Real Estate Guide
Principles of ownership
Freehold/Ownership - the owner of title to property has an almost unlimited right to use it and may occupy the property or lease it to a third party for a minimum period of time (in general four years for living purposes, six years for business purposes and nine years for hotels). No statutory security of tenure exists in Italy. The property may be sold vacant or with a lease in place. The sale of title to a property that is subject to a lease does not entitle the seller to terminate the lease agreement.
Leasehold - leases are contracts through which the landlord lets the tenant enjoy the possession of the property for a given period against the payment of a rent. It is quite regulated in terms of minimum duration and rights of termination.
Ownership right or title - the process of ascertaining the title on a real estate to be transferred in a Sale and Purchase agreement is usually made by a Notary, who carries out a search at Land Registry going back 20 years from the closing date. The notary has personal liability in certifying who owns the real estate or has title on it pursuant to the search outcome. In case of lease the Agent or both the tenant and the landlord do the work (for each for their own interests) and the notary is not involved.
Common hold/Usufruct - Perpetual usufructus does not exist. The maximum duration of the usufructus is the life of the beneficiary. If the beneficiary is not a natural person the maximum duration is 30 years.
Emphyteusis - a typical agreement utilized in an agricultural environment and today is utilized very seldomly. Moreover, it is really uncommon to see it utilized in transactions concerning buildings. Some examples in green energy agreement when the plant is on roof top.
Use - the use may concern movable and immovable properties. If it concerns a house, it is called "right to dwelling". The civil code regulates such kind of agreement and the provisions regulating the usufructus are generally applicable to the use.
Condominium ownership – not applicable.
Utilisation right - not applicable.
Registration - registration at the Land Registry is necessary to give the purchaser priority against any other purchaser who could have purchased the same immovable estate from the same seller. The first that register has the tile on the estate. Also leases with terms longer than nine years must be registered at the Land Registry and with the Company Register (when required).
Restrictions on foreign ownership
The only restriction to buying a property in Italy is the lack of reciprocity between Italy and the buyer's country - citizens of countries in which Italian citizens are not allowed to buy properties may not buy property in Italy. If the buyer sets up an Italian special purpose vehicle (SPV) then property may be acquired.
Title to real estate
Investigation of title – not applicable.
Transfer of title - title to real estate is transferred by executing a written sale and purchase agreement which is legalised by a Notary or drafted by the Notary directly and then Registered within 20 days by the Notary at Land Registry.
Registration - registration at the Land Registry is necessary to give the purchaser priority against any other purchaser who could have purchased the same immovable estate from the same seller. Leases with terms longer than nine years must be registered at the Land Registry and with the Company Register.
Information on register - the Land Registry gives information with respect to the title of property, the existence of mortgages, enforcement procedures, outstanding tax payments, judicial cases involving the property, certain easements, etc. As well as the Land Registry there is the Cadastral Register which, despite the fact that it is a tax office, contains the plan of the building and land.
Commercial leases – not applicable.
Structure of a real estate transaction
Negotiations of terms/agreement - the parties negotiate the terms by themselves or utilize a real estate agent to do so. Very often the parties execute a preliminary agreement. Such agreement may be registered within 20 days from the date of its execution (in such a case it gives priority on other preliminary agreements registered subsequently . On each four pages sheet a stamp duty of 14,62 Euros is levied. Taxation depends on the tax regime applicable to the transaction (that may be subject to VAT o to Registration tax).
Heads of terms – we do not have heads of terms as construed in the common law practice. Negotiations are carried out under the bona fide principle. The preliminary agreement mentioned above is also subject to the bona fide negotiation principle but, unlike in the UK, is a binding agreement).
Investigation of title - Not applicable.
Purchase deed - the notary must always be present in a purchase deed, either drafting the agreement or, at least, legalizing the parties signature the signature and collect the relevant tax (SA tax agent).
Contracts - mostly made by the notary but the parties are assisted by a lawyer (not mandatory but advisable).
(i)Sale and purchase agreements: mostly made by the notary but the parties are assisted by a lawyer (non mandatory advisable).
(ii) Lease agreements: there are standard agreements often drafted by the relevant associations of tenants or landlords but in commercial agreements lawyers are always involved.
Sale and purchase agreements: once the deed is executed by the parties. It is fundamental to register the deed at Land Registry to grant the priority against third parties.
(ii) Lease agreements: once the deed is executed by the parties.
(i) Sale and purchase agreements: the agreement must be registered at the Land Registry through a notary and is also subject to stamp duty.
(ii) Lease agreement: the parties must apply the stamp duties to the agreement and then register it with the Office of Register (and the Land Registry when the lease lasts more than nine years).
Leases - are contracts through which the landlord lets the tenant enjoy the possession of the property for a given period against the payment of a rent. It is quite regulated in terms of minimum duration and rights of termination. There are standard agreements often drafted by the relevant associations of tenants or landlords but in commercial agreements lawyers are always involved.
Transfer of ownership of leased property (alienation) - the transfer of ownership of leased properties is free; it doesn’t entail the landlord right to terminate the lease agreements and gives the tenant (in the commercial agreements) the right of first refusal to acquire the building at the same price and conditions offered to the landlord.
Language requirement – can be in English but is required to be registered in Italian.
Governance of lease signature/administration – no applicable.
Usual commercial lease terms
Summary of available lease types – commercial and for residential purposes.
Alterations/modifications - alterations must usually be previously agreed with the landlord in writing and often, even if authorised, at the end of the lease they become acquired by the landlord without compensation.
Assignment and sub/under letting - only partial assignment or subletting is permitted without authorisation. if the lease agreement is transferred together with the business it may be assigned to the acquirer without the landlord’s authorisation. The landlord may oppose the assignment for serious reasons and may decide not to free the assignor of the rent payment obligation.
Destruction/reinstatement - the tenant is usually required to reinstate at the end of the term of the lease unless the lease contract states otherwise.
Duration of lease - Six years renewable for a further six years.
Forfeiture/irritancy - not applicable
Insurance - not compulsory but often required by the landlord especially in commercial leases.
Rent review - the parties may agree that the annual rent is yearly adjourned upon request of the landlord. The increase of rent, however, cannot be higher than 75% of a certain index published by central statistic entity (‘ISTAT’).
(i) Repair: ordinary repairs are the responsibility of the tenant. Extraordinary repairs are the responsibility of the landlord, however different agreement may be reached between the parties.
(ii) Decoration: if the tenant receives the premises fully decorated it can be asked to return them fully decorated. There is usually no obligation on the tenant to make good general 'wear and tear'.
Service Charges - Costs related to the building are shared among the various tenants in compliance of the share of occupancy (with some differences with respect to services that are differently utilised (the lift maintenance costs).
Tenant’s duties – not applicable.
Termination/break clauses - break clauses are usually inserted at the discretion of the parties. Usually they concern the lack or late payment of the rent or connected expenses; the tenant may be authorised by the landlord to early terminate the lease agreement.
Increasing covenant strength
Lease deposit – the assignor or subletting entity remains primarily liable for the obligations arising from the contract.
Surety - not very often applicable. Sometimes tenants are asked to submit a letter of patronage.
Warranty - not applicable
Rent deposit/Bank guarantee - maximum three monthly instalments (very frequently replaced by a bank guarantee. A bank guarantee (for an amount corresponding to six months/one year of rent) is usually requested by the landlord to secure the regular fulfilment of contractual commitments.
Security of tenure
The concept of security of tenure does not exist. If the tenant remains at the end of the Lease term it must pay the same monthly rent and costs (under a different title: no more as tenant but as ‘occupier without title’) until the landlord has obtained an enforcement order against the occupier. Any lack of payment entitles the landlord to obtain a different order from the Court to be enforced against the occupier. Any other damage the landlord is able to prove must be reimbursed by the tenant.
On sale/acquisition - there are five possible taxes applicable to a transfer of ownership of real estate and they are all national:
- (a) VAT (IVA or Imposta su valore aggiunto)
- (b) Register tax (Imposta di Registro)
- (c) Mortgage tax (Imposta potecaria)
- (d Cadastral tax (Imposta catatstale)
- (e) Stock transfer tax
The application of such taxes, the percentage of charge, the taxation base can change following a number of elements that qualify each acquisition.
Immovable property tax - not applicable
Income tax - not applicable
Land tax - not applicable
Lease tax - not applicable
Local tax - not applicable
Mortgage - Mortgage tax is always applicable in sale and purchase agreements (when either VAT or Register tax are applicable). However, when VAT is applicable, the mortgage tax consists of a fixed amount (globally amounting to around 400 Euro). When VAT is not applicable, and thus Register tax is applicable, Mortgage tax is also computed as a percentage of the net asset value, the relevant taxation ending to be 11 per cent on the net value of the real estate, or 15 per cent if a land acquisition is concerned.
Other taxes - if a purchase of the interest in a corporate vehicle owning the real estate occurs, only the Stock transfer tax applies and in such event no other indirect tax is due. Stamp duty corresponds 0.14 per cent of the purchase price but it is not a recoverable cost and increases the acquisition costs.
Cadastral tax is always applicable (when either VAT or Register tax are applicable). However, when VAT is applicable, such tax consists of a fixed amount (globally amounting to around 400 Euro). When VAT is not applicable, and thus Register tax is applicable, Mortgage tax and Cadastral tax are also computed as a percentage of the net asset value, the relevant taxation ending to be 11 per cent on the net value of the real estate, or 15 per cent if a land acquisition is concerned.
Property lease tax - not applicable
Value added tax - in general terms VAT and Register Tax (‘Imposta di Registro’) are alternative. In general if the seller owns the relevant real estate as part of its entrepreneurial activity VAT and not Register tax applies on the price (usually VAT is equal to 20 per cent of the real estate purchase price).
- UK England & Wales
- UK Northern Ireland
- UK Scotland
- Bosnia and Herzegovina
- Czech Republic
- Slovak Republic
- Middle East and Asia