Buying off-plan property in Italy

What Is an Off-Plan Property?

Under Italian law, the concept of an immobile da costruire (property under construction) has a specific legal meaning.

It does not simply refer to any building work in progress. The special protection applies where the transaction concerns a property whose construction has already been legally authorised but has not yet been completed in the sense required by the applicable legislation.

The distinction is important because the statutory safeguards apply only when the legal conditions established by the legislation are satisfied. They are not automatically available for every future property or every agreement relating to land intended for development.

Whether a particular transaction falls within this statutory regime depends upon the legal requirements established by the applicable legislation and should therefore be assessed in light of the specific circumstances of each development.

Why Buying Before Completion Involves Different Risks

When purchasing an existing property, ownership is usually transferred shortly after the contractual negotiations have been completed.

With an off-plan purchase, the situation is different.

Between the signing of the preliminary agreement and the final deed, several events may still occur:

• construction may continue over many months;
• staged payments may become due;
• technical specifications may require limited adjustments;
• the developer may still have construction financing secured by mortgages;
• completion of the building may depend upon administrative procedures and final inspections.

The greatest concern for most purchasers is straightforward:

What happens if the developer encounters financial difficulties before the property is completed?

It is precisely this situation that Italian legislation seeks to address.

A System Built Around Prevention

The Italian approach is based on prevention rather than compensation.

Instead of protecting the buyer only after problems have arisen, the law requires several safeguards to be in place before significant payments are made.

These safeguards operate together.

The preliminary agreement must contain specific information required by law.

Payments made before completion are protected through a mandatory financial guarantee.

The final transfer of ownership cannot be completed without additional insurance protection.

The notary verifies compliance with these legal requirements before proceeding with the transaction.

Together, these measures create a coordinated system designed to reduce the risks traditionally associated with purchasing property under construction.

The Mandatory Financial Guarantee

One of the most important protections concerns the money paid by the purchaser before ownership is transferred.

Whenever the statutory conditions apply, the developer must provide a bank guarantee or insurance guarantee covering the amounts received, and those that will become payable, before the final deed of sale.

This guarantee exists for a simple reason.

Its purpose is preventive rather than compensatory: to protect the purchaser before ownership has been transferred and while significant payments may already have been made.

If the developer becomes insolvent or is otherwise unable to complete the transaction in the circumstances contemplated by the legislation, the purchaser should not lose the money already paid.

The guarantee therefore protects the buyer during the period in which ownership has not yet been transferred but substantial payments may already have been made.

The guarantee must be issued by an authorised financial institution and correspond to the legal requirements established by the applicable legislation.