Buying a house in Italy as a foreigner will require paying a deposit, just like everyone else. The deposit is the sum of money or the amount of other tangible things which is handed over by one party to the other at the time a contract is concluded in order to ensure the performance of the envisaged obligations. It is regulated by Article 1385 of the Civil Code. So, if you're planning on buying property in Italy, here is everything you need to know about paying the deposit on a house purchase.
What does the Civil Code say about deposits in Italy?
Specifically, with regard to house deposits, Article 1385 of the Civil Code states: "If at the time of the conclusion of the purchase contract one party gives the other, by way of deposit, a sum of money or a quantity of other tangible things, in the event of performance, shall be returned or set off against the performance due. If the party who has given the deposit is in default, the other party may withdraw from the contract, retaining the deposit; if, on the other hand, the party who has received the deposit is in default, the other party may withdraw from the contract and claim double the deposit. If, however, the non-performing party prefers to claim performance or termination of the contract, damages are governed by the general rules.
Purchase deposits and preliminary contracts
As explained to idealista/news by Giulio Biino from the association of Italian notaries, "the preliminary agreement provides for the payment of a deposit. This is the sum of money that the promising buyer pays to the promising seller. Double the deposit amount must be returned if the seller no longer intends to conclude the final deed and breaks the agreement. On the other hand, the deposit will be retained by the seller if it is the potential buyer who no longer wishes to conclude the final deed. It may be said, therefore, that the deposit takes the form of a sort of guarantee for future performance. If a preliminary agreement is entered into, it is clear that binding oneself with a deposit is almost essential; on the other hand, a preliminary agreement which does not provide for the payment of any sum doesn't provide much of a guarantee for ether part, neither the buyer nor the seller".
Purchase deposit and mortgage deposit
The deposit paid to a seller is different from a mortgage deposit in Italy, also known as the down payment. Both provide for the advance payment of a sum of money, but are two different institutions.
The purchase deposit represents a guarantee: in the event of non-performance by the buyer, the seller may withdraw from the contract and retain it; in the event of non-performance by the seller, the buyer may withdraw from the contract and demand double the amount.
The mortgage deposit or down payment, on the other hand, does not represent compensation in the event of non-conclusion of the contract, but is exclusively an advance payment of part of the price. If the contract fails, this deposit must be returned and a claim for damages may be made at a later stage.
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