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The deferred possession of real estate in Italian Law

  1. Introduction
  2. What is deferred possession
    1. Legal possession
    2. Material possession
  3. When it is useful to agree for to deferred possession
  4. The protections in the case of deferred possession
    1. The penalty
    2. The price deposit

Introduction

With deferred possession, the parties agree on a delivery date for the property later than the deed of sale (or deed of purchase).

Deferred possession of the real estate is an option that is not widely used but can go against various requirements.

This mechanism can carry risks, especially for the buyer. Therefore, it is important to understand how it works in Italy and what protections and strategies to adopt.

What is deferred possession

Deferred possession (also called deferred delivery) occurs when the parties of a real estate purchase, buyer and seller, agree that the deferred delivery of the property (or rather the keys to the property) will take place at a different and later time than the conclusion of the notarial deed of purchase.

To fully understand this mechanism, a distinction must be made between legal possession and material possession (for the possession in general in Italian Law https://antonellolawfirm.com/2024/06/27/the-possession-in-italian-law/).

Legal possession of the property is transferred to the buyer at the time of the deed of purchase.

Material possession

The parties may stipulate that material possession is also transferred to the buyer at a different time than the purchase and sale itself.

Possession can thus be:

When it is useful to agree for to deferred possession

This option can be very useful in numerous circumstances.

Among the most common are those involving the need for the seller to proceed with the sale of the property but, at the same time, to continue occupying it for a later period of time after the deed.

Another scenario is when the property is leased to tenants.

Sometimes it may also be the buyer who, for a variety of reasons, intends to proceed with the purchase of the property, but likes the seller, where available, to remain in the same at a later time.

The protections in the case of deferred possession

As we have seen, deferred possession is a very useful scheme in numerous cases, but it is not without risk, so it is important to follow some special precautions.

First, it is essential to clearly express this will or need already at the negotiation stage.

In addition, precise timelines for (material) transfer of possession must be established.

And it is essential to include an appropriate clause in the deed of sale, and in case there is a preliminary contract in that as well.

Finally, an option that is not widely practiced, but certainly deserves a mention is to proceed with the conclusion of an insurance policy for possible damage to the property.

In spite of this, however, there remains the risk for the purchaser of not taking possession of the property on the deferred date. This is precisely why there a penalty for delay and the use of the price deposit can be insert in the contracts.

The penalty

The parties may include in the deed of sale (and also in the preliminary contract) a penalty to be paid by the seller for each day of delay than the deferred date of delivery of the property stipulated.

The price deposit

Through this institution, the buyer can deposit the purchase price into a dedicated bank account of the notary, which will be paid into the seller’s bank account once the seller has vacated the property (for the price deposit in Italy https://antonellolawfirm.com/2024/03/10/the-price-deposit-in-italy/ ; and Q&A https://antonellolawfirm.com/2024/03/15/the-price-deposit-frequently-asked-questions/).