It has taken more than three and a half years.
A law was passed in Italy at the end of 2013, allowing Italian notaries to receive the purchase price of Italian properties and to keep these funds until the actual registration of the sale (trascrizione della vendita) had been successfully completed. The Italian notary would then release the funds to the vendor.
This law was not put into effect pending the issue of implementing regulations. On 29 August 2017, new legislation has finally brought this provision into force.
It will make a big change for all buyers of Italian properties that are now released from the onus of opening an Italian bank account just to buy their Italian property, and discharged from the risks of the old purchase procedure, with “assegni circolari” (Italian bankers`draft) involved. In a way, it will bring Italian conveyancing in line with conveyancing in the rest of the European Union and England and Wales.
The “Old bad ways”.
In the recent past, the purchase of an Italian property involved a “time honoured” paper procedure. Before the completion of the acquisition the foreign buyer of Italian property was required to open a bank account with an Italian bank, in Italy.
This was apparently a simple step, but it took time and some red tape. If the foreign buyer had no previous contacts with local banking, this involved a new experience. This was due to the fact that, under exchange control regulations, still in force in Italy, it is now not possible to pay in cash more than Euro 3,000 for each transaction. Previously the limit was Euro 1,000. Money had and still has to be introduced legally into Italy, and where large sums are involved the only safe and acceptable way is by international bank transfer.
Many times, Italian notaries, in the absence of specific regulations would refuse to receive and to hold the purchase money into their bank account, pending completion of the registration formalities.
On the other hand, no Italian property buyer in their right mind would entertain some vendors` suggestion (presumably based on avoidance purposes) that payment of the purchase price should be effected in cash. The idea of the buyer attending on completion of the Italian property acquisition with a suitcase full of Euro 50 notes is as ridiculous as it is risky and illegal. So, a local Italian bank account had to be opened, to enable an international bank transfer of a substantial sum of money to take place, out of the buyer`s foreign bank account legally into Italy.
On completion of the acquisition when all the issues of the property acquisition had been dealt with, the buyer, sometimes a bit bewildered, would attend in person at his Italian bank and collect three drafts (assegni circolari ). Usually, one payable to the estate agent (for the commission due), one in the name of the Italian notary he had appointed (for Italian taxes and notarial fees of the acquisition) and a third one payable to his vendor for the balance of the purchase price.
Once the buyer had collected the three bankers drafts he would then, travel and attend at the Italian notary`s office and upon signature of the Deed of Sale (compravendita) by both parties in the presence of the Italian notary, the buyer would hand over the drafts to the named beneficiaries.
So at least, apparently, the buyer parted with the bankers` drafts but acquired the legal title to the property, the vendor would part with legal title to the property, but acquire the funds of the sale. This was the safest way of acquiring Italian property, any other attempt would involve additional risks either for the buyer or the seller. It was and still is very much a paper based transaction. It did involve risks.
Under Italian law, contracts for the purchase of property are called “contratti reali”, this means that the actual title to the property passes when the parties actually agree / sign the “compravendita”, before the sale is actually registered. The Italian notary is then under a duty to register (trascrivere) the deed of sale (compravendita) as soon as possible and in any event within 30 days from the date of completion.
So, although the buyer (and his Italian lawyer) was being as prudent as possible and only parted with the purchase price by handing over the drafts on signature of the Deed of sale, in the presence of a notary who would then register the contract as soon as possible, there was still a time gap between the actual payment of the price (delivery of the “assegni circolari”) and the actual registration of the property in the name of the new buyer, at the Italian land registry.
Many things could potentially happen in this period of time. The vendor could attend in front of another notary and fraudulently attempt to sell the same property to another buyer, or the actual property could be frozen still in the hands of the vendor by his private creditors, before the actual registration of the transfer in the Italian land registry (Registri immobiliari). Any legal proceedings would be expensive and take years to come to conclusion.
This was and still is the stuff of the disturbed nights / the nightmares, of Italian property lawyers.
The “New better ways”
On 29 August 2017 new legislation came into force in Italy.
Under this legislation, an Italian property buyer can now legally require his Italian notary to actually receive his funds for the payment of Italian taxes, notarial fees and importantly the purchase price / the balance of the purchase price into the Italian notary`s bank account, before completion of the sale. So, there is no longer a requirement that a foreign Italian property buyer should immediately impact on local banking practice.
Under the new legislation, the Italian notary is now required to keep these funds into a nominated bank account, an escrow bank account which, to use similar English terminology, the notary shall keep “in trust for his client”. The Italian notary will only release these funds to the vendor on successful completion of the registration formalities (trascrizione della compravendita).
Thus, there will be no interim period between completion of the sale and payment on the one hand, and actual registration of the new title in the local Italian land registry (registri immobiliari) on the other. The transaction risks will suddenly abate.
The funds paid by the foreign buyer into this account can only be used for the named purposes, and are not the property of the Italian notary. So, if the notary dies, these funds will not be part of his Estate. If the Italian notary is sued by his private creditors, the funds held into these nominated bank accounts cannot be frozen. Judgments against the notary cannot be enforced out of this escrow bank account.
This is a small step in the right direction, that will cover quite a distance towards bringing Italian conveyancing practice into the 21st century. Also, it will provide some peace of mind to the busy Italian property lawyer.
Avv. Claudio Del Giudice
15.09.2017 Copyrights reserved.