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Risks for real estate sellers

Real estate law

Risks for real estate sellers

Rescission of the preliminary contract if the seller does not declare that the property is attached. Seller ordered to repay double "caparra" (Cass. 12032/2022).

In real estate sales, people often - and rightly - talk about the protection of the buyer or the risks associated with the purchase of a property.

This sometimes forgets the risks to which the seller may be exposed, especially if no truthful declarations are made in the preliminary contract about negative registrations or about the urban planning and cadastral conformity of the property.

In the above-mentioned judgment of the Italian Court of Cassation of 13 April 2022, it was ruled that the absence of information in the preliminary contract about enforcement proceedings relating to the property to be sold constitutes a "serious breach of a definitive nature".

The fact that the rescission took place before the expiry of the period stipulated in the preliminary contract is considered irrelevant with regard to the serious breach of contract by the other contracting party.

The seriousness of the breach of contract would not be diminished by this, as the seller has the possibility to delete the negative entry before the expiry of the time limit.

In the case at hand, two persons had concluded a preliminary contract and the selling party had declared that the property for sale was free of encumbrances and restrictions, whereas the property had been subject to execution proceedings for two years. The buyer had paid an amount of approximately 500,000 euros as a down payment (and liability money).

The party promising to buy suffered damage because it could not obtain a bank loan, which had been denied by the bank precisely because of the enforcement proceedings.

Therefore, under Article 1385 cc 2 of the Civil Code, the seller was ordered to repay the potential buyer twice the down payment - amounting to approximately 1 million euros.

Therefore, it is also extremely important that the seller checks or has checked the condition of the property before signing a written sales agreement, even if it was drawn up by an estate agent, and that the buyer is aware of this.

In such cases, it is also difficult to claim compensation from the appointed real estate agent if the contract does not include a mandate to check the real estate register and cadastre.

The classification of the contract (only) as an intermediary contract, without any further mandate, as set out in Cassation Decision 19294/20, exempts the real estate agent from the obligation to pay compensation, as in this case no mandate was given to conduct cadastral and to conduct cadastral and real estate register searches.