Protection of patrimonial rights of buysers of real estate under construction

PROTECTION OF PATRIMONIAL RIGHTS OF BUYERS OF REAL ESTATE UNDER CONSTRUCTION

GENERAL
With the publication of the legislative decree implementing Law No. 210/1994, the procedural process of a regulation that aims to combine public order needs with the protection of savings has concluded. This is in light of the numerous bankruptcies in the real estate sector since the 1980s, which, according to reliable estimates, have affected about two hundred thousand families.
The subjective scope of application of this special regulation concerns individuals, buyers or prospective buyers of real estate und
er construction, who have entered into any contract with a builder, including contracts of real estate exchange and leasing, that involves the non-immediate transfer of ownership or the title of a real right of enjoyment on the property in question. At the same time, the builder is defined as the entrepreneur or housing cooperative selling or promising to sell the property under construction to a natural person or member of the cooperative, whether the property is built in-house or if its construction is contracted out or performed by third parties.
The regulation also applies to individuals who, even without being a member, have engaged in a legal transaction with a housing cooperative having the aforementioned object.

The fundamental pillars of this new regulation are based on the following aspects:

Detailed indication of the contents of the contract (detailed description of the property and any burdens on it, terms and methods of payment for the total price, details of the building permits, execution times, any contracting companies, etc.);
Notarial obligation to proceed with the deed only in the presence of the subdivision of the financing obtained by the builder and the perfection of a title for the cancellation or subdivision of the mortgage; Right of pre-emption for the buyer and limits on the possibility of revocation actions in case of the builder's bankruptcy in certain specifically regulated situations;
Establishment, at the Ministry of Economy and Finance, of a Solidarity Fund for buyers of real estate under construction, divided into autonomous sections and interregional areas, intended to ensure payment of compensation to buyers who, following the builder's submission to bankruptcy procedures, have suffered the loss of money or other assets without acquiring ownership or other real rights over the property subject to the agreement;
Surety guarantees and insurance for the property. These represent the most significant innovations in the entire regulatory framework, as for all contracts that pursue the aforementioned purposes and for which the building permit or other enabling title has been requested after the effective date of the implementing legislative decree, there is an obligation on the builder to provide the buyer with a surety guarantee for an amount corresponding to the sum and value of any other consideration received and to be received before the signing of the final sale deed/assignment of the property specified in the contract.
Additionally, concurrently with the transfer of ownership, the builder must provide the buyer with a ten-year indemnity insurance policy effective from the date of completion of the work, covering any material and direct damage to the property—and damage to third parties—resulting from the total or partial collapse of the structure or arising from serious defects due to soil issues or construction deficiencies.

CONTENT AND LIMITATION OF THE GUARANTEE
The surety must be presented by the builder, under penalty of nullity of the sale/assignment contract, which can only be asserted by the buyer, before the collection of the agreed amounts and any other consideration, and is valid until the signing of the deed of transfer of ownership or another right of enjoyment of the sold property.
The guarantee does not cover amounts disbursed by a lending party, nor public contributions already secured by independent guarantees, nor what is paid at the time of the deed or assignment of the agreed real right.
The buyer can enforce the surety only and exclusively upon the occurrence of a crisis situation concerning the builder (bankruptcy judgment, forced administrative liquidation, extraordinary administration, application for admission to the pre-arranged agreement, declaration of insolvency), provided the body responsible for the procedure has not communicated the intention to fulfill the preliminary contract or that the buyer has notified the builder of the intention to withdraw from the contract, in the event of a lien on the property.
Regarding the conditions of the surety—issued by credit institutions, insurance companies authorized to operate in the surety branch, financial intermediaries as per Article 107 of Legislative Decree No. 385/1993—it must include the waiver of the benefit of prior enforcement against the primary debtor, operationality within thirty days from the written request made by the buyer and accompanied by proof of payments made to the builder, and the inapplicability of any missed payment of premiums/commissions.
Finally, the mandatory contribution to the Solidarity Fund (not exceeding 5 per thousand of the amount of the sureties and for a maximum period of fifteen years from the effective date of the last of the legislative decrees to be issued under Law No. 210/2004) is the responsibility of the builder, but the payment is made through the surety institution, which is obliged to transmit to the fund manager, by December 31 of each year, a statement summarizing the data of all the sureties issued.

Type
Contract Guarantees.

Category
Similar to those for public works contracts.

Legal References
Law No. 210 of August 2, 2004
Legislative Decree No. 122 of June 20, 2005.

Common Applicant
Construction company or "Builder" committed to transferring real estate units.

Common Beneficiary
Individual buyer of real estate units under construction.

Usual Initial Duration
Equal to the period set for the signing of the transfer deed of the property.

Extensions
Yes, they are foreseen.

Special Clauses
Generally not permitted.

Specific Documentation to Acquire
Regularly completed questionnaire;
Preliminary contract drawn up according to the contents of Article 6 of the legislative decree;
Request/details of the building permit or any other enabling title for construction;
Investment plan and financial coverage for the entire project;
Any subdivision agreement made with the municipality and surety guarantees for urbanization costs;
Reference list of the builder detailing previously completed and ongoing real estate initiatives;
Copy of any contracts awarded to the executing companies;
Estimate of the overall surety need for the specific initiative;
Questionnaire.