Italian real estate law - acquiring real estate in Italy Interview in Manager Magazin June 28th 2005
VACATION PROPERTIES
Popular Alternative (by Karsten Stumm)
Bella Italia: Taxes on real estate purchase in Italy have been cut notably, yet the country remains a difficult place for foreigners interested in buying – unless you are prepared. Talking to Manager Magazin real estate expert Jürgen Reiß tells you how to avoid the most common problems.
mm.de: Mr. Reiß, of all countries Italy with such a high tax rate is cutting duties for real estate acquirers. Is Italy suddenly becoming chic for German vacation property acquirers? Or do the resolutions not help anyone in practice?
Reiß: Actually, they do. Those renting apartments or houses in Italy profit the most from it. But now everybody who buys property in Italy – and lives there – can save taxes.
mm.de: Which amount do the tax benefits achieve?
Reiß: In this case only register tax of 7 % of the real estate value of a developed property is due. Cataster and mortgage taxes of 1% up to 2% of the value of the property are added . It used to be much more.
mm.de: Financial benefits are certainly important. Are there maybe any common legal problems purchasing real estate in Italy apart from that?
Reiß: Obviously: Many buyers have difficulties with their preliminary contracts. Often, important parts of these contracts are simply forgotten - for example information on payment terms and tenant occupation. Then things can turn critical: People are legally bound to their preliminary contracts, which will prevail even though they may be incomplete. To implement contractual modifications afterwards can get very expensive.
mm.de: How far can such legal arguments go?
Reiß: They can take years and devour immense amounts of money. For example: One of my Italian clients had bought a property from a developer, and wanted to resell it afterwards. Seemingly, it worked; my client found a buyer for the property in a rather short time, made a preliminary contract on the subsequent purchase – and received a decent down payment.
mm.de: Then everything worked out indeed. Reiß: Not really. The first contract made with the developer was not done properly. It was voided by the developer. The consequence: Construction was left undone during the legal argument and the building was not finished by the time my client had guaranteed to his buyer in the contract. In the end my client was caught in the middle of a more than five year litigation between all the implicated parties mm.de What could I do in advance to avoid such problems?
Reiß: You should take expert advice. Good advice in advance is definitely less expensive than a multi-year litigation in Italy. And in the contract you should stipulate very clearly that the buyer is not liable for any public duty, taxes or defects of the property
mm.de: Again and again properties in Italy are offered to interested buyers far below their trading value in order to save purchase tax and capital gains tax for the buyer and the seller. How should interested buyers deal with such offers?
Reiß: Every buyer has to decide that on his own. If he accepts such an offer, he can achieve tax savings on the price. But he is breaking Italian law; Experts call this TAX EVASION. As a lawyer I have to advise against doing this, of course.
mm.de: Which penalties would be expected – or can those who are caught legalize their contracts afterwards just like illicit construction?
Reiß: Not at all. There is the risk of severe penalty . Italian tax authorities can double or triple the tax originally due. In addition, a penalty payment of 10 to 15 percent of the undeclared value of the property can be imposed.
mm.de: Buying an illicitly constructed building can mean severe problems with the building inspection in case of later extensions or modifications. How can you tell that the property has been constructed illicitly?
Reiß: By obtaining the former building permit, likewise for extensions and modifications, too. You need this document anyway. Without the permit, no purchase agreement will be valid. Another piece of advice: In case of an illicit construction the possessor should have it legalized by the building inspection afterwards. In Italy this is possible. In all cases the buyer should demand a confirmation of the legalization
mm.de: Inheritance and gift tax have been partly abolished in Italy. Can German citizens still face legal problems coming into an inheritance in Italy?
Reiß: Yes, they can. The obligation to file a declaration of inheritance and gift tax, if real estate or rights in rem such as an usufruct or a mortgage on a property are tansferred, is still in force. If you do not file this declaration you will come away empty-handed as a real estate heir.
mm.de: However, not every German heir speaks Italian. Are there prepared declaration forms German heirs can use - and where can you get them?
Reiß: Italian consulates should have them available. Unfortunately in practice, very often they don´t.
mm.de: Is it worth buying a special insurance for legal costs if you are planning to purchase real estate in Italy – and what kind of insurance has paid off according to your experience?
Reiß: An insurance for legal costs pays off in all cases, the most common litigation usually can be settled without expenses getting out of hand
mm.de: These insurances are tricky: Most of them will not be active until three months after purchase. Do interested buyers have to watch out for more traps?
Reiß: It depends. If you want to insure not only contractual claims but also claims related to the property itself and those connected to property rental, you should buy an additional insurance for the specific object you purchase.
mm.de: If you were to buy an apartment or a house in Italy, in which area would you look for it these days.?
Reiß: In Bologna, of course. Or at Lake Como, which might come into consideration for the retirement age.
Italian real estate law - Real estate purchase in Milan
Published in Real Estate-Special, Thursday, July 19th 2007 Financial Times Germany, by Floria Eder
Rising Prices level off Italy
…Italien Vigorous Building Activity in Milan
…Laborious Bureaucracy Real estate in Italy could be a good investment as long as the buyer doesn’t shirk from the bureaucratic effort related to it. Bureaucracy is no fun, and “this is often underestimated,” says Juergen Reiss from the law firm Dr. Reiss and Colleague, who have specialized in German-Italian law. The effort begins with the application for a tax ID number. Every child receives a “Codice Fiscale” (tax ID number) with their birth certificate. Extensive administrative paperwork follows. On the other hand, there are no real hurdles for foreigners except for preemptive rights for local residents. The supply in good areas is currently much lower than the demand. This is driving the prices and is leading to the situation that real estate agency fees must often be shouldered by the buyer. Property can, however, be bought privately. A simple contract is generally all that is needed to complete a legal purchase. Still, Reiss recommends an official notarization. Notary fees and taxes are added to the purchase price: between 250 and 400 Euro plus 3% to 4% of th e cadastral value. If the property is a second residence, much larger sums can be expected. In up to 90% of business dealings, at least some of the purchase price is exchanged under the table. The notary shortly leaves the room while the money changes hands, but calculates his fee based upon the full price. FLORIAN EDER
Italian real estate law - Real estate purchase in Italy
by Kirstin Hausen, Milan, interview with Jürgen Reiß, JD,
WDR Funkhaus Europa, August 2005
Introduction: Cypresses in the yard, a view on Lake Garda and for breakfast German filter coffee and a sausage sandwich. If you do not spend your vacation to Italy in a hotel but in your own house you can pick exactly whatever you like out of German and Italian habits. Vacation properties in Italy are popular, the Toscany faction sends its regards. So called rustici are the country houses made of natural stone German tourists in Italy are raving about, but do you also know the trulli? They are really on their way up. Kirstin Hausen on the latest trends on the Italian real estate market.
Script: Trulli are round, not very spacious, but quite original vacation domiciles. And they have a tradition. In Puglia, the densest populated region of Southern Italy, their tops jut to the sky everywhere. „I grew up at the seaside in Puglia. Marvellous. The water is great. Very clear and clean. Especially in the Gargano area.“ Ilaria Mancini understands the Germans buying a small house here. In the inner country there are still bargains: trulli that need to be renovated, for 30,000 to 40,000 Euros. Toscany is still very popular with Germans. Especially the little villages in the interior, from which young Italians move away to study in the cities, to work and to lead a life different from their parents´ one, are very popular. These villages are resurrected by the Germans moving in, praises the economic journalist Livio De Luca. De Luca: „ Of course this is positive. And apart from that it is foreign capital being transferred to Italy. And in Toscany and the Marche region there are cases of historic buildings being restored in this way.“ Germans just like it neat and tidy. A wild meadow behind the house might still be all right, but if the window frames need a new paint they will roll up their sleeves. Even on vacation. That impresses many Italians. De Luca: „I can only say the best about them. In general they are very consequent and reliable.“
And that makes Germans very popular real estate buyers in Italy. But watch out. Certain things here work differently from Germany. Preliminary contracts, for example, warns Jürgen Reiß, attorney-at-law in Karlsruhe and Bologna. The preliminary contract, so called contratto preliminare, is not a gentlemen´s agreement and not a declaration of intent but a legally binding contract. Therefore: if you commit yourself to buy a property and do not buy it afterwards, you will face damage claims or can even be obligated to eventually purchase the property". Sometimes problems come up after the purchase.There are property owners from Germany who had to pay fines of several thousand Euros because they had not paid taxes for their vacation domicile. If you wait for a corresponding notice in such a case, you will wait for ever. You have to calculate the ICI, as property tax in Italy is called, by yourself, go to the office and pay it.
In Brezzo de Bedero, a town of 800 inhabitants on Lago Maggiore, the mayor has especially commissioned a German speaking company to collect debts from defaulting German tax payers. „We found many people who had not paid. We sent them a letter with our tax calculation and the fine. In the end most of them turned out to have no clue.“ Nevertheless, the great majority of Italians has no objection to German neighbours. Even not in the north where Italian partisans fought a ferocious guerilla war against occupying forces from Nazi- Germany. „After all the fighting in the past we have a European Union today and it is just very positive that the peoles get on closer terms with each other.“ Simonetta Pauletti is the daughter of a partisan and knows many stories in which the Germans were the enemies. Her son Alberto cares less. Germans in Italy? Shrugging his shoulders he says: „If they do not bother us they are free to stay here.“
Spiegel-Online, April 5th 2006
Interview on the election in Italy (by Alexander Smoltczyk)
"No dungeon for the Cavaliere"
Attorney-at-law Jürgen Reiss, admitted to the bars of Italy and Germany, thinks that Italian Prime Minister Silvio Berlusconi will get away with impunity despite the charges pending against him. Talking to SPIEGEL-ONLINE the specialist for Italy’s legal system points out the juridical issues waiting for Berlusconi after the voting (out).
SPIEGEL-ONLINE: Does Berlusconi have to win the election to be protected from criminal prosecution? After all, one of his predecessors and friends, Bettino Craxi, has escaped to Tunisia at his time.
Reiss: No. The office of the Presidente del Consiglio does not protect from criminal prosecution. It is true that the Losi-Schifani law, enacted June 2003, provided for the immunity of the holders of the five most important government offices. Thereupon, the criminal trial against Berlusconi in the “SME” case had been suspended by the Milan Superior Court and presented to the Italian Constitutional Court. Early 2004 the latter one held the law unconstitutional for violating the equal protection and due process clauses. Later on, the reopened “SME” trial against Berlusconi had been dismissed, charges being barred by the statute of limitations then.
SPIEGEL-ONLINE: So could a re-elected Prime Minister Berlusconi be questioned for alleged tax evasion and bribery in the upcoming trial?
Reiss: The Italian Criminal Procedure Act provides no privilege for the holders of offices against questionings. The immunity of Members of Parliament has been abolished in 1993. In the “SME” case, Berlusconi has also been questioned in his office at “Palazzo Chigi” in 2002. Yet the proceedings regarded only Marcello dell´Utri, as the proceedings against him were not continued. He made use of his right to remain silent.
SPIEGEL-ONLINE: What would happen to him in case of a guilty verdict?
Reiss: After a guilty verdict the prosecution would decree his arrest. A prison sentence of three years or less may be suspended on probation. A prison sentence of four years or less may be served by the convicted criminal at his domicile, when he is seventy or older. After all, Berlusconi would not be likely to serve his sentence in prison in case of a guilty verdict, as he has never been convicted before and thus probation would be probable. Considering his age, a prison sentence, even without probation, would not bring him behind the bars either.
SPIEGEL-ONLINE: Among others, the „Mediaset“ trial was about a perjury by a British lawyer, married to a British Minister. How likely is Berlusconi to be found guilty?
Reiss: As hardly any details have become publicly known until now, the result of the proceedings is not certain. Yet a conviction will not be very likely, if there is no evidence beyond any reasonable doubt, as Berlusconi´s lawyers have acted with quite cunning tactics so far, spotting any weak point in the prosecution’s case and using it in favour of Berlusconi.
Besides, you have to consider that the participation of the Italian public in the Berlusconi trials is rather little, as there is hardly any interest in these proceedings. The particular reason is, that the proceedings are dragging on and have not brought any clear result yet, and therefore are found annoying by the public.
A decrease of investigating activities of the Italian prosecution cannot be remarked nor be expected, as Berlusconi´s intent to diminish their independence has clearly failed. In the upcoming proceedings the prosecution will again try everything to get a conviction. Eventually, it will be this grim endeavour one more time, which will cause a political confrontation with the investigators and eclipse the finding of the truth. As the past proceedings have shown, this will work for Berlusconi.
SPIEGEL-ONLINE: What legal options would an eventual center-left government have to break Berlusconi´s omnipotence in the media?
Reiss: One could think of strengthening the anti trust authority. A government led by Romano Prodi may enact anti trust laws, which are not really strict in a European context, more effectively, which is indispensable looking at the decreasing competitiveness of Italian corporations anyway. Prodi, who might call former EU anti trust commissioner Mario Monti into his cabinet, is well aware of this challenge. But a center-left coalition is not very likely to endeavour to abolish the numerous “ad personam” laws, as this would heat up the political debate, which would work for Berlusconi. Thus, a long-term process of breaking up the Berlusconi empire, which to see he is not very likely, is more probably to be expected.
