Choosing your coveted new luxury home can be a highly fulfilling experience but there is at least one part that intimidates most buyers: the legal process. This is especially true for foreigners because legal regulations and procedures can vary significantly from country to country and over the course of time.
We have asked a group of qualified legal professionals with significant experience in property transactions, to give us an overview of the legal process in their countries and introduce the main issues.
UK - Domenic Pini, Partner at Pini Franco LLP
One of the most typical differences with other countries is that, under English law there are two distinct types or ownership, freehold (full ownership – for an unlimited period of time) and leasehold (limited time ownership - normally 125 years). If you buy an apartment in a condominium you normally have to buy a leasehold which is a contract that allows your exclusive possession for the duration of the term subject to complying with the obligations contained in the lease contract. In addition, since recently, it has been possible to purchase a leasehold and also have a share in the freehold, by buying shares in the freehold owning company. This is known as a part freehold purchase.
From a legal perspective it is important to carry out a due diligence on whether the seller has the proper title to the apartment, what restrictions apply, what condominium charges are, what local authority requirements there may be as well as reviewing the contract. These checks are usually carried out by a lawyer (notaries are not used in the UK). Under English law “caveat emptor” (let the buyer beware) applies so that if checks are not carried out and the buyer acquires a defective title there is no remedy except for fraud or misrepresentation of facts. In addition it is always advisable to appoint a surveyor to check the construction of the apartment and to see whether there are any faults.
Once the checks have been completed both sides sign final copies and send them to each other. This contractual procedure is legally binding and normally requires the payment of a 10% deposit. Once signed the buyer and seller cannot withdraw without paying compensation and they normally proceed to closing. At closing, the title of the apartment is transferred to the buyer on payment of the balance of the price.
Italy - Tommaso Francalanci, Director at Commercialisti Consulting
In Italy, the title of a property is exchanged in front of a notary at the time of purchase deed (rogito) while the payment is generally made in different tranches starting from the acceptance of the irrevocable offer or alternatively from the preliminary agreement.
There are many cases in which a property is “sellable” (so the Notary could make the deed of sale) but after the purchase the buyer can discover issues that impair the value of the house and even the possibility to resell it in a reasonable time. For this reason, as soon as the buyer has identified the property they want to purchase we suggest to carry out a legal and technical due diligence which can last as little as 10-15 days and include the following activities:
- Check the general planning of the city hall, in order to assess if new or existing buildings and infrastructures can be placed or built up near the property
- Control the structure of the house and make a general survey of the technical construction
- Verify at the property register (“Conservatoria”) if there are any liens, constraints or mortgages on the property
- Examine the previous purchase deeds. For instance in many cases when the last deed is a donation, there could be the risk of having revoked the sale with a big loss of money.
- Check the seller’s financial situation for any risk of bankruptcy
Switzerland - Benno Hafner, Owner at Hafner & Hochstrasser
For a non-resident, acquiring a residential properties in Switzerland may be complicated because the federal law comprises some specific provisions which are to be considered carefully in advance. In particular also citizens from a EU member state, who do not have their legal and actual residence in Switzerland, are covered by this restriction. On the other hand there is no restriction to acquire residential property for Swiss citizens (or Permit C holders) and for foreigners, i.e. non Swiss residents, who are willing to move their first residency to Switzerland if the property in question serves as their primary residence.
Non-residents generally need an approval from the competent cantonal authority, to acquire non-commercial real estate in Switzerland. An approval will be granted only under the restrictive provisions stated in the federal and cantonal law, for instance in case of non-residents who have particularly strong relations to the concerning location, or for holiday apartments if the contingent for second homes for that specific community is not yet fulfilled, or for apartment-units in an apart-hotel complex. If the former owner of the property has already received an approval then the new buyer does not need to apply for an additional approval again. Moreover, each canton can define special locations where foreigners are allowed to acquire their secondary home. There are also some exceptions, which make it possible to acquire a property without approval. It can be advantageous to contact a local professional who can explore the legal possibilities that are available.
When it comes to the due diligence process, Switzerland is well organized. All properties (apartments, villas, chalets, condominiums, houses, land etc) have to be registered in the official land registry. The land registry is public and organized by region; it contains the mortgage register and all the information on the property itself. Everyone who has an interest in buying a Swiss property can ask the registry office to get an extract of the land in question with all legal titles, mortgages, restrictions, encumbrances and easements. The purchase and sale of the land needs a public deed which a local notary has to draft. Usually, the due diligence is done by a lawyer who then mandates a notary to draft the transaction deed.
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