When all searches have been satisfactorily completed, it will be necessary to agree the terms of the contract, such as the price, the amount of the deposit payable on exchange of contracts, and the date of completion. Special terms may have to be introduced to deal with particular problems disclosed by the searches or the documents submitted by the vendor. A draft contract is normally produced and considered.
Normally, in Italy, a contract for the purchase of property (Compromesso) is a legally binding agreement to complete the purchase and to pay the balance of the agreed price on a specified, future, date. It is a complex legal document, which should always be submitted to a specialised Italian lawyer or Property Consultant for advice or considered with great care before signature, to avoid the pitfalls that plague the property market, in Italy as anywhere else.
Basically, the foreign buyer should ensure that the contract:
- specifically defines in detail the property sold. Reference should also be made to the parcel numbers of the relevant Local Land Registry (Catasto) and possibly a scale plan of the property sold should also be attached to the contract, and
- states the deposit paid, including a receipt for any payment made, indicating the actual, agreed total price for the property, and
- states without reservations/doubts the legally binding and unconditional commitment of the vendor to sell the property in question on or before the agreed date of completion, and
- deals with any existing mortgage or third parties' right, or other problems discovered on effecting the survey/searches or on examining the documentation submitted by the vendor.
At the time of signature of the contract, a deposit (Deposito or Caparra) will be payable, ranging between 10% and 40% of the price of the property. Under Italian law the legal definition of this deposit can have serious implications for the foreign buyer. If the deposit paid is defined as "Caparra Confirmatoria" , it means that in case of default in completing on the agreed terms, the purchaser will automatically lose the whole of the deposit paid. Conversely, if the vendor is to blame, he will be under a binding legal duty to pay to the buyer twice over, the sum originally received as a deposit. In addition further sums may be payable, if it is proved that the damages actually exceed the amount of the deposit.
If the deposit is defined as "Caparra Penitenziale" then, subject to the actual wording of the contract, it will enable either or both parties to the contract to withdraw from the transaction, by allowing the vendor to keep the deposit paid, in the case of the buyer withdrawing, or compelling the vendor to return the deposit received, where the vendor wishes to terminate the contract.
Where the property is subject to a mortgage (Mutuo Ipotecario) or the purchase is to be completed with the assistance of a mortgage, it is essential to deal with all the necessary arrangements before signing the contract. In Italy bank mortgages may cover up to 85% of the price of the property, and may be agreed in Italian Liras/Euros, or any other foreign currency. Repayment may be fixed or by floating instalments.
Obviously; where the property to be bought is already subject to a mortgage, it will be necessary to agree with the vendor that the existing mortgage will be paid off, and the corresponding entry on the Local Land Registry cancelled before completion. The assistance of a notary will be required, and the procedure may be expensive and time consuming. Alternatively, it is possible to agree with the vendor and the bank that the buyer will "take over" the mortgage (Accollo del Mutuo) , but in this case it is essential to check the state of the past repayments and the terms of the original mortgage agreement.
As an alternative, and if the property is to be bought with the assistance of a mortgage, it will be advisable to finalise all the arrangements (expensive and frequently protracted in time) before committing oneself to purchase the property. When all the arrangements have been completed, and the draft contract agreed, signature of two identical original contracts should take place, both by the purchaser and the vendor. The two original signed contracts should then be exchanged. At the same time a cheque (Assegno) or a banker's draft (Assegno circolare) for the deposit will be handed over to the vendor, finalising the formalities of this stage of the transaction.
Where a substantial time is likely to lapse between exchange of contracts and completion of the sale, it may be necessary to protect the buyers interest in the Italian property, by registering the Compromesso. This will prevent the multiple disposal to several prospective buyers, of the same Italian property by fraudulent vendors. In practice, a copy of the "Compromesso" will have to be lodged with the local Registration Tax Office, and a small tax paid. The benefit of this procedure is that any other prospective buyer on effecting the ordinary searches against the particular property will be informed of the existing, pending agreement to sell/buy the same. The first prospective buyer to register his/her Compromesso will acquire a good right to complete the purchase, also against third parties.
The disadvantage of this procedure is that by "registering" the Compromesso with the local tax Authorities the buyer and the vendor will be prevented from declaring a lower value of the property in the Title Deed (Rogito), as sometimes allowed under Italian Law (provided that the value declared is above the statutory value [see below] of the same property, at the local land registry). This, in turn will mean that a higher Italian Registration Tax (Imposta di Registro) will be payable on the transaction (Italian Registration Tax is payable at a flat rate (either 11% or 18%) on the value stated in the Title Deeds of the property being acquired).