New rules to enhance buyer protection in real estate transactions has been recently approved in Italy, allowing one of the parties of the sale contract to choose a form of guaranteed payment managed by the notary. The introduction of this payment procedure, similar to the one commonly used in France, aims to reduce transaction risks on the buyer side, ensuring that the seller actually receives the money only when registration of the new owner on the public registry has been successfully completed.
Legal publicity in Italy plays an important role on real estate transactions. It is with the conclusion of the registration procedure that the sale can be considered as completely valid and the new owner can resist against any claim from third parties. In the time between the deed of sale of the real estate and the registration, any other adverse registration on the land registry may prevail. Following, if the price has been paid on time of deed, the only option available for the buyer to recover the loss would be to sue the seller for the restitution – or the reduction – of the price.
The new rules allow one of the parties to ask the notary, at the time of deed, to take the price and deposit it into an escrow account managed by the notary, with the instruction to pay the seller only when registration of the new owner on land registry has been successfully completed without finding any other unexpected registration made by third parties.
When the notary receives the money, he has to put them in a dedicated escrow account. The law provides for special rules regarding the money deposited in the escrow account:
– The notary cannot use the money for any other purposes but the payment of the price to the seller and taxes;
– Creditors of the notary cannot convict the money standing in the escrow account;
– In case of decease of the notary, the money won’t be part of his probate;
– Interests accrued while the money are standing in the account will have to be transferred to the State, which will put them in a specific fund aimed at supporting small and medium sized enterprises.
When the registration is completed and uncertainty is faded, the notary will transfer the money from the escrow account to the seller and the sale will be totally effective.
This payment method of course is not new and has always been an option. All the terms and conditions related to the payment of the price – when, how and with what guarantee – have always been covered by the freedom of contract principle. The parties were free to agree on these points, discussing them on the negotiation table. Now, according to the prevailing interpretation of the new rules, if one of the parties – more likely the buyer – ask to deposit the money to the notary, then the deposit becomes a mandatory procedure that nor the notary or the seller can refuse. There are also voices going in the opposite direction, arguing that this payment procedure will still remain an option, but they are a minority. However, only time will tell which interpretation will be shared by Italian Courts.
If you are engaged in a negotiation regarding a real estate in Italy or intend to do so, keep in mind that legislation is constantly changing; these new rules may be a step forward for you protection as buyers.
If you need any assistance for you real estates, contact us to our team of specialized lawyers for assistance.