Real Estate Due Diligence | Property Preliminary Contract | Luxury Law

Due diligence process

One of the most important aspects when purchasing a property, is the due diligence. This preliminary process should not be skipped or given abbreviated attention because it compromises your purchase and possible future sale of your property. You need your lawyer to check all the relevant aspects of the property purchase starting from checking the presence of any encumbrances and charges. The due diligence process is not easy and straightforward, and it requires a good knowledge of the Italian law and rules, some hidden issues might in fact be discovered only with the help of a very prepared professional.

It is not advisable to sign a binding agreement before finalizing the due diligence process.

The preliminary contract is a binding agreement even though you do not acquire the ownership of the property once you sign it. This contract obliges you to purchase within the time indicated in the agreement, therefore it is strictly important that you have it drafted by an expert lawyer who will add the right clauses necessary to protect your interests.

First of all you have to make the other side aware in writing that you will not purchase the property in case of a negative feedback of the due diligence.

In fact when showing your interest in a purchase, you need to be very carefull in not getting involved in any obligation without having first finalized the due diligence process. This fase is strictly important considering that without it and if you discover some hidden problems you might be required to complete your purchase anyway and this might cause expensive consequences.

Italian law protects the rights of the buyers when purchasing a property with hidden defects, however you might agree that it is better to avoid purchasing the wrong property rather than being obliged to sue the vendor for protecting your rights.

Given all the above, we can now synthesize the three most important aspects of the due diligence.

Legal due diligence: it is always reccommended to have a check on the documents in the concerned Government Offices.

The legal due diligence will help you to verify the origin of the property by looking at the original title deed and the istory of the property. If performed by expert lawyers, they will look at the cadastral details and will extract some main information depending on what arises during the searches.

Your lawyers will also check if there are any charges or encumbrances on the property and will inform you in case of any potential inheritance problems involving the property that you are willing to purchase.

He will also check if there is a rental contract in place and will inform you on your rights in case you wish to purchase the property which has been rented to third parties.

Also, it might happen that a property has been built without a valid plan permission, but that despite that it is on the market and “sellable”. In this case the due diligence needs to be very accurated and it will require more time considering the potential high amount of documentation and information to verify.

The above are just some of the few checks which we will perform.

Tecnical due diligence: this is orientated on verifying that the property is in good state and that there are not discrepancies between what is declared in the paper (planimetry) and the way the property actually looks.

Moreover, a valuation of the property is always reccommended in case you are not aware of the market value in the area where you are willing to purchase.

The tecnical due diligence also includes checks of the implants (eletricity, water implants etc.), and all practical issues which you need to discover in advance and for not incurring in the purchase of a property which has considerable hidden problems.

Economical due diligence: this requires an analysis of the value of the property by taking into consideration the place where this is located, the market trend which refers to that specific property (residential, villa, commercial etc.)

The above is just a sintetic list of what your lawyer needs to make you aware of, however there are many other searches that need to be done and they are various depending on the property that you are willing to purchase.

Always appoint a reliable lawyer who will make all these searches for you and who will inform you on any potential issues.

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