In the past, the purchase of off-plan properties in Italy was regulated by the Legislative Decree of 20 June 2005, no. 122, while today this field is governed by the Legislative Decree 14/2019. This latter has extended the scope of the rules protecting off plan properties purchasers, since they risk to be negatively affected by such events as bankruptcy of builders or foreclosure of the properties to be sold.
The Italian Legislative Decree 14/2019, in force since 16 March 2019, applies to contracts relating to off plan properties, for which an authorization has been applied for or produced before the above mentioned date.
It should be pointed out that the expression “off plan property” refers to properties in respect of which a building permit has been applied for, but which are – in whole or in part – not yet built. In other words, then, “off plan property” conditions do not allow to issue a certification of habitability. The Legislative Decree 14/2019 protects purchasers as natural persons, provided that builders are actually in crisis.
Off-plan property in Italy: The new Italian Legislative Decree 14/2019
The Italian Legislative Decree 14/2019, regarding off-plan property purchasers in Italy, is in force since 16 March 2019.
It protects off plan properties purchasers in the following cases:
- the Seller is a builder;
- the Purchaser is a natural person;
- the Sale is a property yet to be built;
- a contract (even a leasing contract) has been signed, which results in the purchase of a house from a builder or anyway in a delayed transfer of the right of ownership/use on a property yet to be built. Or, in other words, obligations are adopted towards a building cooperative in order to obtain the right of ownership/use on a property yet to be built.
Pursuant to the Italian Legislative Decree 14/2019, buyers cannot waive the protections provided in it and thus any clauses that contravene this provision need to be understood as void and null.
Off-plan property in Italy: guarantees for the purchaser
The new Italian Legislative Decree has widened the scope of the guarantees for off plan properties purchasers. More in detail, it has introduced the following changes:
- Builders are required to provide purchasers with a surety agreement guaranteeing that in case of financial crisis of the builder all the amounts paid or to be paid by the purchaser before transferring the property ownership will be given back;
- Bank guarantees and insurance bonds can be enforced even where the obligation for builders to issue a ten-year posthumous insurance policy has not been met;
- Preliminary sale contracts, providing for the property to be built, must take the form either of a public agreement or of a notarized private agreement;
- The details of bank guarantees and insurance bonds must be indicated both in preliminary contracts and in deeds for transferring ownership of the property. Moreover, sureties must be compliant with the standard model approved by Ministerial Decree;
- Failure to provide the purchaser with a ten-year posthumous insurance policy makes preliminary sale contracts void. Only the purchaser can enforce a policy. In this case, the purchaser can either make a claim for annulment of the preliminary contract or, if it is more suitable for him/her, choose to keep the same contract in force.
Off-plan property in Italy: preliminary sale contracts and their advantages
In Italy, a preliminary contract for selling an off plan property must include:
- Description of the property to be built, its borders and appurtenances;
- Enumeration of potential deeds of obligation, as well as information about the existence of mortgages or prejudicial entries;
- Agreed time limit to carry out the works, price and payment modalities;
- Details of the building permit and of potential contractors;
- Technical specifications with a description of building materials and projects.
The fact that the preliminary contract must take the form of a public agreement or of a notarized private agreement allows to verify in advance whether the property is encumbered by mortgages or other servitudes. The Notary Public is obliged to transcribe the contract into the appropriate property registers, thus protecting the purchaser against future mortgages or servitudes, provided that the sale takes place within three years.
Moreover, bank guarantees and insurance bonds will be enforceable until the issuing institute receives a certified copy of the deed transferring the ownership of the property together with the issuance certification of a ten-year posthumous insurance policy. Until that, purchasers can claim the sum guaranteed by the surety in case of crisis of the builder.
If the preliminary contract has not been signed in the form of a public agreement or of a notarized private agreement, it will become void for formal defect.
Off-plan property in Italy: insurance policy
As mentioned above, the purchase of an off plan property in Italy is guaranteed by a ten-year indemnity insurance policy by the builder, or else the contract becomes void.
The policy must be compliant with the standard model approved by Decree of the Italian Ministry of Justice together with the Italian Ministry of Economy and Finance.
The insurance policy must be compliant with the following requirements:
- The Beneficiary is the purchaser of the property;
- The policy has a duration of ten years with effect of the date of completion of works;
- It covers direct physical damages to property;
- It covers damages occurred after the signing of the sale/assignment contract.
The policy covers direct physical damages to the property, including damages caused to third parties, which the builder will indemnify pursuant to Article 1669 of the Italian Civil Code, resulting from total or partial destruction or from serious defects of construction works, and anyway occurred after the signing of the sale/assignment contract.