’s other creditors, including mortgage creditors;
- it blocks the challenge of antecedent transactions and the power of the receiver to opt for dissolution, when the preliminary contract has been entered “at a fair price” and regards a building for use as a dwelling, which is to be the main residence of the buyer or the buyer’s family or kin up to the third degree.
The Notary Public
The notary is normally chosen by the buyer, who is charged with the expenses of the purchase. It is the notary’s job to check the full ownership of the property, that it has no encumbrances and to verify the identity of the owners and of the property to be purchased.
The checking of whether or not there are encumbrances (mortgages, distrains, attachments, citations, preliminary contracts, liens, third party rights in general) is done at the Land Agency (Agenzia del Territorio), by means of the studying of the deeds regarding the property for a period of over 20 years: very briefly, this involves reconstructing the changes in ownership for at least the last twenty years in order to ascertain the continuity of the transcriptions and the non-existence of encumbrances.
The notary also checks on the correct planimetric identification and the correct classification of the property at the Registry Office.
Once these things are done, the notary begins to draft the deed of sale, which must also provide for:
- the indicating of all town-planning measures involved in the construction of the building and the conformity of the works to said measures;
- the seller’s right to sell (in relation to the status with their spouse, with any other co-owners, to bankruptcy proceedings or authorization decisions by authorities);
- the buyer’s right to purchase (in relation to the status with their spouse, to bankruptcy proceedings or authorization decisions by authorities, to their citizenship if a foreigner who is not resident in Italy);
- the method of payment to the seller and to the real estate agent;
- the attachment of any documents regarding the energy performance of the building, in the cases provided for by law;
- tax requirements (deed VAT or registration, any tax benefits, problems connected with tax deadlines).
The notary also provides consultation in order to solve legal and tax problems encountered, Estero such as: risks of losing ownership due to preceding gifts or in regard to unknown heirs or tax privileges on the real property (such as in the case of the reselling of a first home in the first fi ve years), of revocatory actions, of bankruptcies, of pre-emptive rights in favor of the State for properties of cultural interest or for leased properties, of restrictions connected with garages. Lastly, the notary handles the formalities subsequent to the deed, such as registration (for payment of taxes) and the transcription (to make the deed opposable to third parties).
The Notary’s responsibility in the case of errors
In the event of the notary’s failure to check the possible existence of detrimental registrations or transcriptions and the resulting proven existence of damage to the purchaser, a claim for compensation may be made to the notary. If instead there is a mere material error in the drawing up of the deed (e.g. in the indicating of the data identifying the parties or the property) it may be advisable to request the notary to correct the erroneous data.
Cancellation of the mortgage
If there is a mortgage on the house that one wishes to sell/purchase and the buyer does not intend to take over the loan against which the mortgage had been registered, the mortgage may be cancelled prior to the sale by means of the “Bersani method,” i.e. with the redemption of the loan and the “assignment” of the Bank to notify the Land Agency (Real Estate Advertising Service) as to the redemption of the debt. The day of the sale, however, it is necessary to make sure that the mortgage is “recorded as cancelled” at the Land Agency (Real Estate Advertising Service) so that the Bank has thirty days following the redemption of the loan to request that the mortgage will remain. It is also possible, however, to cancel the mortgage by notarial deed (the costs of which are very low), which guarantees the immediate effectiveness of the cancellation.
Purchase from a “Builder”
Some information should be given on the sale of buildings to be constructed by those who are defined as builders. Important changes regarding this type of purchase were introduced with D.Lgs. 20 June 2005 no. 122, giving “Provisions for the protection of property rights of purchasers of real properties to be constructed, according to Law 2 August 2004 no. 210” and coming into force on 21 July 2005: it includes precise guarantees in protection of the buyer and against those who sell this type of building, such as the “suretyship” that the builder is obligated to provide, in the preliminary contract, for the buyer for an amount corresponding to the sums that the builder has collected. The failure to provide the suretyship gives the buyer the right to declare the contract “null and void,” with the request for reimbursement of the moneys already paid, along with any compensation for damages. Another important change is that of the builder’s obligation to issue the buyer an insurance policy that, for at least ten years, protects the buyer against damages deriving from the total or partial ruin of the building or from serious flaws in the construction.
Allotment of real properties by cooperatives
Another way of purchasing real estate is through allotment by cooperatives through the application for membership, or by purchasing the share of an outgoing member. It is essential that for a client who applies to a cooperative to evaluate the reliability of the cooperative by means of various inquiries such as membership in an association of cooperatives, registration in the National List of Cooperatives, the cooperative’s annual or biennial balance sheets, the charter, articles of association, condominium rules, agreements with the municipality, and the building permit. It is necessary to clarify beforehand what the planning, construction and registration costs will be, as well as those for permits and licenses, connection to utilities, the costs for price adjustments, the amount of the original contract and the risks deriving from any delays in Estero construction procedures or the assigning of the shares of the divided loan, as the liability for a missed payment falls upon all of the members of the cooperative up until the final assigning of the dwelling and the of the corresponding share of the divided loan.
One type of real estate regards the construction of subsidized buildings by companies that, following an agreement stipulated with local authorities, sell to persons or organizations with special requisites subsidized buildings with right to property, or also with a building lease generally for 99 years and renewable. For these properties there exist specific regulations that provide for the possibility of the subsequent sale to potential buyers, who must possess the same characteristics established in the specific Conventions, at prices set by the municipal offices.