Investing in an off-plan property is ideal if you want to follow the whole property development process from start to finish…
… it enables you to realize your dream home and add those personal design touches along the way. When a purchaser makes a commitment to buy a property from a developer that has not been built yet or is in the process of being built there are a number of risks involved. This type of investment hides a number of risks, the most common being bankruptcy of the builder and the loss of the purchaser’s money.
Fortunately, there are a number of safety precautions the buyer can undertake. Italian legislation provides several different modes of protection for the buyers of properties. Italian Law 122/2005 states that the builder of such projects is obliged to offer a surety bond. This is a guarantee for the buyer to protect the money deposited prior to the transfer of ownership of the property. In case the building company faces bankruptcy or defaults on the project, this bond would ensure the buyer has their money returned to them.
According to article 2 of Law 122/2005 the builder is obliged to offer such a surety bond through a qualified financial intermediary (a bank, insurance company or financial broker authorized by the Bank of Italy) at the very least at the time of the signing of the preliminary contract required in off-plan transactions. A lack of such a surety bond within the preliminary contract will be considered void unless the buyer explicitly wants it to produce its effect. The surety has to be clearly mentioned in the preliminary contract and as mentioned will guarantee the buyer the return payment of their deposit should the project fail as a result of the fault of the builder.
In order to request the ‘excussion’ of the guarantee (the process where a creditor must proceed against a principle debtor before proceeding against a surety debtor) the buyer must formally withdrawal from the Preliminary Contract. This should be done through a written request of withdrawal by the buyer, together with evidence of payments made by them, this would then be sufficient to activate the guarantee. The surety are then obliged by law to pay the money back within 30 days.
According to article 3 of Law 122/2005 the surety bond also covers damages arising as a consequence of building defects of the property, even if these defects are discovered after the signing of the Deed of Sale. The building defects of the property covered by article 3 are listed in article 1699 of the Italian civil code. This guarantee is valid for ten years from the finalization of the building works in question. If in such cases that the seller is a different legal entity from the builder of the property, he is obliged to request a copy of the surety bond from the builder and give it to the buyer. This is part of his contractual obligation in accordance with the Deed of Sale.
We fully recommend that you contact an independent legal advisor, one who is separate from your off-plan property investment project. There may not independent impartial legal support when the lawyer is recommended by the Developer or the Real Estate Agent.