The rent-to-buy scheme in Italy is opening more doors to potential house buyers wanting to move into their dream home sooner, rather than later.
Rent-to-Buy has become a rising trend in Italy since the Italian parliament introduced measures to revitalise the property real estate sector in 2014. The “Sblocca Italia” (Unlock Italy) measures have opened the door for potential home buyers unable to get a mortgage or raise all the funds needed to buy a property straightaway. Rent-to-buy allows them to live in their dream home, while at the same time better positioning themselves to raise the finance to buy it in the future. Basically, a promissory purchaser can immediately start living in the property as a tenant with the option to purchase it at a later date.
Alessandro Clemente from renttobuyhousesinitaly.com is a lawyer specialising in such transactions. He tells us: “Since the price drop of 2008-14 Italian property is now fantastic value. Even better news, is that acquiring Italian property has been made much easier by this new Italian purchasing method. Rent to Buy cuts through all the problems associated with an Italian mortgage application and can be arranged with no formalities beyond the Rent to Buy contract.”
Immediately start living in the property as a tenant, with the option to purchase it at a later date.
Here is how it works. The buyer and seller agree to a purchase price which is locked into the contract for the duration of the tenancy. The potential buyer then makes regular payments that include the rental price and an extra fee which gives them an exclusive right to purchase the property at the end of the lease period. When ready to buy, the extra fee is deducted from the selling price along with the deposit paid. Sometimes the amount you pay monthly will be entirely deducted from the price, but in these cases the property price initially arranged is higher.
How it works
The first stage is to make a rent-to-buy offer. If accepted, a formal rent-to-buy offer is signed, the property is taken off the market and you are granted the exclusive right to buy within a stipulated time frame. It is important to get a rent-to-buy expert to assist with the negotiations and to make sure the agreement covers everything including property use, option to rent out the property, length of contract, deposit paid, agreed monthly payments, tax regulations and how to action the right to buy during the contractual period. Filing of the deed with the Notary offers 10 years legal protection.
The typical rent-to-buy contract includes both the preliminary contract of sale and lease agreement in a single deed. It must be signed in front of a Notary (generally chosen by the purchaser) who has the power to file and register the Title. You will be required to pay a deposit, which is usually a minimum of 10% of the property price.
As a tenant, you will then pay a regular rent and postpone the purchase of the property until a specified future date, which may not be more than 10 years from the start of the rent-to-buy contract.
Price of property: €200,000
Monthly payment: €600 (€300 rent + €300 towards the property price)
Deposit (10% of the agreed price): €20,000
Amount after 5 years: €30,800 (€20,000 deposit + €18,000 “saved” in 5 years)
Can I rent to buy?
As British citizens are currently EU citizens, you have the right to buy a property in Italy, and this is highly likely to continue after Brexit (people from most non-EU countries can buy in Italy – read our guide to Living in Italy After Brexit). Countries that have an international treaty that allows reciprocity can also buy. As with any normal property purchase in Italy, you will need a passport ID, an Italian bank account and an Italian ‘Codice Fiscale’, which is a personal code provided by Italian Tax Office. You will also need the money to pay a deposit.
• You can move into your Italian home straight away, while getting the finances together to buy the property outright.
• You can become an Italian resident before the UK withdrawal from the European Union.
• The owner can’t sell your dream property to anyone else during the agreement period.
• There is the possibility of living in the property for a “trial period” up to 10 years, and if you decide it’s not for you, you could sell it on to a third person. It may also be possible to negotiate an “out clause” in the contract, so that you can pull out if after living there you decide it is not for you.
• You can negotiate an affordable monthly payment that suits you and the seller, knowing that part of the amount will be deducted from the property price.
• During the tenancy period, you can improve your credit rating, putting yourself in a better position for future finance.
• It is better for everyone that a property is not left empty, while the seller waits to sell.
• At the end of the process you are likely to have spent more money than if you had bought it outright at the beginning.
• There might be problems if the seller becomes bankrupt or your own financial situation changes. Although, the contract should offer protection should this arise.
• Unless stipulated in the agreement, you aren’t obliged to buy at the end of the agreed period. But, if you decide not to buy, the owner can retain part or all of what has been paid so far. This will then act as compensation for the seller.
Individual situations are unique and require local professional and legal services. A professionally prepared contract will offer protection and allow you to immediately start living the “la dolce vita” in your dream home in Italy.
The details of the fiscal implications of Rent-to-Buy are fully described by the Italian Revenue Agency (Agenzia delle Entrate) Circolare 4/E 19.02.2015).You can also reach Alessandro Clemente by telephone on +39 368 350 99 80, or via [email protected].
The process of buying property in Italy is significantly different from here in the UK. This is why we’ve created our completely free Italy Buying Guide, to provide those dreaming of a new life in Italy with all of the practical, legal, and financial information needed to help them realise that dream.