Legal advice: investing in off-plan properties in Italy
Italian lawyer Giandomenico De Tullio presents the legal ins and outs of investing in off-plan properties in Italy.
Investing off-plan is where a purchaser makes a commitment to buy from a property from developer that has not yet been built or is in the process of being built. This type of investment hides a number of risks, the major one being that the builder goes bankrupt and the buyer loses his money.
Italian legislation provides a number of protections for the buyers of such a type of properties. Law 122/2005 declares the obligation of the builder to offer a surety bond. This is to guarantee the buyer for the money deposited prior to the transfer of ownership of the property, in case of bankruptcy or default.
According to art.1 of Law 122/2005 the builder is obliged to offer such a surety bond at the latest at the moment of the signing of the preliminary contract required in off-plan transactions. In absence of such a surety bond the preliminary contract will be considered void unless the buyer explicitly wants it to produce its effect. The surety has to be clearly mentioned in the preliminary contract.
According to article 2 of Law 122/2005 the surety needs to be a Bank, an Insurance Company or a Financial Broker authorized by the Bank of Italy. The surety bond guarantees the buyer repayment of the money paid as deposit.
In order to request the excussion(1) of the guarantee the buyer has to formally withdrawal from the Preliminary Contract. A written request of withdraw from the buyer, together with evidence of payments, will be sufficient to activate the guarantee. The surety will be obliged by the law to pay the money back within 30 days.
According to art.3 of Law 122/2005 the surety bond will also cover damages arising as a consequence of building defects of the property, even when discovered after the signing of the Deed of Sale. The building defects of the property covered by art.3 are listed in art. 1699 of the Italian civil code. The guarantee for such defects lasts ten years from the finalization of the building works in question. In the case that the seller is a different legal entity from the builder of the property, he is obliged to request from the builder a copy of the surety bond and give it to the buyer. This is part of his contractual obligations in reference with the Deed of Sale.
If you are considering to invest in an off-plan property in Italy our advice is to contact an independent separate legal adviser. Such would not be the case when the lawyer is recommended by the Developer or the Real Estate Agent.
(1) The process or proceedings whereby a creditor must proceeds against a principal debtor before proceeding against a surety or subsidiary debtor
Please note, any statement made in this article is intended to be a general practical introductory explanation only and not formal legal advice. The firm accepts no liability or any responsibility for any statement made.
Avv. Giandomenico De Tullio is a partner of De Tullio law firm.