The preliminary agreement for an off-plan property

More Than a Simple Promise

Although commonly referred to as a "preliminary agreement", this contract performs several different functions simultaneously.

It records the parties' commitment to complete the sale.

It describes in detail the property that will be built.

It regulates the construction timetable and the payment schedule.

It documents the legal guarantees required by law.

Finally, it creates the contractual basis upon which the final deed of sale will later be executed.

For these reasons, it should never be regarded as a provisional document that can be completed later without particular attention.

Many of the rights and obligations governing the transaction are established at this stage and will continue to apply until ownership is transferred.

What the Agreement Must Describe

Unlike the sale of an existing building, an off-plan transaction concerns a property that is still evolving.

Under the statutory regime, the agreement must contain the minimum information required by law. This includes a precise description of the future property and its exclusive appurtenances, together with the additional legal, technical, financial and planning information required by the applicable legislation.

Depending on the characteristics of the development, the contract normally describes:

• the building project;
• the specific unit being purchased;
• garages, cellars or other ancillary premises;
• common areas;
• technical specifications;
• construction materials;
• finishes and equipment;
• architectural plans attached to the agreement;
• the technical specifications, commonly referred to in Italy as the "capitolato".

The objective is to ensure that both parties have a common understanding of what will ultimately be delivered.

The contractual documentation therefore plays an essential role in defining the future property long before it physically exists.

Building Permits and Planning Information

A protected off-plan transaction does not necessarily presuppose that the building permit has already been issued. Under the statutory definition, the regime may apply where the permit has been requested and the property has yet to be built, or where construction has not reached the stage at which the certificate of occupancy may be issued.

The preliminary agreement must state the details of the building permit or, if it has not yet been issued, the details of the relevant application, together with any other building title, notice or authorisation required by law.

These details connect the contractual description of the future property with the planning and building procedure on which the development is based.

The statutory protection therefore depends on the legal conditions established for property under construction, not simply on the fact that a final planning title has already been issued.

The Construction Schedule

Time is naturally one of the principal concerns for every purchaser.

The preliminary agreement must indicate the maximum time limits for completion of the construction, which may also be linked to the different stages of the works.

Construction projects, however, are complex undertakings.

The agreement may legitimately allow for adjustments resulting from technical requirements, administrative procedures or objectively justified circumstances, provided that these remain consistent with the contractual arrangements and the applicable legal framework.

The agreement may regulate objectively justified adjustments or extensions, but the statutory requirement for maximum completion time limits remains an important element of the contractual framework.

Paying During Construction

Off-plan purchases frequently involve payments made progressively as construction advances.

Rather than paying the entire purchase price at completion, the purchaser may pay instalments linked to specific construction milestones.

The preliminary agreement therefore sets out:

• the total purchase price;
• the amount payable upon signing;
• subsequent instalments;
• the construction stages triggering each payment;
• the balance payable upon execution of the final deed.

This payment schedule must remain consistent with the mandatory financial guarantee required by Italian law, ensuring that the sums paid before completion benefit from the statutory protection applicable to qualifying transactions.

Variations During Construction

One question frequently asked by purchasers concerns possible changes to the project.

Minor technical modifications are not uncommon during construction.

Materials may become unavailable, technical solutions may require adaptation or improvements may be introduced to comply with updated regulations or construction requirements.

The important question is not whether changes occur, but whether they remain consistent with the contractual expectations legitimately accepted by the purchaser.

Italian contractual practice generally distinguishes between changes that do not materially affect the nature, functionality or value of the property and substantial alterations that would modify the agreement originally accepted by the purchaser.

A properly drafted preliminary agreement regulates these situations clearly, identifying the circumstances in which variations may occur and establishing appropriate safeguards for the buyer.

The Developer's Mortgage

Many construction projects are financed through development loans secured by mortgages over the land and the future building.

This is a normal commercial practice and should not automatically discourage prospective purchasers.

For this reason, purchasers should not regard the mere existence of a development mortgage as an indication that the transaction is unsafe. The legal protections provided by Italian law are designed precisely to regulate these situations.

The important issue is not the existence of the mortgage itself but the legal mechanism through which the individual property will be transferred free of unacceptable encumbrances at completion.

Where mortgages or other prejudicial entries affect the property, the preliminary agreement must identify them and expressly state the obligations assumed by the developer in relation to them, including when those obligations are to be performed.

For transactions falling within the statutory regime, the final transfer must also comply with the specific rules governing the division of the construction mortgage and the cancellation or release of mortgages or enforcement entries before or, where permitted, simultaneously with completion.

Technical Documentation

An off-plan purchase relies heavily upon documentation.

Where the statutory regime applies, the technical specifications ("capitolato") describing the materials, finishes and accessories and the relevant project drawings depicting the property, its exclusive appurtenances and the relevant common parts must be attached to the preliminary agreement as required by law. Other technical and planning documents may also accompany or be referred to in the agreement according to the characteristics of the development.

These may include:

• architectural drawings;
• floor plans;
• technical specifications;
• construction schedules;
• planning documentation;
• identification of common areas;
• documentation concerning the statutory financial guarantee.

The consistency of these documents is as important as the wording of the contract itself.

Any discrepancy between the contractual description and the attached documentation should be clarified before the purchaser becomes legally bound.

Why the Notary Should Be Involved Early

Where the statutory protection regime applies to a preliminary agreement for a property under construction and the relevant building permit or other qualifying building title was requested or submitted on or after 16 March 2019, the involvement of the Notary is not optional: the agreement must be executed as a public deed or authenticated private agreement and recorded in the Italian Land Registers.

Many of the legal questions that later become difficult to resolve can be identified before contractual obligations are assumed.

The Notary verifies the legal structure of the transaction, examines the developer's title and the public registers, checks the statutory guarantee and the mandatory contents and attachments, and prepares the agreement in the form required for recording.

This preventive approach is entirely consistent with the philosophy of the Italian legal system, which seeks to resolve potential issues before ownership is transferred rather than afterwards.

Building Legal Certainty Before the Building Is Completed

Buying a property that has not yet been completed inevitably requires a degree of confidence.

Italian law transforms that confidence into legal protection by requiring that the essential elements of the future transaction be clearly documented from the very beginning.

The preliminary agreement defines the property, regulates the construction process, establishes the payment arrangements, incorporates the statutory guarantees and creates the legal foundation upon which the final transfer of ownership will later rest.

Rather than representing a temporary stage before the "real" contract, the preliminary agreement is the legal instrument that organises the entire transaction from the very beginning.

When carefully drafted and supported by the statutory protections provided by Italian law, it allows purchasers to commit themselves to a future property with a high degree of legal certainty, even before construction has been completed.

For this reason, the preliminary agreement should always be prepared with great care and should reflect the specific characteristics of the development, the contractual arrangements agreed by the parties and the mandatory protections established by Italian law.