Did you know there’s actually an alternative way to sell your house in Italy? A loophole in Italian law means you can sell a property but still stay the legal owner, and it’s called vendita immobile con riserva di proprietà. To understand how this particular formula works and what the implications are, idealista/news talked to Giampaolo Marcoz from the National Council of Notaries.
What's all this about?
"Property sales with reservation of ownership, or agreement of reservation of ownership,” says Marcoz, “is a formula of sale governed by the Italian Civil Code according to which the buyer enters the material availability of the goods purchased at the time of signing the deed, but the property of the seller remains until the full payment of the price has been made, i.e. until the payment of the last instalment.”
How does it work?
"The sale with reserved ownership is used in cases where the buyer needs to enjoy the property they have purchased immediately but cannot yet pay the full price.
“The seller is willing to cede their use of the property, but wants to be exempt from risk and above all ensure that the buyer keeps their commitment and pays the agreed price, without delay.
“In the event of non-payment by the buyer, the seller can terminate the contract and ask for the release and material return of the property by appealing to the judicial authority. They shall in any case return the instalments received, but shall have the right to retain part of them as fair compensation, in addition to compensation for any damage suffered.”
What are the advantages to the buyer and seller?
"The buyer immediately obtains use of the house and can then begin to enjoy it for themselves and their family, plus is granted a deferred payment without having to apply for a bank loan.
“The seller is free from the risks deriving from the house the moment they hand it over and is therefore exempt from any related responsibilities; they can also increases their chances of selling the property because they don’t require the entire price to be paid and nevertheless maintains legal ownership of the property and has all the relative guarantees if the buyer defaults.”
What are the disadvantages of this?
"The sale under retention of title has some critical issues. The first is that of taxation; in fact, the buyer, even though they do not become the official owner of the property, is required to pay the property transfer taxes upon conclusion of the contract. This circumstance limits the use in all those cases when the buyer is still uncertain whether or not to make the purchase.
“One big disadvantage for the seller, on the other hand, is the loss of the material availability of their goods and their consequent use by the buyer; this situation exposes the seller to a significant risk of deterioration of the goods, which could have a significant impact on the choice of the seller.
“Finally, the seller will have to resort to a court if they want to get the property back against the will of a buyer who has not respected the agreed payments, resulting in the use of significant financial resources in a protracted legal battle.”
Is this a common thing in Italy?
"This is a formula that is not very widespread in the Italian real estate market, but does see a greater application in the sales of businesses. However, it can be very interesting as an alternative to buying and selling with a simultaneous mortgage loan from the bank.
“The need for recourse to the judicial authority in the event of non-compliance makes this legal arrangement less attractive, but could help reconcile the interests of both parties if needs be.”