Italy: Real Estate Comparative Guide

1 Legal framework

1.1 What legislation governs real estate in your jurisdiction?

Article 810 to 1172 of the Civil Code set out Italy's general law in relation to proprietary interests in real estate.

Among other things, these 363 articles specify:

• the different types of interest in real estate;
• the limits to such interests;
• the way in which such interests can be transferred; and
• the remedies that are available in case of interference with the interest by a third party.

The provisions of the Civil Code are so comprehensive and detailed that they even deal with the remuneration of estate agents.

Non-proprietary interests in land – which in Italy include leases – are dealt with by other provisions of the Civil Code (see question 2.2).

Of the special legislation introduced after the enactment of the Civil Code on 16 March 1942, the following laws are notable:

• Law 756 of 15 September 1954 on leases and other kinds of contracts relating to agricultural land;
• Law 346 of 10 May 1976 on adverse possession in relation to small plots of agricultural land;
• Law 392 of 27 July 1978 on leases of urban dwellings; and
• Law 431 of 9 December 1998 on residential leases.

With regard to matters other than the right to own and use land, the following key Italian statutes are notable:

• Royal Decree 499 of 28 March 1929 on the establishment of land registries;
• Law 1150 of 17 August 1942 on general planning;
• Law 10 of 28 January 1977 on the right to build on land;
• Legislative Decree 9 of 23 January 1982 on residential buildings;
• Law 52 of 27 February 1985 introducing the mechanisation of the mortgage registry;
• Law 47 of 28 February 1985 on urban planning and construction law;
• Legislative Decree 447 of 26 October 1995 enacting the framework law on noise and sound pollution;
• Presidential Decree 380 of 6 June 2001 enacting the consolidated general construction law;
• Legislative Decree 152 of 3 April 2006, as amended by Legislative Decree 4 of 16 January 2008, enacting the Code of the Environment; and
• Legislative Decree 222 of 25 November 2016 introducing simplified planning permission rules.

1.2 What special regimes apply to different types of real estate?

In Italy, the law that applies to agricultural land is different in several respects from the law that applies to other land. Aside from the different tax regimes, the main differences relate to:

• non-derogable statutory provisions on leases; and
• the pre-emption right afforded to neighbouring farmers (see question 2.3).

Italian law also draws a distinction – for tax purposes, but also for other purposes (see question 6.6) – in relation to residential property that is an individual or family's main home (so called "prima casa") as opposed to other properties.

The default position under Italian law is that if a legal or natural person does not own the land, the land belongs to the Italian government.

Given that Italy has a very long coastline and some of its most sought-after real estate sits on it, the shoreline belongs to the Italian state (so-called 'demanio marittimo'). The state can grant licences to use specific areas of the demanio marittimo, such as beaches. The Capitaneria di Porto – essentially the coastguard – must be consulted in relation to the use of the shore for water sports and so on.

2 Ownership

2.1 What types of ownership rights exist in your jurisdiction?

Italian law contemplates the 'diritto di proprietà ' in relation to land and buildings. This is an unfettered right of ownership which lasts forever, bar for adverse possession which requires 20 years of undisturbed possession of the property by a third party that acquired control of the property with the acquiescence of the owner.

The diritto di proprietà is the fullest of ownership interests and falls within a category of proprietary interests that are referred to in Italian law as 'diritti reali' – literally 'interests in real property' or 'rights in rem'. Incidentally, real property also includes movable assets.

Each diritto reale:

• is absolute in nature – that is, it can be exercised by the holder against anyone, not only against the person that the holder acquired the right from;
• entails direct control of the property;
• is statutory in nature (it can be transferred as is, but cannot be created by way of contract); and
• has an intrinsic economic value.

The diritti reali include, alongside the diritto di proprietà :

• diritto di usufrutto, entailing the right to enjoy a property and to receive the income ('the fruits' – literally in the case of a piece of land) from it as fully as the holder of the diritto di proprietà would do, without being able to change the economic purpose of the property. Such residual interest is by the owner and is referred to as 'nuda proprietà ' – literally, 'naked property'. The diritto di usufrutto comes to an end when the interest holder dies. So, from a practical standpoint, the diritto di usufrutto is broadly the Italian equivalent of the English interest in possession;
• diritto di uso – a limited form of diritto di usufrutto of limited practical relevance. Unlike with the usufrutto, the holder of the right can use freely the property but only keep the 'fruits' of it insofar as they are needed for the sustainment of his or her family;
• diritto di abitazione which confers upon the holder the right to live in a property for free but only insofar as that satisfies the needs of his or her family;
• diritto di enfiteusi – an interest in agricultural land which is of little practical relevance nowadays, whereby the owner confers upon someone the right, either in perpetuity or for a limited period of time, to appropriate the natural fruits of the land in exchange for the payment of a fee and the duty to improve the land;
• diritto di servitù – a right to make partial use of someone else's property (eg, the right to cross over neighbouring land) or a limitation to someone else's property interest (eg, the right to prevent a neighbour from increasing the height of his or her house). A diritto di servitù is essentially the equivalent of an easement under English law; and
• diritto di superficie – the right to build on existing land or on top of a building that belongs to someone else; in practice, this is an exception to the default rule under Italian law that buildings belong to the owner of the land they are built on or under (see question 2.4).

Importantly, the right to exclusively occupy real estate for a set period of time in exchange for the payment of rent – which in Italy is created by way of a contratto di locazione in the case of residential property and a contratto di affitto in the case of commercial property – is not a diritto reale and is not considered to be akin, or even comparable to, the diritto di proprietà .

This is very different from English law, under which a long lease is considered a form of ownership.

Unlike a long lease in England and Wales, the contratto di locazione/affitto has a relatively short term (see question 2.2); and in the case of residential leases, it cannot be transferred at will by the leaseholder.

It follows from the above that under Italian law, there is no concept of 'freehold' as opposed to 'leasehold' as different types of ownership.

2.2 What ownership structures are commonly used in your jurisdiction?

About 80% of dwellings in Italy are occupied by their owners. The remaining stock residential properties are occupied pursuant to a contratto di locazione – a form of medium-term lease (Article 1573 of the Civil Code prescribes a maximum duration of 30 years) that is not considered a form ownership (see question 2.1).

The contratto di locazione must fall within one of the following categories, for which the law establishes standard commercial terms that cannot be derogated from by way of contract:

• contratto di locazione a canone libero, where the parties can freely agree the amount of the rent but the contract has a minimum duration of four years, which is tacitly renewed for another four years;
• contratto di locazione a canone concordato, where:
• • the amount of the rent is fixed at a level lower than market price by reference to tariffs agreed locally between the associations of landlords and tenants; and
  • the term cannot last less than three years and can only be renewed for two years;
• contratto di locazione transitorio, where:
• • the parties can freely agree the amount of the rent;
  • the initial term is up to 18 months; and
  • the lease is demonstrably linked to needs that are transitory in nature, such as an employment contract with a probation period equal to the initial term of the lease; and
• contratto di locazione con riscatto – a 'rent to buy' contract that is rarely used in practice.

There are also leases for students and for tourists (with a maximum term of 30 days), which are sub-categories of the contratto di locazione transitorio.

As family ties in Italy are very strong, it is common for individuals who own more than one property to grant a relative – often an adult child finding his or her feet in the country's challenging labour market – a licence to occupy the spare property for free, pursuant to a so-called comodato d' uso gratuito.

Upon the death of a spouse, widows and widowers have by law a lifelong exclusive diritto di usufrutto (broadly equivalent to the English interest in possession; see question 2.1) on the property that they owned jointly with the deceased.

It is relatively rare for real estate assets to be settled into a trust or into a 'patrimonial fund', which is akin to a trust but an altogether more inflexible instrument contemplated by the Civil Code, which was enacted in 1942 – long before trusts had made their way into the Italian legal system.

In comparison with countries such as England, in Italy, a relatively high proportion of smaller commercial units are owned by individuals. Traditionally, companies that own real estate mainly use it for their own business, although corporate landlords are becoming increasingly common.

2.3 Are there any restrictions on real estate ownership in your jurisdiction?

Children that are under 18 years old and adults who are legally established as lacking mental capacity cannot acquire or dispose of any rights, including real estate ownership.

Individuals who are not Italian nationals or nationals of an EU member state cannot purchase a property in Italy in their name unless this is specifically allowed by way of an agreement between the Italian state and the nation of which the individual is a national. Italy has agreements of this kind with most countries, including the United States. By contrast, the United Kingdom does not.

In order for an individual to purchase a property, that individual must have a codice fiscale, which is a tax ID issued by the Italian Inland Revenue to anyone who enters into a tax relevant transaction in Italy (but who does not necessarily pay tax there). A foreigner must request the codice fiscale through the Italian consulate general in his or her country.

Individuals and corporate vehicles that are included on economic sanctions lists that apply in Italy cannot purchase a property in the country.

As outlined in question 2.1, the diritto di proprietà and other diritti reali are absolute in nature. A corollary of this is that they can be freely transferred by their holder to whomever he or she wishes.

That said, Italian statutory law contemplates specific pre-emption rights. For example, a tenant has a statutory right of first refusal – a so-called diritto di prelazione – in case the owner avails of the option to terminate early the lease on grounds that it will sell the property.

Another example of a pre-emption right is that of the owner or leaseholder of land that borders the land being sold, where the owner or leaseholder in question is registered as a farmer.

If a property is sold without first being offered to the person holding the pre-emption right, that person can, within one year of the sale, apply to the court to have it reversed and cause the property to be transferred to him or her instead upon payment by him or her of the purchase price.

2.4 Is ownership of land and buildings constructed thereon legally separable?

Yes, it is possible to legally separate the ownership of land and buildings built thereon or thereunder. One way to do so is for the owner of a property to dispose of the diritto di superficie (see question 2.1). However, the default rule set out by Article 934 of the Civil Code is that buildings constructed on land (including below ground level) belong to the owner of the land.

2.5 What security interests can attach to real estate? How are they prioritised?

The following security interests can attach to real estate:

• privilegio; and
• ipoteca.

The privilegio (literally 'privilege') is a right conferred by law to specific categories of creditors (eg, the state in respect of unpaid tax and duties) to satisfy their credit with priory over other creditors on the real estate asset belonging to the debtor. The privilegio can either:

• attach to all real estate assets of the debtor, in which case it is referred to as being 'generale'; or
• attach to specific real estate assets, in which case it is called 'speciale'.

A privilegio speciale has priority over an ipoteca.

The privilegi exist as a matter of law (which everyone is supposed to know) and are thus not registered with the land register, unlike the ipoteca.

The ipoteca is a charge. It is usually translated in English as 'mortgage'. However, this is incorrect, because under English law a mortgage entails the lender/mortgagee purchasing the property in its own name, with the condition that the conveyance of title becomes void upon payment of the debt.

By contrast, when a bank finances the acquisition of a property in Italy and the loan is secured by way of an ipoteca, the borrower purchases the property in his or her own name and the bank secures the repayment of the loan by way of the ipoteca.

The ipoteca 'follows' the asset to which it attaches. So, if a third party purchases the property from the borrower/chargor (which, unlike in England, is possible in principle because the borrower owns the property) the creditor/chargee can still enforce the ipoteca and therefore cause the property to be appropriated and sold by the court-appointed receiver, with the proceeds applied towards repayment of its credit.

There are three types of ipoteca:

• ipoteca volontaria, which is granted by the debtor at the behest of the creditor;
• ipoteca giudiziale, which is granted by way of a court order; and
• ipoteca legale, which is granted by the new owner of a property where the previous owner/seller wishes to secure through it the payment of deferred consideration for the sale.

Importantly, the ipoteca comes into existence when it is registered with the land register, which is public. Hence, the ipoteca becomes known (or at least knowable) to the world at large, including other creditors of the homeowner.

It is possible for several ipoteche to attach to the same real estate asset in succession with one another. The ipoteca that is registered first – called the ipoteca di primo grado – prevails over those that are registered thereafter (the ipoteca di secondo grado and so on).

3 Registration

3.1 What body administers the land register in your jurisdiction?

The Italian Inland Revenue administers the Catasto ('Cadastre') and the banca dati ipotecaria, which jointly perform the function of the land register for the most part of Italy, with the exception of those areas which were previously part of the Austrian-Hungarian empire. These broadly coincide with the provinces of Trento, Bolzano, Trieste and Gorizia, as well as some towns in the provinces of Udine, Brescia, Belluno and Vicenza. In these areas, the Catasto is the only repository.

The Catasto collects and manages administrative data on properties throughout the country, including information on:

• the classification of the property;
• the share of ownership;
• floorplans;
• a lot map; and
• the rendita catastale – that is, the rateable value of the property for tax purposes.

The Catasto is divided into two parts, one covering urban properties and the other covering rural land.

The banca dati ipotecaria are effectively registers of deeds containing information on property ownership, indicating who has or had legal rights to a property, including mortgage liens and other limitations on ownership. They are also commonly referred to as:

• registri immobiliari (real estate registries);
• conservatoria dei registri immobiliari (the word 'conservatoria' referring to the keeper or the physical register in each provincial capital); and
• pubblicità immobiliare (public notices of property).

Unless stated otherwise, the term 'land register' in this Q&A refers to the banca dati ipotecaria.

The records of the Catasto only constitute proof of ownership rights in respect of properties located in the specific areas referred to in the first paragraph. This is because in such specific areas, a 'title system' applies, whereby legal title is only legally transferred upon registration of the transfer.

In the rest of Italy, the banca dati ipotecaria merely stores documents that prove ownership. That is because the general system in place in Italy is a 'deed system', whereby legal title is transferred though the deed and entries into the land register are merely proof of ownership, as between the parties and the wider world. Importantly, however, under the deed system, if the same property is sold (or purported to be sold) to two different buyers, the buyer whose purchase is registered first with the land register (so-called 'trascrizione') prevails over the other one in having good title recognised.

By contrast, registration of the ipoteca with the land register (so-called 'iscrizione') causes the security interest to come into existence (see question 2.5).

3.2 Is registration of real estate rights, transactions and encumbrances mandatory? What are the consequences of failure to register?

The registration of real estate rights, transactions and encumbrances is mandatory in the sense that:

• in those parts of Italy where the title system applies (see question 3.1), title/interest in real property is not acquired – as between the transferor and transferee and vis-à-vis another purchaser – until the transfer of title is registered with the land register;
• in those parts of Italy where the deed system applies (see question 3.1), title/interest in real estate is not acquired vis-à-vis another purchaser of the same property until the transfer of title is registered with the land register; and
• the ipoteca comes into existence as it is registered with land register.

Notaries public have a legal duty to register the conveyancing of land within 30 days of execution of the sale deed. Notably, this obligation must be abided by irrespective of whether the purchase price has been paid.

3.3 What are the formal and documentary requirements for registration?

Registration is effected through the filing with the land register of a nota di trascrizione accompanied by the deed of sale.

3.4 What is the process for registration?

The registration is done by the notary public.

3.5 Is registered information publicly accessible?

Yes, registered information is publicly accessible, for the most part online. In particular, anyone can request via service providers:

• a visura ipotecaria – an excerpt from the banca dati ipotecaria that confirms good title and the existence of encumbrances and security interests on the property; and
• a visura catastale – an excerpt from the Catasto setting out the estremi catastali, such as:
• • the administrative identifiers for a property;
  • the types of ownership rights and the names of their holders;
  • the floor and lot plan; and
  • the rateable value for tax purposes.

4 Commercial leases

4.1 What types of commercial leases exist in your jurisdiction?

Italian law contemplates several types of commercial leases (contratti di affitto), as follows:

• general commercial lease;
• hotel lease;
• lease with a yearly rent in excess of €250,000; and
• lease of an entire business.

The right to occupy and use a commercial property can also be granted pursuant to a comodato d' uso gratuito, which is broadly equivalent to a licence to occupy a property for free. The comodato d' uso gratuito is often used when the property is undergoing renovations at the expense and under the supervision of the future leaseholder.

4.2 Are the terms of a commercial lease regulated or freely negotiable? What do they typically cover (eg, duration; security deposit; rent; sub-letting; termination)?

General commercial leases: Articles 1615 to 1627 of the Civil Code set out the specific provisions that apply to commercial leases, known as contratti di affitto; together with the general provisions of the Civil Code on contractual obligations, they form the body of law that applies to commercial leases.

These statutory provisions deal with the basic obligations of the parties, which in the case of the leaseholder include the obligation not to change the economic purpose of the property (eg, turning a restaurant into a dental practice). It also apportions cost for repairs between the parties, with the landlord having to bear the cost of repairs beyond normal wear and tear.

Such statutory provisions – particularly those that are there to protect the tenant – cannot be derogated from by the parties, except in specific cases such as leases with a yearly rent of more than €250,000.

The minimum duration for non-residential leases – other than leases of hotels – is six years. After the first six-year term, the lease is automatically renewed for a further six years unless the landlord terminates it for one of the following reasons:

• The landlord or a close relative intends to use the property as his or her home;
• The landlord or a close relative intends to run his or her own business out of the property; or
• The landlord intends to tear down the property in order to build a new one or to do a deep renovation.

As with residential leases, it is possible to stipulate a transitory commercial lease that lasts for less than six years. The transitory use must be objective (eg, office space needed for an election campaign) and must be specified in the agreement.

It is also possible to grant a seasonal lease, under the terms of which the tenant can only use the property for a given number of months in each of the six years of the term.

Within the term of the lease, the landlord can only terminate for good cause (eg, rent arrears).

If the landlord wants the lease to come to an end after the second six-year term, it must give notice to this effect to the leaseholder 12 months in advance of the end of the lease; otherwise, the lease will tacitly renew.

The leaseholder can, at any time during the term of the contract, terminate it for 'serious reasons' by giving six months' notice to the landlord.

As is the case with residential leases, the leaseholder has a right of first refusal on the sale if the landlord invokes the sale of the property as a reason to break after the first six years.

Unlike with residential leases, the leaseholder can sub-locate the property by merely putting the landlord on notice. The landlord has 30 days to object to the sub-location by raising 'serious concerns' (eg, the risk of insolvency) relating to the sub-leaseholder.

Notably, at the end of the lease of a retail unit, the landlord must pay the leaseholder an amount of money on account of 'lost goodwill' associated with the location of the business in the leased premises, unless the leaseholder was in arrears with the rent or terminated the lease on its own volition.

The amount that the landlord must pay is equal to 18 months' rent; but if another business that is the same as the business of the outgoing leaseholder is carried out on the premises, the landlord must pay a further 36 months' worth of rent by way of indemnity.

Commercial rent can be pegged to the Italian official inflation rate, but only in the ratio of 75% of the official rate per year.

Hotel leases: The statutory provisions that apply to the lease of hotels depart from the general rules on commercial leases in the following respects:

• The minimum duration of the lease is nine years, with tacit renewal for another nine years, and the landlord must give notice 18 months before the end of the term; and
• The indemnity for loss of goodwill is equal to 21 months' rent.

Leases with a yearly rent in excess of €250,000: The parties to a lease of a commercial property (including hotels but excluding buildings of historical interest) that stipulates a yearly rent in excess of €250,000 can freely negotiate all terms of the lease derogating from the provisions of the Civil Code outlined above.

The only provisions that cannot be derogated from are those setting out the apportionment of maintenance costs between landlord and tenant.

Leases of entire business: Italian law contemplates the affitto di azienda – that is, the lease of an entire business branch as a going concern, including the premises it is carried out from – as a separate form of contract to the lease of commercial properties.

When negotiating the parts of the contract for the affitto di azienda that deal with the premises, the parties can derogate from the provisions of the Civil Code that apply to commercial leases.

4.3 What are the formal and documentary requirements for conclusion of a commercial lease?

Unlike with a residential lease – and somewhat counterintuitively – according to the Civil Code a commercial lease need not be agreed in writing unless it has a term of nine years or more.

However, it is customary to agree in writing a commercial lease – usually by way of either a notarial deed (atto pubblico) or a contract executed under hand with certified signatures (scrittura privata autenticata), although a contract executed under hand is sufficient – because a written copy of the contract is necessary to register it with the Italian Inland Revenue, which is compulsory for tax reasons. Also, failure to register the lease with the Inland Revenue renders it null and void.

In connection with the documentary requirements, an energy performance certificate (see question 9.5) must be either attached to the lease contract or mentioned in it.

4.4 What is the process for concluding a commercial lease?

The negotiation of a normal commercial lease – that is, one to which the provisions of the Civil Code apply – is a less involved process than the negotiation of a commercial lease in England and Wales. This is because some of the most heavily negotiated terms in an English lease, such as dilapidations, are out of the hands of the parties, because the Civil Code sets the terms and they cannot be derogated from.

It follows that there is no need to break down the work of the respective legal advisers into the preparation heads of terms, lease reports and so on.

By law, the landlord provides to the leaseholder a fitness for purpose warranty. That tends to make due diligence on the fitness of the premises less pressing for the leaseholder than in the United Kingdom. That said, recent case law has confirmed that it is incumbent on the leaseholder to check that the property conforms with all planning rules. This can be a rather involved process in Italy, given the complexity of the rules in question. Hence, the leaseholder usually requests the landlord to provide a contractual warranty in that respect.

In terms of checking title in the property and limits to the use that can be made of the property in view of third-party rights, the fact that all relevant information (eg, easements) is registered with the Catasto and is readily available online makes the due diligence a speedier process than in the United Kingdom.

In Italy, there is no 'exchange of contracts' and 'completion' as separate stages of concluding a lease agreement, by reference to the payment of a deposit or otherwise. Deposits are rare in any event, as security is usually provided in the form of a guarantee.

The leaseholder simply gets the keys to the property on the day the tenancy begins. If a guarantee must be given to the landlord, the instrument is typically delivered to it before the leaseholder can enter the premises.

4.5 What are the respective obligations and liabilities of landlord and tenant under a commercial lease, and what are the consequences of any breach?

See question 4.2.

4.6 How are rent variations typically effected throughout the term of the lease?

Any rent variation is agreed by mutual consent. This happens rarely because rents are pegged to the inflation rate and leases do last that long, so the landlord and leaseholder can agree a new rent upon renewal of the lease.

In terms of supervening circumstances that warrant a rent reduction (eg, the COVID-19 pandemic), the leaseholder benefits from the protection afforded by Article 1467 of the Civil Code, which enables a party to seek termination of a contract if extraordinary supervening circumstances have upset the economic imbalance of the bargain.

4.7 What taxes are levied on rental income?

Income from rental properties generally accrues to natural and legal persons, which must pay, respectively, income tax and corporation tax on it.

It is possible, however, for individuals to opt into the 'cedolare secca' regime for short leases whereby the landlord pays a flat tax on the rental income (usually 21%, but it can go down to 10%) and the income does not accrue to the landlord's general income.

4.8 Can a commercial lease be triple net?

In Italy, it is not customary to differentiate between base rent and additional rent. Therefore, 'triple net' does not really apply as a concept.

Also, the apportionment of maintenance costs between landlord and tenant is set out in law and generally cannot be derogated from.

The landlord customarily bears the burden of property taxes and buildings insurance.

4.9 How are landlord and tenant disputes typically resolved?

Typically, a dispute between a landlord and leaseholder is ultimately resolved in court.

The court of the place where the property is located has jurisdiction.

In some circumstances, mediation must be attempted in the initial phase of the court proceedings.

Commercial leases relating to large and high-value properties often stipulate dispute resolution mechanisms either:

• that are alternative to court litigation (ie, arbitration); or
• that eventually lead to litigation if an amicable solution cannot be reached by the parties by way of an initial dispute resolution mechanism (eg, mini-arbitration on technical issues).

4.10 What types of guarantees are market practice and required by landlords to secure the tenant's obligations

Usually, the landlord will require a fideiussione – that is, a suretyship from a bank.

The payment of a deposit by the leaseholder is rare.

5 Real estate transactions

5.1 What form do real estate transactions typically take in your jurisdiction?

Given that questions 2 and 4 have respectively dealt with residential and commercial leases, we address the sale and purchases of real estate only here.

In Italy, the sale of real estate can be validly carried out only by way of a deed that is executed before an Italian notary public. The deed is in the form of minutes of the conveyancing procedure carried out by the notary in the presence of the seller and the buyer or their attorneys.

Unless a preliminary contract is entered into, the payment of the purchase price and the transfer of title happen as part of the conveyancing at the notary's presence, typically by way of the buyer handing to the seller an assegno circolare – that is, a banker's draft. It is also common – especially when the property is bought using a bank loan – for the buyer to make a real-time bank transfer before the notary.

Both the payment of the banker's draft and the real-time bank transfer require the buyer to have a bank account in Italy, as only a banker's draft issued by an Italian bank can be cashed at the seller's bank, usually also in Italy. As to the real-time transfer, it is still not possible to effect a real-time transfer from a foreign account, even when the account is denominated in euros.

Foreign buyers that do not have a bank account in Italy can overcome this issue by using the notary's escrow account, to which the money is transferred prior to the deed. The money is then transferred instantaneously by the notary to the seller when the deed is executed.

It often happens that the buyer and seller agree the key terms of the sale and that time passes before the conveyancing can actually take place. In such circumstances, the buyer and capture their agreement in a contratto preliminare (literally, 'preliminary contract'), also informally known as a compromesso.

Typically, upon signing the contratto preliminare, the buyer pays the seller a holding deposit (so-called 'caparra confirmatoria') of between 10% and 20% of the purchase price. The contratto preliminare then stipulates the date by which the deed will be executed. Usually, the date is specified as being of the essence – meaning that if the deed is not entered into by the set date because the buyer pulls out of the deal without good reason, the seller can keep the deposit. If it is the seller that pulls out without good reason, the buyer can choose between:

• forcing the sale upon the seller (which ultimately requires the intervention of the court); or
• asking the seller to pay double the caparra confirmatoria.

Article 2775-bis of the Civil Code creates a security interest in the form of a privilegio (see question 2.5) in favour of the buyer on the property in relation to the debt arising in connection with the repayment of double the caparra confirmatoria.

The contratto preliminare is registered – usually at the buyer's expense – both with the Italian Inland Revenue (so-called 'registrazione') and with the land register (so-called 'trascrizione').

If a forced sale is pursued by the buyer as the remedy for the seller's breach of the contratto preliminare, the registration of the contratto preliminare is made to count as the registration of the actual sale that ends up being ordered by the court. Hence, the buyer's title is first in time and therefore prevails over the title registered by a third party (see question 3.1) – that is, someone the seller tried to sell the property to while the forced sale was going through in court.

5.2 Which players are typically involved in a real estate transaction in your jurisdiction?

Aside from the seller and the buyer, the only player that is necessarily involved in a sale and purchase of real estate is the notary public.

Other players that may be involved in a real estate transactions are:

• the lending bank;
• the surveyor;
• the estate agent.

5.3 Is the seller bound by a duty to disclose? What representations and warranties will it typically make?

The deed of sale must contain a representation and warranty from the seller that the property conforms with the data of the Catasto, including the floor plan and lot map (see question 3.1).

If the deed of sale incorrectly quotes the Catasto, the deed can be declared null and void, although it is possible to make rectifications to it.

It is also important that the property sold conforms with the planning rules (so-called 'conformità urbanistica'). The consequences of a building having been built in breach of planning rules can be serious (see question 8.4).

Unlike with the cadastral conformity, there is no specific obligation on the part of the seller to make a representation and warranty in the deed of sale in respect of the conformità urbanistica.

So, in respect of the conformità urbanistica, the buyer can solely rely on Article 1337 of the Civil Code, which imposes a general duty of good faith upon parties that are negotiating a contract.

If a representation and warranty is made by the seller during the negotiation about the conformità catastale or indeed the conformità urbanistica but then turns out to be incorrect, with the seller having wilfully misled the buyer, the seller will be liable towards the buyer only in respect of the loss caused by the specific misrepresentation (eg, lower square footage), unless the representation and warranty was of such importance that the buyer would not have proceeded with the purchase had it known the truth, in which case the seller may be liable for the entire loss (eg, associated with having bought a building that must be torn down in part because it does not comply with planning law).

Also, where breach of the representation and warranty affects a fundamental element of the bargain that underlies the sale and purchase deed, the deed can be declared null and void by a court. This is not usually the desired outcome for the buyer, as it ends up without a property and having merely an unsecured money claim against the seller.

It is not uncommon for buyers to make the purchase conditional upon a surveyor issuing a certificate stating that the property that is being sold satisfies both the conformità catastale and the conformità urbanistica. This is because the buyer has recourse to the surveyor if problems emerge after the purchase.

In any event, it is important for the buyer to conduct the necessary searches with the Catasto and the banca dati ipotecaria in order to establish good title, the existence of encumbrances, the absence of security interests and so on.

Unfortunately, such searches do not reveal issues around the conformity of the property with local planning rules. That can be a rather involved process that requires the expertise of a local surveyor. This is why the buyer often seeks a formal certificate of conformity from one.

5.4 What due diligence is typically conducted in a real estate transaction?

The buyer typically either obtains directly online or asks the notary to obtain:

• the visura ipotecaria (see question 3.5); and
• the visura catastale.

It is important that the visura ipotecaria goes back at least 20 years.

Furthermore, a careful buyer will ask a surveyor to check that the property complies with building regulations. That is particularly warranted when the property is a standalone building that was built by the seller.

5.5 What are the formal and documentary requirements for conclusion of a real estate transaction?

The following documents must be provided to the notary in time for the deed of sale:

• By the buyer and by the seller, if natural persons:
• • a copy of their personal ID and indication if the place of residence is different from that stated in therein;
  • their codice fiscale (see question 2.3);
  • any marriage certificate or certificate of unmarried status;
  • a copy of any matrimonial regime agreement or any agreement in relation to living together while unmarried; and
  • for nationals of non-EU member states, a copy of the permanent residence certificate and entry visa.
• By the buyer and by the seller, if legal persons:
• • a copy of the personal ID of the directors;
  • an excerpt from Companies House; and
  • the board resolution authorising the purchase or sale (where restrictions are placed on the directors' powers, as shown by the excerpt from Companies House).
• By the buyer, irrespective of whether a natural or legal person:
• • a copy of the contratto preliminare (if any);
  • the name and contact details of the estate agent (if any), details of the fee agreed with him or her and evidence of any payment already made to the agent; and
  • if a loan has been applied for, the contact details of the prospective lender.
• By the seller, irrespective of whether a natural or legal person:
• • a copy of the deed of purchase or, in the case of an individual who inherited the property, the relevant probate documentation;
  • a copy of the floorplans filed with the Catasto and of other cadastral documents;
  • proof of any payments already received by the buyer (eg, on account of a holding deposit paid by the buyer);
  • a copy of the contratto preliminare (if any);
  • if there was an ipoteca, a copy of the document from the bank confirming the repayment of the secured debt and evidence from a notary that the cancellation of the ipoteca is being taken care of by him or her;
  • if the property is a flat, a copy of the apartment block's rules and regulations and a declaration from the building's manager certifying that all services charges and other expenses on account of maintenance of communal parts of the building and so on have been settled in full, and that there are no pending disputes;
  • a copy of the building permits that were issued when the building was built, including any variations to the original project and any planning amnesty obtained;
  • a copy of the certificate of fitness for use of the dwelling issued by the local municipality (certificato di agibilità ) or proof that such certificate has been applied for;
  • if the property is situated on grounds of more than 5,000 square feet, the certificate of urban destination originally issued by the local municipality;
  • in the case of commercial premises, agricultural land or apartment rented pursuant to Law 431/98, documentation regarding possible pre-emption rights of third parties; and
  • an energy performance certificate.

5.6 What is the process for concluding a real estate transaction? How long does this take? What costs are incurred?

Question 4.3 explains how leases are entered into.

The sale of an Italian property and the transfer of proprietary rights are generally concluded by way of the parties executing the deed of sale in the presence of an Italian notary public.

The notary drafts the deed, based on the indication that the buyer and seller give to him or her in relation to all elements of the bargain.

The notary is usually chosen and paid by the buyer. This notwithstanding, the notary acts in the best interests of both the buyer and the seller, insofar as he or she ensures that the conveyancing of title is valid.

The notary checks all relevant documents relating to the transaction, such as the title deeds and the land register records. To an extent, the buyer can rely on the notary not overseeing anything major. Notaries are usually very professional and thorough.

The fact that the notary carries out some due diligence – in the interests of carrying out a valid conveyance – does not relieve the buyer from doing its own checks.

Notaries charge relatively high fees. It is normal for a notary to charge €3,500 plus value added tax (VAT) for the conveyancing of an average residential property worth, say, €250,000.

The notary also collects from the buyer the imposta di registro, ipotecaria and catastale and pays it to the Italian government.

The time it takes to conclude a real estate transaction varies significantly depending on factors such as the involvement of a lender.

A cash buyer can complete a purchase in a matter of weeks. If anything, searches are probably more straightforward in Italy than in other countries because the basic information is readily available via the Catasto and the banca dati ipotecaria.

Another rather big cost in relation to the sale of a property is the estate agent's fees. Article 1755 of the Civil Code provides that the estate agent is entitled to be paid a fee both by the buyer and by the seller. The normal fee is 3% of the property price that the agent is entitled to receive by the buyer and the seller, so 6% in total. For very expensive properties, a lesser percentage is deemed acceptable. It is noteworthy – and, perhaps more than that, a trap for the unwary – that even if one does not agree a fee with an Italian agent, the fee is due by law.

A further cost for the seller relates to the sourcing of an energy performance certificate, unless there is one already and it is less than 10 years old.

5.7 What are the respective obligations and liabilities of buyer and seller, and what are the consequences of any breach?

The seller fulfils its obligation to transfer the title in the property to the seller by:

• signing the deed (in those parts of Italy where the deed system exists – see question 3.1); or
• signing the deed and procuring that the deed is registered with the land register (in those parts of Italy where the title system exists – see question 3.1).

The buyer's obligation is to pay the purchase price. This obligation is only contractual in nature. This means that non-payment by the buyer of the purchase price does not prevent the passing of title. The notary public is not there to chase payment from the buyer if the seller agrees that the payment is deferred. In fact, no matter what, the notary is obliged by law to register the sale within 30 days of the deed.

In order to secure its right to receive the purchase price from the buyer, the seller can register an ipoteca legale on the property (see question 2.5). Alternatively, the seller will ensure that the deed includes a provision whereby it retains title in the property until the purchase price is paid in full.

Question 5.3 discusses the liability of the seller in respect of a breach of representations and warranties in relation to the characteristics of the property and other key elements of the bargain.

5.8 What taxes are payable on a real estate transaction?

The main taxes that are levied in respect of a real estate transaction in Italy are the imposta di registro (broadly the equivalent of stamp duty land tax in the United Kingdom) and VAT.

VAT – generally equal to 22% of the purchase price – and imposta di registro – equal to 9% of the value of the property calculated on the basis of the rateable value recorded at the Catasto – are alterative to one another. Generally speaking, only one of the two can be levied in respect of a transaction.

The imposta di registro is levied by default. VAT is levied instead in specific circumstances.

Although the imposta di registro and VAT are generally alternative to one another, when a sale is subject to VAT, instead of the imposta di registro not being levied at all, it is levied for the fixed amount of €200 only.

In Italy, the seller and buyer are jointly and severally liable to pay the imposta di registro. However, it is customarily the buyer/leaseholder that pays the tax.

Sale and purchase transactions: The sale of a building that is a 'bene strumentale per natura' – that is, a building that lends itself only to a specific business use (eg, a hotel) – is subject to VAT at the full 22% rate or at a reduced rate of 10% if the property recently underwent major renovations and is being sold by the developer. In this context, the 'developer' is the owner of the land and whoever commissions and pays for the construction works, not necessarily the building company that carries out the works.

The sale of a residential building is subject to VAT at 10% if the building is sold directly by the developer and the developer opts for VAT instead of paying the imposta di registro. The sale of land that can be developed is subject to VAT at 22%. The sale of land that cannot be developed (eg, agricultural land) is exempt from VAT.

The sale of all kinds of real estate also warrants the payment of:

• imposta di registro;
• imposta ipotecaria; and
• imposta catastale.

Generally speaking, the imposta ipotecaria and the imposta catastale are, respectively, equal to 3% and 1% of the of the value of the property, calculated on the basis of the rateable value recorded. For example, on the sale of a piece of land that cannot be developed, they come to €50 each.

Leases: Residential and commercial leases are not subject to VAT.

However, the landlord can opt into VAT at 10% for residential properties and at 22% for commercial properties, thereby avoiding the imposta di registro.

If VAT is not opted into, the imposta di registro is levied at a rate of 2% for residential leases and 1% for commercial leases. The duty is calculated on the total amount of the rent that is to be paid during the term of the lease; and the parties can opt whether to pay the tax in a single go or in staggered yearly payments for the term of the contract.

6 Real estate finance

6.1 Who are the most common providers of real estate finance in your jurisdiction? Do any restrictions apply in this regard?

The most common providers of real estate finance in respect of Italian residential property are Italian banks.

There is nothing to prevent a foreign lender that complies with the necessary regulatory requirements (in terms of both licensing and compliance with the rules on consumer credit) from financing the purchase of a property in Italy. However, this rarely happens.

In respect of Italian commercial real estate operations, operators range from Italian banks to foreign institutional investors, such as pension funds and asset managers.

6.2 What forms of real estate finance are available in your jurisdiction?

The forms of real estate finance that are available in Italy are broadly the same as those that are available in other jurisdictions.

Individuals resort to loans from banks secured by an ipoteca (see question 2.4).

In relation to corporate transactions involving Italian property (ie, when the target that owns the Italian asset is taken over), Italian law imposes limits on leveraged buyouts, which are a common way to structure deals, particularly in the United States.

A leveraged buyout involves the buyer funding a significant part of the acquisition by way of a loan that is secured either on the target's assets (the Italian property) or on the target's shares. The loan is typically construed as deferred consideration paid for the shares, whereby the outgoing shareholders effectively agree to 'lend' to the buyer the deferred purchase price, but want security over the asset or the shares in return. The transaction is typically completed by merging the target with the acquiring vehicle, which is usually a special purpose vehicle (SPV). The merged entity ends up holding the debt.

Article 2358 of the Civil Code makes the direct or indirect provision by a company of a loan or guarantee to buy own shares subject to a special shareholders' resolution on the back of a report confirming, among other things, that:

• the operation is in line with the company's long-term objectives; and
• the creditworthiness of the buyer/borrower has been assessed.

Importantly, the loan or guarantee limit cannot exceed the company's distributable profits and available reserves set out in the latest balance sheet approved by the shareholders. There is an outright ban on accepting shares of the company as collateral for the loan.

Article 2501-bis of the Civil Code makes the merger between the Italian acquiring vehicle and the target subject to a 'merger proposal project' supported by a third-party expert report setting out, among other things, the financial resources that are available to satisfy the debt of the merged entities.

The above provisions have the effect of reducing the leverage and requiring the SPV to be financially supported in a transparent way.

6.3 What formal, documentary and other requirements do lenders typically require of borrowers?

In relation to borrowers that are natural persons, apart from the obvious identification documents – which in Italy do not include proof of address, because each citizen has his or her own individual ID and codice fiscale (see question 7.1) – the documentation requested by the lending bank is broadly the same as everywhere else: that is, documentation that is necessary to evidence creditworthiness and affordability of interest repayment such as payslips for employees and tax returns for self-employed people.

The lender will also require documentation concerning the property – first and foremost a valuation report prepared by a lender-approved surveyor, who is then typically also asked to produce the visura catastale and visura ipotecaria.

6.4 What type of security interests are typically required by lenders?

The security interest that is required by the bank that finances a property acquisition is the ipoteca (see question 2.5).

As an alternative to the ipoteca, the lending bank typically seeks a fideiussione – that is, a suretyship issued by another bank.

The lender may also be willing to accept a fideiussione issued by individuals (eg, the parents of the borrower) or to create an ipoteca over an unencumbered property that is different from that which is being purchased.

6.5 What is the process for obtaining real estate finance? What costs are payable?

An application is made to the bank to obtain the loan.

As part of the application, the prospective borrower must involve the bank in all key aspects of the transaction and will share with it all relevant documents, including the contratto preliminare if one is entered into.

The bank will appoint a surveyor to carry out a valuation of the property. The cost of the surveyor is usually charged to the prospective borrower. It is in the region of €400 for an average property.

If the survey is positive, the bank will grant the loan, subject in principle to further due diligence.

The bank remains involved in the subsequent stages of the conveyance – from the further due diligence on the property, which is typically carried out by the same surveyor who did the report, all the way to execution of the deed – as the bank has an interest in checking that the deed mentions the loan and the ipoteca, and that the latter is registered (see question 6.6). The notary will also liaise with the bank in connection with the loan drawdown/payment mechanics on the day of the deed.

6.6 How is security enforced in case of any breach?

In order to start enforcement proceedings in Italy, the creditor must obtain a titolo esecutivo (literally, an 'enforceable title').

Insofar as a loan that is secured by way of ipoteca has been expressly mentioned in the deed of sale (see question 5.5), if the borrower then defaults under the loan, the combination of such documents constitutes the titolo esecutivo that the lender can serve on the borrower alongside the atto di precetto (last formal warning to pay) giving the borrower 10 days to repay the loan.

If the borrower does not pay in time, the lender can start enforcement proceedings in respect of the property, known as esecuzione immobiliare. These proceedings are overseen by the court of the place where the asset is located. The process is very detailed and takes a considerable amount of time to complete. It involves:

• a court-appointed receiver taking control of the property;
• the property ultimately being either appropriated by the lender or sold under the supervision of the court; and
• the proceeds of the sale – after deduction of the costs of the enforcement proceedings – being paid to the lender.

We are not aware of an esecuzione immobiliare that has taken less than two years to complete. Where the charged property is a family home, the borrower is entitled to renegotiate the loan with the bank before the esecuzione immobiliare can go ahead. This extends the duration of the proceedings even further. The average length of time of an esecuzione immobiliare is probably in excess of four years.

7 Real estate investment

7.1 Who are the most common investors in real estate in your jurisdiction? Do any restrictions apply in this regard?

Italian real estate has always been popular with foreign investors, both individuals and corporates.

Individuals who are not Italian nationals or nationals of an EU member state cannot purchase a property in Italy in their name unless this is specifically allowed by way of an agreement between the Italian state and the nation of which the individual is a national. Italy has agreements of this kind with most countries, including the United States. By contrast, the United Kingdom does not.

This has created problems with English nationals who, after Brexit, can no longer reside habitually in Italy unless they obtain permanent residence, which is difficult.

Obviously, individuals and corporate vehicles that feature on sanctions lists that apply in Italy cannot purchase a property there.

7.2 What investment vehicles are typically used in your jurisdiction? What are the benefits and drawbacks of each?

International investors that finance the acquisition of Italian commercial real estate use either an Italian special purpose vehicle (SPV) – typically a società a responsabilità limitata (broadly the Italian equivalent of an English company limited by shares) – or a foreign SPV.

While purchase through a foreign SPV can undoubtedly bring tax advantages, Italy has very strong 'rules of attraction' when it comes to taxation. The foreign SPV will be deemed to be established in Italy and may have to pay tax there if it carries out activities such as the contracting of building works or the leasing out of the property.

7.3 How are these vehicles established and administered in your jurisdiction?

Italian corporate vehicles that are set up to own real estate do not differ in any way from corporate vehicles that engage in other kinds of business.

Foreign corporate vehicles owning real estate in Italy may have to create a stabile organizzazione ('stable organisation') in Italy for tax purposes. The stabile organizzazione will be issued with an Italian value added tax number and with a separate ID number that is necessary to participate in the exchange of electronic invoices, which is compulsory in Italy.

8 Planning and zoning

8.1 How is land use regulated in your jurisdiction?

In Italy, the rules governing the use of land emanate from the central state as well as from local government which has three levels:

• regions, of which there are 20;
• provinces, of which there are 103; and
• municipalities, of which there are more than 8,000.

The power to apply the rules is largely devolved and the municipality is the central point of contact when seeking planning permission. That said, the province has its own powers in connection with geological, hydrological and environmental aspects.

Each municipality has its own Piano Regolatore Generale (planning masterplan), which divides up the territory of the municipality into zones, each of which has separate different functions and permitted uses that are predefined by law, including:

• zones of historical interest;
• built-up/residential zones;
• partially built-up/residential zones which can be developed further;
• agricultural zones; and
• zones for public buildings such as schools, public offices and hospitals.

The planning masterplan sets out the general planning parameters that are relevant to each zone, such as:

• allowed uses;
• land utilisation capacity;
• building height; and
• minimum distances between buildings.

The planning masterplan also sets out more detailed building limitations within each zone. For example, it may identify areas within a wider built-up/residential zone where it is not possible to alter the external appearance of buildings or where only restoration and maintenance are allowed.

If the planning masterplan goes into sufficient detail as to the parameters that are necessary to evaluate the granting of a building permit by the municipality, the developer need only apply for a building permit.

Alternatively, if the planning masterplan is not sufficiently detailed, a piano attuativo ('implementation plan') must be adopted by the municipality based on the project submitted by the developer. What follows is the entering into of a convenzione urbanistica ('planning agreement') between the municipality and the developers. The planning agreement sets out, among other things, what public utilities and public infrastructure the developer must build in order to ensure the best public utilisation of the new development.

8.2 What is the process for obtaining planning permission? How long does this take? What costs are incurred?

In Italy, a permesso a costruire ('permission to build') is generally required to erect new constructions and to undertake works on existing buildings that involve structural changes, increased volumes or elevations combined with a change of use.

Something akin to the UK permitted development exists, but it is narrower in scope as it does not include extensions. Even work that does not require a permission to build must be brought to the attention of the municipality's sportello unico dell' edilizia ('single counter for planning') before work can start, unless the works are really minor (eg, the replacement of flooring or the installation of solar panels).

Hence, instead of needing to apply for permission to build the following, notice must be given to the municipality prior to starting the construction works:

• a comunicazione di inizio lavori (CIL) for temporary structures;
• a comunicazione di inizio lavori asseverata (CILA) (where 'asseverata' means 'certified') for minor maintenance works that can, however, concern the fabric/structure of the building; and
• a segnalazione certificata di inizio attività (SCIA) for major maintenance and renovation works.

The SCIA is a form of enhanced CILA, insofar as it requires that the name of the building contractor and other information be specified. Both the CILA and the SCIA must be prepared by an architect or civil engineer, who will usually also have prepared the project inclusive of all drawings that must be submitted alongside the CILA or SCIA.

Once the CILA or SCIA has been submitted, the building work can commence straight away and the municipality has 30 days to inspect the site and order the cessation of works if it finds any irregularities.

Legislative Decree 222 of 25 November 2016 broadened the scope of the SCIA (creating the so-called 'SCIA 2') to include works that entail a ristrutturazione – that is, a major renovation, possibly involving an increase in the volumes, elevations or outside appearance of existing buildings without changing their intended use. It is also possible to use a SCIA to seek, within certain limits, a variation to an existing building permit.

Notably, the SCIA 2 can also be used to erect a new building, provided that the local planning masterplan goes into sufficient detail as to the specifications of new buildings in that zone. However, in this case, the works can start only once 30 days have elapsed from submission of the SCIA.

The introduction of the SCIA 2 has drastically reduced the situations where a fully fledged permission to build is required. This is now essentially confined to:

• the erection of new buildings in zones where the planning masterplan is not sufficiently detailed;
• the undertaking of major renovation works aimed at changing the intended use of a building; and
• the undertaking of works that require a variation to an existing permission to build in relation to the alteration of the façade of listed buildings.

A fully fledged permission to build can be obtained through a rather detailed and lengthy process which generally involves the following steps, although the procedure is simplified in some regions:

• The application and the project are submitted to the single counter for planning of the local municipality.
• The single counter for planning has 10 days to appoint the responsabile del procedimento ('case officer'), whose name will be communicated to the applicant.
• The case officer has 60 days to formulate a draft permission to build, which may involve minor suggestions as to how the project needs to be changed. The case officer can also indicate that the application cannot be accepted as it is, specifying why this is the case. The case officer can also request further documentation/information that he or she cannot obtain from public sources. In that case the 60-day timeframe is stayed until the documentation/information has been submitted.
• A final decision is made by the chief planning officer within 30 days – or 40 days where the case officer has expressed his or her dissent to the application – from submission of the draft permission to build by the case officer.
• If the case officer does not object to the application specifying the reasons for the objection, the permission to build is granted by silenzio assenso (silent assent) upon the expiry of 30 (or 40 in case of objection without reason) days of the case officer receiving the draft permission to build.

All the above deadlines are doubled where the project is particularly complex.

The costs involved in obtaining a CIL, CILA, SCIA or a standard permission to build are:

• the fees of the architect or engineer to prepare, complete and submit the application (on top of the fees for the preparation of the project which may need to be submitted with it);
• the processing fee payable to the municipality, which usually does not exceed €200; and
• the duties payable to the municipality on account of contributions for the creation of new public infrastructure (so-called oneri di urbanizzazione) and an extra construction duty (so-called oneri di costruzione). Such costs are calculated in accordance with algorithms and are usually in the lower thousands of euros for small projects, but can reach hundreds of thousands of euros for large projects.

8.3 Can a planning decision be appealed?

An adverse planning decision can be reversed if the applicant succeeds in bringing a case to the Tribunale Amministrativo Regionale, which is the kind of court where one can sue a public body in Italy. The case will typically revolve around the case officer having unreasonably refused the original application and having failed to propose reasonable alternative solutions.

8.4 What are the consequences of failure to obtain planning permission or to comply with a planning condition?

Failure to obtain or comply with planning permission can result in a fine as well as an order from the municipality to tear down the construction.

8.5 Is expropriation of land possible in your jurisdiction?

Yes, expropriation of land is possible in Italy.

Where the state declares a piece of land to be of 'public utility', the legal owner can be dispossessed of it but must be paid an indemnity. The indemnity is equal to the market value of the land, in case of land that can be built on. In the case of agricultural land, the indemnity is based on the rateable value (see question 3.1) and therefore normally the indemnity yields a much lower amount than market value.

8.6 Is confiscation of land possible in your jurisdiction?

The permanent dispossession of land by the state without compensation to its legal owner is not possible in Italy.

9 Environmental

9.1 What main environmental legal provisions apply to the development, use and occupation of real estate?

Italian law distinguishes between the protection and conservation of the natural landscape and historical and artistic heritage from an aesthetic standpoint on the one hand; and the protection of the environment intended as the protection from pollution on the other. In turn, the body of law in respect of the latter is very heterogenous. For example, noise pollution is governed by a law that is separate from the law that governs soil contamination.

In relation to the protection and conservation of the natural landscape and of Italy's historical and artistic heritage from an aesthetic standpoint, if planned construction works will affect a zone or a specific building of particular interest, as part of the application to obtain a building permit, the developer will need to obtain the approval of the relevant governmental bodies (usually at the provincial and regional level) prior to commencing work.

The province will assess the geological and hydrological aspects of a project from information that is submitted alongside the planning permission to the municipality.

In relation to the prevention of pollution, the key laws are:

• Legislative Decree 447 of 26 October 1995 enacting the framework law on noise and sound pollution;
• Legislative Decree 152 of 3 April 2006, as amended by Legislative Decree 4 of 16 January 2008, enacting the Code of the Environment; and
• the specific provisions of the Penal Code setting out criminal offences against the environment, some of which are particularly relevant to the construction industry, such as:
• • damage to Italy's archaeological, historical or artistic heritage;
  • destruction or defacement of natural beauty;
  • collapse of buildings or other disasters; and
  • environmental pollution.

Unless a new development involves the construction of major infrastructure – such as public roads, industrial storage facilities for chemical products or energy production facilities – there is no need to proceed with a separate evaluation of the environmental impact of the project as part of the planning application process.

That said, interventions in certain coastal areas do require an environmental impact assessment. For example, the building or renovation of a leisure resort in a coastal area set in a natural landscape will warrant an environmental assessment, which is a relatively involved process.

9.2 Who can be held liable for environmental contamination and how are clean-ups effected?

In Italy, only the party that carried out the environmental contamination (either causing it directly or allowing it to happen) can be held liable for it.

According to Articles 242 and 244 of the Code of the Environment, in case of environmental contamination, the obligation to carry out the clean-up "rests upon whoever person is responsible for the pollution, which the public authorities have to duty to identify or look for".

The public authority that is responsible for identifying the polluter for the purpose of ordering a clean-up is the province. If the province is unable to identify the polluter, the clean-up must be carried out at its own expense.

When the province identifies an instance of environmental contamination, it will issue the owner and user of the land with a formal notice that usually limits the use of the polluted land. The province has a privilegio speciale (see question 2.5) on the polluted land as security of the costs of the clean-up. Whoever is in control of the land (including the owner or leaseholder) or has an interest in the contamination being removed can proceed with the clean-up at its own expense.

If nobody steps forward to undertake the clean-up and the public authority must intervene and take care of this itself, the public authority can recover the costs of the clean-up from the owner of the land, provided that the province can demonstrate that:

• it made all reasonable efforts to identify the actual polluter; or
• it found the polluter but was unable to take action against it.

This mechanism is as close as Italian law comes to the strict liability of the owner of the land under English law.

The Code of the Environment has also introduced non-criminal offences in relation to the discharge of wastewater, the disposal of waste and atmospheric emissions, These are policed by the local authorities, which can impose fines and/or order a clean-up.

9.3 What environmental provisions and considerations should be factored into real estate transactions?

Anyone that is considering purchasing a property in Italy which is located in a place of outstanding natural or manmade beauty should be aware that conservation rules are very strict and will effectively prevent major interventions, particularly to the exterior of the building.

It takes time and local expertise to obtain the necessary permits to carry out interventions, because many different local and central government agencies are responsible for various aspects. For example, in coastal zones the Capitaneria di Porto – essentially the coastguard – must be consulted in relation to the use of the coastline for water sports.

9.4 What initiatives are in place to promote green buildings and energy efficiency in your jurisdiction?

The main initiatives in Italy to promote energy efficiency are the Superbonus 110 and the Ecobonus.

These are income tax/corporation tax credit schemes available to natural persons, cooperatives and non-profit organisations, whereby the value of certain kinds of building works – up to 110% in the case of the Superbonus 110 and between 50% and 110% in the case of the Ecobonus – can be deducted from future payments of income tax. Such tax credits:

• can be directly transferred to a bank, which discounts them for cash; or
• can accrue to the benefit of the construction company which accepts them as consideration for its work (so-called 'sconto in fattura').

The following types of interventions qualify for the Superbonus 110:

• thermal insulation of walls and roofs in apartment blocks or, under certain conditions, single dwellings;
• installation in apartment blocks or, under certain conditions, single dwellings of central state-of-the-art condensation boilers or heat pumps;
• installation of solar panels, energy accumulators and charging points for electric vehicles, if made in conjunction with the installation of a new heating system; and
• replacement of windows, if made in conjunction with the installation of a new heating system.

The following types of interventions in any kind of new or existing residential building qualify for the Ecobonus:

• replacement of windows;
• solar shielding;
• installation of biomass boilers;
• installation of state-of-the-art condensation boilers or heat pumps;
• installation of solar panels including accumulators and charging points for electric vehicles and so on;
• removal of architectural barriers; and
• other interventions that enhance energy efficiency, such as connection to a district heading network.

There are no state-sponsored schemes in Italy that incentivise the construction of new green buildings. However, it is possible to obtain a grant from the European Union to build an eco-sustainable wooden house to use as a first/main home.

9.5 What types of environmental certifications apply in your jurisdiction?

In order for a building to be sold or leased, an energy performance certificate (APE) must be prepared for that building by an architect, a structural engineer or a surveyor. It must then be handed to the buyer or tenant prior to entering into the contract, or must be mentioned in the contract or attached thereto.

The APE has the same content as a British energy performance certificate. Both reflect the format set out in Directive 2002/91/EC.

10 Trends and predictions

10.1 How would you describe the current real estate market and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The Italian property market is a 'tale of two cities'.

Residential properties have generally been decreasing in value over the last 15 years or so. However, the top-end residential market in big cities and art capitals has remained strong. Luxury properties in places such as the Emerald Coast in Sardinia, the lakes in Northern Italy and Puglia are still very much in demand, especially by foreign buyers.

Rents for flats and small retail units have, in the main, been stagnating and are not keeping track of inflation.

Industry and light industry have been suffering due to the general state of the economy after the COVID-19 pandemic. However, some markets are still very active, such as the market for warehouses located in and around big cities.

Demand for hotels also remains very strong. Over the last few years, there has been fierce competition – particularly among foreign institutional investors – for luxury hotels in top-end destinations.

The development of greenfield and brownfield sites has generally been weak in recent years. Italian banks have not been financing such developments and foreign investors tend to shy away from such projects, largely due to the complexities of Italian planning law. New residential developments that have been completed in recent years have generally been self-financed.

In terms of future developments, possibly the most important one is the recent approval by the Italian Parliament of the framework law for the reform of the Catasto, which will enter into force on 1 January 2026.

The reform seeks to address several shortcomings of the Catasto – mainly in relation to how the rateable value of properties, which informs the payment of the Italian equivalent of stamp duty land tax (see question 5.8), is determined.

Rateable values were generally much lower than market values before the property markets started falling in 2009. Ever since, as market values fell, they have been converging with rateable values. However, the two are still very much out of sync and there is an element of unfairness in the way that rateable values are set in the first place. For example, the rateable values for retail units are inflated because they assume a profitability that no longer exists in an era when online shopping has taken hold and the high streets have been decimated. Generally speaking, though, the rateable values must be adjusted upwards.

The reform of the Catasto will hopefully address such issues, although it is mainly perceived by Italian citizens as a 'money grab' by the government, which is obviously interested in increasing tax revenues. The changes are set to be achieved partly by empowering local government in relation to the assessment of real estate. In remains to be seen whether Italy's typically under-resourced local authorities will be up to the task.

11 Tips and traps

11.1 What are your top tips for the smooth conclusion of a real estate transaction and what potential sticking points would you highlight?

Our top tip for foreigners looking to buy property in Italy is to acquire a degree of familiarity with how the Italian conveyancing system works. They should not make assumptions based on how things work in their own country.

For example, Italian estate agents act in the knowledge that their entitlement to fees is established by law (see question 5.6), which means that they occasionally 'forget' to tell a foreign buyer that they will charge a 3% commission. The first time the foreign buyer finds out about the fee is usually when it is presented by the agent with the contratto preliminare to sign. The contratto preliminare is often presented by the agent as a mere formality, like a booking form. In fact, the contratto preliminare is a powerful tool in the hands of both the buyer and the seller (see question 5.1).

Foreigners that embark upon development projects should also be aware of the difficulties in in navigating Italian bureaucracy. Even arranging basic things such as electricity and water supply to the building site can be complicated and can take an inordinate amount of time and effort. This in turn causes the developer to become overly reliant on local 'fixers' – typically the contractors who do the work – and often these people end up taking advantage of their position of power.

Hence, engaging capable Italian lawyers at an early stage of an acquisition or redevelopment project is key.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.