When the ownership of an Italian property has passed by way of an inheritance (eredità), or has been transferred between generations by a gift (donazione), this may create an obstacle to the future sale, in particular if less than 20 years has passed from the inheritance or gift.
A seller may find there is increased scrutiny of the property history by the buyer, the Notary or by a bank considering a mortgage application by the buyer.
Selling inherited property
In the case of inherited property, there may be concerns that other heirs may appear years later and claim against the estate. Even if the property was passed by will, it would be possible for certain protected family members, the parents, children or spouse of the deceased (eredi legittimari), to bring legal action to declare the dispositions of the will in violation of their rights and claim the redistribution of the estate (azione di riduzione).
The legitimate heirs may bring proceedings against the estate if the inheritance is governed by Italian law. If the deceased had made an express or implied choice of a different national law in their will, it is unlikely that Italian forced heirship rights would apply. See EU Succession Regulation n. 650/2012.
Selling gifted property
In the case of gifted property, family members of the donor could potentially contest the gift, after the donor’s death. In calculating the total value of the estate and the statutory share which each heir should receive in Italian law, the value of any lifetime gifts by the deceased are taken into consideration, in addition to properties still owned at the time of death.
By way of example:
- Federico, a widower, owned three houses worth 1 million Euro each and gifted two of them before his death to the eldest of his three children, Simone.
- After Federico’s death the total value of his estate would be 3 million Euro.
- Each child would be entitled by law to a one-third share of the estate, of one million Euro each.
- Simone had already been gifted two properties so would not be entitled to a share of the third property.
- His two siblings could bring legal proceedings (azione di riduzione) within 10 years from the death of their father or 20 years from the gift, to reclaim the sum of 500.000 each from Simone, to make up the value of their legitimate share of the estate.
- If Simone was unable to pay this sum from his own assets, and only if less than twenty years had passed from the gift to him, his siblings could claim the restitution (restituzione) of one of the gifted properties, even if by then the property had been sold to a third party.
- After twenty years there is no longer a risk to the third party purchaser as the heirs could then only claim compensation directly from Simone and not reclaim the property.
One method of reducing the risk to an innocent third party purchaser would be requiring the Seller to take out an insurance policy. In that way, the new owner will be indemnified against any legal claim throughout the remaining period of twenty years in which the lifetime gift could be challenged.
A further way to elimate any risk is to require all possible legitimate heirs to sign a declaration (which must be in the form of a public deed witnessed by a Notary) that they renounce their right to oppose the gift or to bring a legal claim in relation to the property.
In reality, the risk of a third party buyer being faced with repossession following an inheritance dispute is very remote. It is far more likely that the 20 years from the gift of property will expire before all three grades of civil proceedings in the azione di riduzione have been exhausted, and that point restitution is no longer permitted.
