Italy has a large amount of red tape and anyone buying property with an Italian mortgage should be under no illusion that the paperwork will be substantial!

You need to obtain an Italian tax code before the transaction can complete. The Fiscal Code identifies a citizen in all their dealings with Public Authorities and Administrations. You have to contact your local Revenue office and produce a valid passport or residence permit. Infants require only a birth certificate or parent self-certification.

Italians rarely bought or sold property in the past because the transaction was a protracted nightmare. Since the recent reforms aimed at getting the true purchase price declared in the documents, it is much better. Before embarking on the process you should engage a lawyer both in the UK and Italy, so that you understand the tax and inheritance implications of owning a property in Italy.

Mortgages can be obtained on these terms:

• Max 80% LTV

• Max term 5- 40 years

• £ 75,000 minimum loan

Both interest-only and repayment mortgages can be arranged, on a variable or fixed-rate basis,

A building or renovation mortgage is commonly available as many Italian properties need renovation and, as part of the mortgage deed, stage payments may be laid out to cover the cost of the works. These stages can be agreed between the lender and the borrower based on certain landmarks stipulated as part of the renovations or construction.

Italian lenders assess affordability based on, your existing monthly outgoings as well as the monthly repayment on your new Italian mortgage should not exceed 35% of your gross monthly income. A percentage of any rental and investment income you receive can also be considered. Mortgage, rent, personal loans and maintenance commitments are all considered as outgoings.

• Mortgage arrangement fee: Typically between 0.4%-0.7% of the loan amount (deducted from the loan amount)

• Bank’s completion costs: Typically between €100-€160 (deducted from the loan amount)

• Please note that some lenders may charge an annual management fee

You should budget at least 15% of the purchase cost in additional fees:.

TRANSACTION FEES

Although the seller will normally pay the estate agents fees, it is not uncommon for the purchaser to be required to make a contribution. Fees are usually around 3 to 5 percent of the value of the property.

In Italy the buyer is subjected to pay:

-TAXES

The taxes you must pay for the purchase are reduced if you satisfy the following conditions:

 

• you will be living permanently in the purchased home within 18months from the date of purchase (residential home)

• the purchased home is not a luxury one.

If you satisfy both conditions, you may declare it in the final purchase act [rogito] and you pay reduced taxes directly at the notary's office.

REMEMBER: if you sell the home within five years from the purchase date, you lose benefits and you must pay the difference between the full taxes balance and the reduced ones you paid, plus a sanction of 30%. You don't lose the benefits if you buy another residential home within one year from the selling date.

From January 1st, 2007 taxes may be calculated on the property LEGAL VALUE - fixed by the Government (Like UK ratable value)- which is less than the DECLARED VALUE of the purchase.

In order to get the benefit you have to:

• be a private buyer;

• declare in rogito the real purchase price.

Buying Procedure for Italian property

(Proposta d'Acquisto, Offer to Buy)

Once you have found a suitable property, you need make an offer to the seller, both verbally and in writing. The seller can accept it in full, or refuse it within the agreed time-limit (usually 15 days). If the vendor accepts your "Proposta d'Aquisto" you will be requested to pay a sum of money as deposit called "Caparra Confirmatoria". The amount of the Caparra Confirmatoria varies from agency to agency and it is relative to the cost of the property you wish to buy (usually 10%).
For buyers using only the Offer to Buy (Proposta d'Acquisto) it also important to remember that this become a preliminary contract when it is formally accepted in writing by the vendor and it must have the clauses of the preliminary contract. By now the property price is fixed and cannot change any more.

Offer to Buy/Preliminary Contract Registration
One important change, brought by the new Italian financial law 2007, is the registration of buying contracts. The Offer to Buy (proposta d'acquisto) or preliminary contract (preliminare di compravendita) now have to be registered within 20 days from the stated date on the preliminary contract or the stated date of the acceptance of the offer to buy.
The charges for the registration are:

• Euros 14,62, Stamp duty for each copy, usually x 3.

• Euros 168,00, Registration fees.

• 0,5 % on the sum paid as deposit, this percentage will be refund and deducted upon the signing of final deed in front of the notary.

The Preliminary Contract or Promise of Sale
(Compromesso o Promessa di Vendita)

This stage is the most important of the buying process and you should pay attention because at this moment both buyer and seller acquire legal rights vis a vis one another. It is very important to know all the qualities and faults of the property regarding building plans, permissions and land regulations, for this reason the "Compromesso" must include the following sentences:

• "Il venditore dichiara che l'immobile è in regola con la normativa edilizia ed urbanistica vigente" (The vendor declares that the property conforms to the town planning and estate requirements);

• "Il venditore dichiara che l'immobile di proprietà esclusiva è libero da vincoli, trascrizioni e iscrizioni ipotecarie" (The vendor declares that the property, exclusively owned, is free from any penalty with regard to town planning, cadastre and mortgages).

• Technically, this is a private contract in which seller and buyer decide all the terms for the Notarial Deed: price, payment plan, precise identification of the property, planning and building licences, whenever required application for "Condono" (amnesty for infringement of local building regulations), and finally, date of the final contract (Rogito, Notarial Deed).

   

Once signed, the buyer is committed to continue with the purchase or lose the deposit. If the seller pulls out, the deposit will be due back to the purchaser, although enforcing this can be difficult as the law favours the seller. Any property contract must be signed in front of a public notary. The notary does not offer any legal advice, so an independent lawyer remains vital.

Next is the prelazione, which applies if you are buying a rural property. You can register the compromesso, protecting your deal (at least in part) against the rights of third parties … more on that below. You’ll have to pay for this, but it’s worth doing particularly if there is to be a long delay between compromesso and rogito. Once the compromesso is signed, the contract and your name is sent to all neighbouring farmers, who have 30 days to decide whether to match your offer. You cannot ask them to waive this right. This is the principle of prelazione. Sitting tenants and people conducting a business from the property also have a right to buy. You may be unsurprised to learn that your purchase can be stymied by interested parties putting in a last-minute offer and having to be bought off.

The Final Contract or Notarial Deed
(Rogito o Atto Notarile)

This is the final stage of the sale/purchase, the equivalent of completion in a UK property transaction. The contract is signed by you and the seller and residual monies should now be transferred. Proof of such payment is then incorporated into the title deeds of the property. It is extremely important that the notarial deed is in keeping with all agreements made in the compromesso or in the offer to buy. The person buying the property may attend in person, but, if it is impossible, a "Power of Attorney" is required (procura) which enables another person to attend and sign on their behalf. The procura must be in Italian form and signed in front of Notary. A "Power of Attorney" may also be useful if the buyer is not fluent in Italian. Moreover, in order to enable the Notary to complete all the formalities of the Italian Laws, you are required to have a tax identification number (Codice Fiscale - Tax Code) from the local tax office even if you are not full time or tax resident and an Italian Bank account.
After signing the contract and receiving all the monies the seller passes the keys of the property to the buyer. In this phase you have the guarantee of being assisted by a impartial professional: the Italian Notary Public, who is an independent public official and in Italy the only professional entitled to transfer legal title to property. The Notary is normally chosen by the buyer, they have the duty of drafting the Rogito, finalizing the sale, ensuring that title passes legally between the parties, and registering the property in the Land and Property Register.