If you are planning to buy a property in Italy you may end up having to deal with security interests. Law of security interests differs significantly from jurisdiction to jurisdiction, especially when comparing common law to civil law jurisdictions.
In the Italian jurisdiction, the most common type of security interest is the mortgage (called ipoteca). The mortgage in Italy has some peculiar features compared to the mortgage of the common law jurisdictions. The mortgage is a kind of security on a specific and determined property (collateral) that gives the creditor a right to preferential treatment on the foreclosing procedure activated on that specific property. The most peculiar characteristic of the mortgage in Italy is that it always follows the property and not the debtor, even though a transaction has occurred. Thus, the mortgage remains attached to the property until it is extinguished according to the specific provisions of civil law.
The mortgage may secure real estate properties or registered movable properties like cars, ships or aircraft. Anyway the secured property is transferred, the mortgage will keep following the property no matter what is the relation between the new owner and the secured creditor.
For the deep impact the mortgage has on transactions, legal publicity is part of its constitutive process. Following, the existence of the mortgage on a property depends on its registration on the relevant public registry (land registry, motor vehicle registry, etc.).
How to constitute a mortgage
Mortgage can be constituted by three means:
1) by the will of the debtor (ipoteca volontaria)
The mortgage may be created by a contract between two parties (one would be the debtor and one the creditor, from the security point of view) or by a unilateral act of the debtor.
Very often the mortgage is voluntarily given in the context of a loan agreement, where the lender agree to lend money to the borrower asking for a collateral to be secured for the same amount of the loan;
2) by a Court order (ipoteca giudiziale)
Civil procedure allows enforceable court orders to create a mortgage by order of the judge. All the decisions of the Court stating monetary measures allow the constitution of a mortgage through the registration of the enforceable title in the relevant public registry;
3) by the law (ipoteca legale)
There are some rules in the legislative framework providing for the right to constitute a mortgage in some specific cases.
The article 2817 of the civil code gives the right to constitute a mortgage in two cases. In particular, to:
– the seller of real estate on the sold property to secure the counter-performance of the contract of sale;
– in probates, to the persons who have the right to receive a compensation for unbalanced distribution of the inheritance on the inheritance real estate properties.
There are, then, other rules contained in specific and sectorial legislation. For example, in many cases the State has the right to constitute a mortgage on properties when the owner is not complying with the payment of taxes.
How to register a mortgage on the public registry
The registration of the mortgage on the public registry is, as already said, a fundamental step of the constitution of the mortgage. Without being it recorded on the registry, the mortgage does not exist.
To register it, two kind of documents should be brought to the institution managing the registry:
– all the documents which proof the title of the right to record the mortgage;
– s document containing personal data of the debtor and of the creditor (called nota di iscrizione).
If the mortgage has been created by contract, the title is the contract itself. However, it is necessary that the signatures have been validated by a notary, otherwise the registration of the mortgage won’t be possible.
If you have a Court order, then to constitute the mortgage it will be enough to bring the order with the attached enforceability stamp of the Tribunal.
In all other cases, it will be necessary to bring all the relevant documents proving the existence of the right to constitute the mortgage, by law or by any other means, on the specific property.
Cancellation of the mortgage from the public registry
The mortgage it is canceled from the public registry:
– automatically, if it was securing a loan agreement with a bank, between 30 days after the complete repayment of the loan;
– by an act of the notary signed by the creditor, n any case;
– by judicial order, in any case.
Extinguishment of the mortgage
The right to constitute the mortgage cease to exists, and thus the mortgage extiguishes, when:
– it is canceled from the public registry in one of the way previously listed;
– registration is not renovated according to the terms of law;
– the secured property perishes;
– the original obligation extinguishes;
– for the effect of any term or condition;
– after having successfully concluded foreclosing procedure.
In conclusion, all the different jurisdictions have specific rules on security interests and it is of fundamental importance, when dealing with real estates or properties in Italy, to be assisted by professionals lawyers with experience in the Italian jurisdiction.