ITALY Law and Practice Contributed by: Guido Alberto Inzaghi, Ivana Magistrelli, Silvia Gnocco and Gabriele Paladini, SI – Studio Inzaghi
Additional representations and warranties are usually included in sale and purchase agreements, eg, those relevant to the tax regime governing the transaction. Parties usually include contractual remedies or spe - cial indemnities to cure any breach of representations and warranties preventing the termination of a sale and purchase agreement once the transfer of title has been executed. The representations and warranties generally last for a certain amount of time following the execution of the sale and purchase agreement and the purchaser will not be able to cover claims that arise following the end of the applicable survival period (which usually ranges from six months to two years, although representa - tions and warranties covering the seller’s title to the property and tax matters usually remain valid until the statutory terms provided by law have elapsed). Warranty and indemnity insurance policies providing coverage for losses arising from breaches of repre - sentations and warranties are increasingly used, par - ticularly when one of the parties (often a real estate investment fund) is to be liquidated upon completion of the relevant transaction. The policy is usually under - written by the purchaser and payment of the insur - ance premium is divided between the parties. 2.6 Important Areas of Law for Investors Investors should carefully evaluate all tax aspects of the investment. Other areas to be taken into account will vary depending on the type of investment being carried out. For core investments, a detailed evalu - ation of existing leases will be required. In relation to value-add investments (aiming to increase/create value), planning and zoning aspects should be evalu - ated in detail. Analysis of tax and planning and zoning aspects should also be conducted if the acquisition involves development projects. 2.7 Soil Pollution or Environmental Contamination Italy applies the “polluter pays” principle, ie, an owner is only obliged to carry out the relevant remediation works if they are responsible for the pollution or con - tamination. If the owner does not carry out remedia - tion works, they will not be entitled to carry out con -
struction works and, in the worst-case scenario, the public authorities may carry out the remediation works at the owner’s expense. In this case, upon the sale of the area, the public authorities should return to the owner the excess price obtained from the sale, after deducting the costs borne by the public authorities to carry out the remediation works. 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law The permitted use of an asset is set out in the gen - eral town planning scheme of the city. However, in the case of existing buildings, the construction history of each asset should also be taken into account, as it may affect the establishment of a specific use. A purchaser may ascertain the permitted use under the town planning rules in force by requesting a zon - ing certificate ( certificato di destinazione urbanistica ), from which it is also possible to discover any urban planning restrictions that apply to the asset. 2.9 Condemnation, Expropriation or Compulsory Purchase Private ownership might be subject to an expropria - tion procedure if supervening public interest arises, such as the realisation of public works or works of public interest. In this event, an indemnification will be paid to the owner of the property/land. The indemnifi - cation is at the market price of the property/land that is the subject of expropriation. 2.10 Taxes Applicable to a Transaction Non-Residential Property The sale of a non-residential property by a VAT entity to another VAT entity is VAT exempt, other than in the following cases. VAT liability will automatically arise if the seller was the developer of a newly constructed property or the entity that carried out renovation works on an existing property, provided that the sale is made within five years of the completion of construction or renovation works (this is known as mandatory VAT). If VAT liability does not automatically arise, VAT may be payable where the seller exercises the option to apply VAT to the sale and purchase transaction and
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