Understanding Caparra: Deposits in Italian Property Transactions

buy in Italy lawyer hire or real estate agents govoni

What does the Civil Code say about deposits in Italy?

Article 1385 of the Italian Civil Code governs deposits in Italy, stipulating that at the time of a purchase contract’s conclusion, one party may provide the other with a sum of money or tangible items as a deposit. This deposit serves as an assurance for fulfilling contractual obligations. If the deposit-giving party defaults, the other party may withdraw from the contract, retaining the deposit. Conversely, if the deposit-receiving party defaults, the other party may withdraw and claim double the deposit. Damages in case of non-performance are governed by general rules.

Purchase deposits and preliminary contracts

In preliminary agreements, a deposit is typically required. This sum, paid by the promising buyer to the promising seller, acts as a guarantee. If the seller reneges on the final deed, double the deposit amount is returned to the buyer. Conversely, if the potential buyer withdraws, the seller retains the deposit. Essentially, the deposit ensures future performance, making it essential for a binding preliminary agreement.

Purchase deposit and mortgage deposit

While both involve advance payments, purchase deposits and mortgage deposits (also known as down payments) serve different purposes. The purchase deposit guarantees performance: in case of buyer default, the seller retains it, while in seller default, the buyer can claim double.

On the other hand, the mortgage deposit is solely an advance payment of part of the price. If the contract fails, the mortgage deposit must be refunded, with damages potentially claimed later.