Real estate agent

According to the Italian Civil Code, an agent is a party who is appointed by one or more persons or companies to promote sales contracts within a specified territory. In Italy all qualified real estate agents are registered with the local Chamber of Commerce. In compliance with the Italian law they are usually paid a commission called Provvigione, which is generally between 2.5% and 3% of the purchase price. This is to be paid by both the buyer and the seller (if the parties have not agreed otherwise). Usually, the property owner and the real estate agent sign standard terms of engagement, which should be carefully evaluated before signing. Such engagement agreements would typically contain details as regards the agent’s fees, the duration of their mandate, and potentially, its exclusivity. Some of these terms are also established by the Italian Civil Code (art. 1742-1752). In addition, contracts may also provide for a “clientele indemnity” in case of termination of the agreement by the principal without any material default on the part of the appointed agent, and shall therefore be duly reviewed.

Specific Power of Attorney

A Special Power of Attorney is a legal document in which one person (principal) appoints another person (attorney) to act in their name and on their behalf. When it comes to contractual relations it is desirable to hire a lawyer able to guide one through the legal proceedings step by step and to work in one’s interest. Thus, an attorney is engaged to do all the legal work on the client’s behalf, and without the need of the client to be physically present at the moment of conclusion of the distinct legal actions. A Power of Attorney is to be signed in Italy or abroad – in front of any foreign notary or a commissioned solicitor (for UK, Ireland or Australia), whereby the latter is to verify the principal’s signature.

Valuation of commercial real estate

Usually, the price of commercial properties is determined on the basis of the expected income that a specific property can generate, as well as on the average market value of similar properties in the same area. The expected revenue a property can generate is usually calculated based on diverse factors. These comprise the net area that could be leased, the value of the property (per square metre) including areas occupied by external walls, the property’s location and its so-called commercial size. 

Offer

The first step to take once the prospective buyer has chosen the commercial property he/she is interested in purchasing is contacting the seller to indicate interest in negotiating in view of signing a contract further on. This offer is not legally binding, it only sets the basis for the valuation of the property along with key terms of the transaction, including whether it would be subject to external financing.

Due diligence

After the offer, when both parties want to negotiate, the prospective buyer will generally carry out due diligence investigations on the property and then confirm the initial price.The due diligence document aims to establish the property from both a legal and technical point of view-  ownership titles, third party rights and burdens, building permits, certificates, registry entries, and technical state of the real estate unit. Normally, such research would be conducted with the assistance of external experts (lawyers, notaries, architects, engineers land surveyors). When purchasing a property from a company an analysis on the company’s solvency status shall also be completed. Finally, the due diligence’s content also includes basic information on the property such as its address, location, year of establishment, structure, etc. 

Preliminary contract (Compromesso)

Being aware of the distinction between the preliminary sale agreement and the deed of sale is very important. The main idea of the preliminary contract is to negotiate the terms of the future deed. Therefore, the preliminary agreement usually contains the two parties’ mutual obligations which need to be realized prior to the execution of the deed of sale and the deadlines for satisfying these obligations (also called condition precedents). In addition to this, the Compromesso does not have a translational effect and no notarisation is required. This agreement is, however, legally binding for the parties and thus serves as a guarantee for the future signing of the final deed. This point of the transaction process might also entitle the seller to request a deposit, although this step is less common in the case of commercial properties. However, should a deposit be due it would probably be lower than the one for residential properties.

Final deed (Rogito)

The final step will be completed before a notary. Usually the notary is a professional chosen by the buyer (the latter also being obliged to pay the notary fees). At this point of transactions the property ownership is being transferred. It is mandatory for the buyer and the seller to be present at the notary’s office for the signing of the notary deed. By law, the notary reads the contract aloud, so as to ascertain that the statements made are legitimate and there are no misunderstandings between the parties. Once read and confirmed, the contract is signed in three copies by both parties and by the notary. In case one of the parties is not fluent in Italian, an interpreter shall be hired. Another possibility would be signing a Power of Attorney with a bilingual lawyer, to represent the non-Italian speaking party.  Last but not least, the vendor receives the sale price from the buyer. The money can be transferred through a Notary’s escrow account. This is a bonded client account in which the notary is allowed to receive funds resulting from the payment of properties and hold them until all conditions for their transfer to the seller have been fulfilled. 

Recent updates to the Italian Civil Code have made for additional mandatory paperwork to be presented for deeds of sale. 

The additional documents required include:

• Planning permission building certificate issued after 1967 – providing all details as regards the construction of the property, and testifying it was built in accordance to the Italian law;
• Confirmation that the property is suitably recorded at the cadastral office and that the cadastral records are correct and up-to date;
• An energy rating certificate (APE – Attestato di prestazione energetica) – a certificate that records all characteristics of an energy-efficient building. It is a control instrument that summarizes information such as the type of building, hot water provision, cooling and heating systems, energy production and installation systems. 

Failure to provide the above documents affects the validity of the deed of sale and prevents its completion. 

Merger and Acquisition (M&A)

When it comes to commercial real estate, it often happens that purchasers have interest in buying the property’s former managing company, as well as the property itself. In these cases the potential purchaser is buying a company, as a set of assets, including equipment, stock of goods and everything necessary in relation to the activity carried out on the property premises. It is important to emphasize that in these cases the sale is not a property sale, but a corporate one. M&A transactions are regulated by the Italian Civil Code, always drawn up in English and need to be signed before an Italian notary public. 

A notary, acting under such a transaction, is obliged by law to deposit the notary deed in the register of companies in which the buyer is registered (Act 310/1993). The sale of a company includes all the assets, even if they are not explicitly described. In case the buyer wants to exclude any assets from the sale, this must be specified in the deed. All contracts stipulated by the company in question before the transfer are also included in the sale, with the exception of those of personal nature. The counterparty in each contract has the possibility to withdraw from it within 3 months of the company sale’s notification date, and in presence of a just reason for withdrawal. The law protects the right of employees to keep their jobs even with a new owner of the company.  

We already mentioned the due diligence necessary for a prospective buyer purchasing a commercial real estate, and the same is applicable in case of company purchase. In addition to what has been previously explained, the company due diligence may be more complex, and also involve an analysis of the company’s solvency, shareholders’ rights, assets and liabilities.

The idea of the investigation is to determine the company’s ownership and ascertain the existence of any parties who might possibly hold rights over the given property. Additionally, the company’s recent balance sheets and income statements should be also examined in order to provide information about the corporate capitalization, reliability and solvency index of the company. The aim of those documents is to establish the company’s solvency status. As a result, the prospective purchaser, after analysing the financial capacity of the company, may once again evaluate the benefits of signing the deal.