Settembre 2017 · solo inglese

Competition Law no. 124/2017: new legal tools for closing real estate transactions before the Italian Notary Public

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Avvocati: Andrea Fedi,



On August 29, 2017 the Law no. 124/2017 (“2017 Competition Law”) became effective, with new, significant provisions to ensure greater competition in several industries.

Paragraphs 142 to 147 of article 1 of the 2017 Competition Law are dedicated to amend some articles of the 2014 Stability Law and the law on the notarial profession (Law no. 89/1913), with particular reference to the Notaries Public’ duties in case of real estate transactions. More protection for the buyer and more certainty in real estate transactions: these are the purposes of the new provisions under the 2017 Competition Law (aimed, specifically, at modifying the rules on paying the price in the hands of the Notary Public).

In consideration of the relevance of the amendments, it is expected that the National Council of Notaries Public will elaborate ethical principles in order to identify best practices to ensure the regular, timely and transparent fulfilment of the new legislative setting. Moreover, within 3 years from the publication of the 2017 Competition Law (and every 3 years thereafter) the National Council of Notaries shall submit to the Minister of Justice a report on the state of the implementation of the legislative amendments, indicating any opportune refinement and proposing any changes as it would deem appropriate.


2.1 When the new rules apply. The new provisions apply to the payment of the price at the time of closing real estate transactions, i.e., sales and other transfers of legal title, or establishment of rights in rem (such as usufruct or mortgages), or termination of rights in rem. That means that:

• the considerations paid against acquisition of mere “contractual” rights of use over an asset (as it is the case of leases) will fall outside of the scope of application of the new rules; and,

• similarly, payments of price prior or after the closing of the transaction in principle do not fall within the scope of application of the new rules (however, see below under paragraph 4.3).
The new rules apply as well to acquisition of going-concerns, please see paragraph 5.

2.2 What is the legal issue the new rules want to address. To understand the impact of the 2017 Competition Law on the real estate market, it is necessary to remind that, in Italy, a real estate transaction becomes enforceable towards third parties only after its recording in the Land Registry. Before that, the seller may transfer title to the same property to another buyer who will take precedence (irrespective of the later date of its acquisition deed) provided that its record date with the Land Registry is prior to the record date of the first buyer in time (but second buyer in recording). Also, an attachment or other judicial restriction which is recorded prior to the record of an acquisition deed will be enforceable to the buyer irrespective of whether the buyer knew or ignored the attachment or the litigation and irrespective of whether the date of the deed of sale is precedent to the date of the decision of the Court on the attachment. Only the record date in fact counts.

That situation entails that when a buyer signs the sale deed before the Notary and pays the price to the seller, there is always an inherent risk that, when such buyer would thereafter record its acquisition, it could discover that someone had already recorded another transaction on the same asset (maybe only few hours before) and such other transaction would be enforceable to the buyer.

2.3 What the new rules provide. The new rules aim at creating a mechanism that protects the buyer who has paid the price. In fact, pursuant to the new legislative update, the party which is bound to pay a price to acquire ownership or other rights in rem will be entitled to elect to pay that price to a separate and dedicated bank account of the Notary Public involved in the transaction. The Notary Public shall then use the above sums only in connection with the specific purpose for which those sums have been deposited (keeping the relevant documentation) and would release the amounts to the other party only once the Notary Public (i) completes the registration of the sale by means of recording it in the Land Registry, (ii) verifies that there are no burdens or encumbrances other than those already existing and known as of the date of the notarial deed of sale or resulting therein, and (iii) verifies the positive occurrence of the condition(s) precedent, if any.

The advantage is apparent. Until today that buyer, who discovers that an encumbrance has been recorded in the Land Registry prior to the date of record of the buyer’s acquisition, can only try to terminate the sale and request the return of the price already paid in the hands of the seller. With the new rules, the price is not paid to the seller and remains in escrow with the Notary, which of course makes easier to recover the amount if unexpected burdens on the asset are discovered after the date of the acquisition deed.

Further, the new rules allow the buyer to demand the application of the legal escrow mechanism and neither the seller nor the Notary can deny that mechanism once it has been requested by the buyer1.

2.4 How it works. The new regulation provides that the sums deposited by the buyer with the Notary Public’s dedicated bank account shall be

(i) segregated/separated from the other assets of the Notary,

(ii) excluded from the Notary Public’s heritage succession, and

(iii) non-distrainable upon third parties’ request.

Interests accrued on those sums shall be used to finance grants and facilities in favour of small and medium enterprises (Fondo PMI), in accordance with the terms and conditions that will be identified by Decree issued by the President of the Council of Ministers, on a proposal of the Ministry of Finance, to be adopted within 120 days from the publication of the 2017 Competition Law.


3.1 Pros. There are significant advantages connected to the possibility of depositing the price on the Notary Public dedicated bank account. In particular, we can consider inter alia the following scenarios:

(i) Sale of the same asset to different buyers: as said, it may be possible that the vendor sells the same property several times to several buyers, with the consequence that, among them, the effective owner, under Italian law, is to be considered the buyer who first records the transaction in the Land Registry. The other buyers may ask for the return of the price already paid, in addition to indemnification for the suffered damages, but usually there are a lot of situations where it is practically hard to have back the money paid to the seller at the time of the signing the acquisition (i.e. insolvency or non-traceability of the seller). It is clear that transferring the money directly to the Notary Public’s dedicated bank account would solve the above risk.

(ii) Burdens or encumbrances on the asset: an attachment, foreclosure, mortgage or another burden or encumbrance might be recorded on the asset prior to the date of recording the acquisition of the buyer in the Land Registry but when the closing of the sale has already occurred. In such case, it is clear the importance of the new rules under the 2017 Competition Law, as the deposit on the Notary’s bank account shall not be released to the seller until the Notary Public has verified the inexistence of burdens or prejudices.

3.2 Cons. On the other hand, there are also some disadvantages arising from the 2017 Competition Law, in particular for the seller:

(a) Interest: the seller loses the interest accrued on the deposited sums during the whole deposit period (generally not short) necessary to complete all the formalities in order to record the transaction in the Land Registry, as the price paid is not at seller’s disposal, and the relevant interest shall be used to support grants and facilities in favour of small and medium enterprises (Fondo PMI); and

(b) Re-investment of the price: in addition, the seller loses the possibility to use immediately the price paid by the buyer, until the notarial deed is recorded in the Land Registry and the price is released by the Notary Public.


The main problems arising from the new rules are related to their interpretation and scope of application, because of the many things the new law does not explicitly clarifies.

4.1 Retroactivity. One could wonder about whether it is possible to apply the new rules also to sale agreements already signed before the 2017 Competition Law came into force (August 29, 2017) but not closed yet; in fact, in those scenarios, on one hand, the common consensus of the parties on the terms of the sale has been reached prior to the new rules coming into force, whilst, on the other hand, the closing of the real estate transaction occurs when the new rules are already fully applicable.

4.2 Waiver. The other debated point is whether the parties to a preliminary sale agreement may:

- agree that the buyer commits to refrain from requesting the deposit of the price with the Notary at the time of closing the transaction trough the notarised sale deed (which is still to come at the time of signing the preliminary agreement); or

- otherwise condition/limit such right of the buyer (e.g., by stipulating that the buyer will be entitled to request the deposit of the price with the Notary only if, during the interim period between signing and closing, certain events occur or not occur).
In other terms, it is uncertain whether the new rules are compulsory, or the parties may shape them or waive to their application.

4.3 Extension by analogy. One could also wonder about the possibility to analogically apply the new rules

(i) to the disbursement of down payments at the time of signing preliminary sale agreements (i.e., prior to the final closing of the real estate transaction), or

(ii) to the payment of deferred purchase prices (i.e., after the final closing of the real estate transaction).

In principle, if the aim of the new rules is the protection of the buyer against unexpected registered encumbrances over the asset concerned by the transaction, then there would be no reason to protect that buyer only at the time of paying the closing price and there would be instead clear logical arguments to extend the same protections (i.e., the legal escrow mechanism) at the time of paying a down payment or a deferred purchase price. However, it is also true that one cannot ignore that literally the new rules cannot apply either to the former or the latter.


The new rules apply also to transfers of going concerns.

In that case, it seems reasonable to interpret the law in the sense that the Notary Public shall release the price to the seller only upon due verifications of absence of encumbrances on all the registries where the assets comprising the going concern are registered: i.e., the Land Registry, for real estates, the Companies’ Register, for shares, the Patent and Trademark Office, for intellectual property rights, the Public Vehicle Register, for cars and trucks, etc..


In the light of all the above, we recommend that the parties and the Notary Public enter into ed agreements in relation to the legal escrow mechanism and clarify as much as possible how concretely the mechanism will operate, including with respect to:

(a) the party in charge of the controls on the existence of encumbrances (if it is only the Notary Public or if also the buyer/seller might produce updated excerpts from the relevant Land Registry showing the existence of encumbrances);

b) who should bear the costs of the above controls (if the Notary Public is entitled to an extra-fee and who should pay that fee: whether the parties jointly, or only the seller –e.g., in case additional encumbrances emerge–, or only the buyer –e.g., where the controls confirm that no additional encumbrance exists), and

(c) what should be the deadline for completing the controls;

(d) what should be the timing for the price release (in order to avoid that the Notary Public may hold the transaction price for an unjustified long term) and what happens in case of dispute between seller and buyer or one party and the Notary;

(e) which liabilities may emerge in case of breach or malfunctioning of the legal mechanism (such as in case of the accidental deposit by the Notary Public on his/her personal bank account);

(f) whether, instead of releasing the price to the seller (when no additional encumbrance on the asset emerges) or returning it to the buyer (where an additional encumbrance on the asset emerges), there could be a third possibility, i.e. to allow the Notary Public to use part of the deposited price to repay and cancel the additional encumbrance (e.g., a mortgage) and release only the balance to the seller.

1The Notary Public may only reject his/her ministry if the parties do not deposit, previously or at the same time of signing the deed of sale,the amount of the taxes,feeds and other expenses related to the transaction,uless the parties are entitiled to the free benefit patronage.


La presente Newsletter ha il solo scopo di fornire informazioni di carattere generale. Di conseguenza, non costituisce un parere legale né può in alcun modo considerarsi come sostitutivo di una consulenza legale specifica.