The real estate market in Italy is very different to the United States and although you can purchase some real bargains it’s also a maze of bureaucracy and regulations that need to be navigated.
If you are a foreign buyer or an expat and don’t have a good grasp of the Italian language the process of buying a property in Italy will be even harder; but it can be done and if you have a good idea of the red flags to be aware of, then you should be fine!
Always Involve A Notaio.
When you’re looking for and purchasing a property in Italy you should always involve a Notaio. A ‘Notaio’ is a legal professional who witnesses signatures on official documents; they have a legal degree and are trained in areas of property law as well as the local legal systems – which do vary across the country. Notaio is similar in some ways to a notary in the United States and will typically have a law degree. The Notaio will also have some training beyond the law degree and will be registered with the relevant notary bar.
It is a legal requirement in Italy for you to have a Notaio to oversee the sale of a property. In many cases, the seller and the buyer of the property will actually share a Notaio; and because they are required by law to be impartial this should pose no problems.
What Does A Notaio Do?
There are several legal functions that a Notaio will serve during the purchasing process; these include:
- Witnessing the signing of documents.
- Checking that the seller has the right to sell the property; in other words, ensure that they have full ownership of the property.
- Searching through land registry data to ensure that there are no other 3rd party claims on the property or the land before the sale can be completed.
- Establishing whether there are any outstanding mortgages associated with the property.
- Confirming any planning permissions that are related to the property.
- Legally verifying the buying and selling parties involved in the property transaction.
- Witnessing the ‘Atto di Vendita’, or the ‘final sales contract’. In fact, the Notaio will read out the terms to the parties involved to confirm they properly understand them.
- Overseeing the legal transferring of any funds as well as ensuring that the correct taxes are paid.
- Registering the new deeds of ownership with the local land registry.
The Notaio plays an important, and legally required, role in the process of buying and selling property in Italy. One of the things that you must be careful to avoid is falling into the trap of trying to circumvent the legal requirements.
It is, unfortunately, quite common for people in Italy to act illegally while selling a property. This might save you a small amount of money in the short term but eventually you will be found out by the rigorous bureaucracy and it could lead to large fines or even the confiscation of the property!
Therefore, you should always follow the letter of the law; and this means that if the vendor does not want to use a Notaio during the transaction the easiest, and safest, thing for you to do is walk away from the sale and don’t sign any documents.
Use An Escrow Account.
When you’re navigating the Italian real estate market you should never use personal accounts to conduct your transactions. This means you shouldn’t transfer money to the buyer’s personal account and nor should you use your own personal account.
There are two main transactions that you’ll have to pay; the deposit and the full final balance for the property. However, you will also need to pay fees to the Notaio, the estate agent and the Gematria; as well as local and national taxes.
An Escrow account is a special type of bank account which is used to hold and transfer money for the purchase of a property. The money in the Escrow account is used to cover costs that include settlements, the closing sale costs, taxes and other associated costs.
In Italy, the safest way to do this is to use a Notaio’s Escrow account. They will oversee the transactions for you and make sure you have full legal protection from creditors or fraud.
When it comes to transferring your deposit you should use an agency account. The real estate agent will oversee the safe and legal transfer of the deposit on your behalf; although you will have to pay them a fee for their services.
It’s always better to be on the safe side when you are operating in the Italian real estate markets; not only to avoid accidental illegalities, but also because the system is very different to what you’re used to in the US, or elsewhere, so always pay the fees to get proper legal advice from authorized local experts.
Taxes And Declarations.
The system of taxation in Italy is fairly onerous and the local taxes vary quite considerably from region to region. This means that it can be tempting to try to under-report any taxes that you may have to pay, however this is a very bad idea!
Not only could repeated tax violations actually put your residency status at risk but it could also lead to long, drawn out legal actions which will end up costing you far more than the taxes you tried to avoid paying!
It’s always worth playing by the rules and if you get in touch with an Italian tax expert you’ll discover that there are several completely legal ways that you can claim deductions and discounts on the taxes you are required to pay. These discounts are not always obvious or easy to find and are often overlooked by foreign buyers; so before you worry about how much tax you have to pay, do a little research to find out if there might be some legal deductions that you had missed.
Always Use An Independent Translator.
It should come as no surprise but all the legal documents in Italy are written, and must be submitted, in Italian. This means that if you’re an Expat and don’t have fluent Italian language skills, then you won’t be able to read the contracts or understand the documents that you are signing.
You should never sign any legal documents that you have not fully understood because an unscrupulous real estate agent or property seller could slip in a few clauses at the end which are unfavorable for you!
The first thing that you should do when approaching any legal documents in Italy is to employ an independent translator to produce English versions of the documents for you.
Alternatively, you can work with a real estate agency that offers bilingual documents. These agencies tend to work with foreign buyers and so they have English versions of all of their legal documents, although you will still have to sign an Italian document for legal purposes. Even in this case, if you want to be 100% sure of what you’re signing, you can still employ a separate translator to double check that everything is in order.
Disclosure – The Rules In Italy Are Different To The US.
When a vendor is selling a property there are some things which they are legally required to disclose however there are others, which unlike in the US and elsewhere in the Western world, they are not. This can be difficult for foriegn buyers to accept but it means that you’re going to have to do a little extra research for yourself.
Of course, you probably don’t have the knowledge or local authority contacts to make this an easy process but you can employ the help of professionals to handle this for you.
For example, the Notaio will be able to establish a lot of the details that you need to know before committing to put down a deposit on the property. However, you should also employ a Gematria to check over the property’s compliance with local authority codes and regulations. The Gematria will also be able to survey the property for you to see if there are any hidden faults, or ‘vizi occulti’.
Despite the fact that’s a legal requirement for the vendor to disclose any hidden faults or problems with the property they often do not do so. If you discover any of these hidden faults then you can either negotiate a lower price or walk away from the deal.
Remember, that even if you are wronged in the course of a property purchase the litigation process in Italy is extremely slow and difficult, so it’s always best to avoid it in the first place, if at all possible. To help you do this, make sure you have done your due diligence before signing any legal documents.
The estate agent themselves is required to disclose certain pieces of information about the property but once again, just to be safe, it’s probably better in the long run to establish all the details for yourself using outside sources, such as a Notaio and a Gematria.
If There Is A Dispute Don’t Expect A Quick Resolution In The Courts.
The Italian legal system is famously slow moving and complex. Even a simple dispute can take years to resolve in court and could leave you with some serious bills to pay! This is incredibly frustrating and can ruin your time in the country; so as a general rule, unless it’s absolutely unavoidable, try to resolve any disputes outside of court.
This means that your best option is to try to come to a resolution and settle the matter out of court. Of course, you can employ a lawyer to help you manage the dispute resolution process – in fact this is highly advisable.
Your first course of action, if the dispute is fairly minor, might be to go and see the other party in person and invite them to have lunch with you! You may need to take a translator but it will be worth showing that you are willing to come to an agreement. Always be polite and try to understand their position while still making your own position clear.
If this fails, then you may wish to seek legal remedy, although in most cases avoiding the courts in Italy is a good idea because corruption and nepotism are endemic!
Never Pay The Renovation Costs Up Front.
It’s quite common to snap up some incredible bargains on properties in Italy that need renovation work to get up to scratch. In some cases, the renovation costs will end up being higher than the purchase price of the property itself!
This means that you need to be careful about how you approach the renovation work. It’s normally a good idea to employ a local expert to oversee the renovations. A Gematria is an officially recognized architectural and engineering expert who can oversee renovation projects on your behalf; dealing with the contractors and ensuring that the work is done in compliance with the local rules and regulations.
However, when you are arranging renovations you should never pay the entire cost of the work up front! Instead, you should draw up a timeline of renovations work with your Gematria and then pay the cost in installments as each part of the work is completed.
Firstly, this will help to ensure that the work is done in a timely manner without huge delays between jobs. Secondly, it will give you more control over the process because if the work is not done to a proper standard you can cancel the rest of the work and employ different contractors to take over the project.
Lastly, paying in installments will mean that you won’t lose out to a cowboy renovator who takes the money and disappears! However, your Gematria should be able to screen the contractors and make sure they are trustworthy and have a good track record on your behalf.
The Italian Real Estate Market Is Full Of Red Flags To Be Avoided!
The real estate market in Italy can be quite difficult to navigate but if you keep your eye out for potential red flags you can make the process run smoothly and without hitches. One thing to be sure to do though is to employ the services of the correct local experts to assist you.
For instance, you are legally required to have a Notaio but not a Gematria. Nonetheless, the fees for the Gematria are worth paying to get peace of mind and the necessary information that may not be disclosed by the vendor or the real estate agent. Lastly, you should always have an independent translator working for you so you can be sure that you fully understand the documents you are signing.