Subject of the reform. What is it?
The Notariat has prepared a number of amendments to the provisions of the contract of sale relating to a property yet to be built which was introduced into our legal system by Legislative Decree no. 122 of 2005.
The proposal is prompted by the need to promote the use of this contractual arrangement which is now rarely used because current regulations place heavy obligations on the builder to protect the buyer.
Under the current rules, the contract on a property whose construction has not been completed may be stipulated provided the builder, at the time of the contract, provides the buyer with a bank guarantee (fidejussion). The bank guarantee issued by the manufacturer, on pain of nullity of the contract, is supposed to protect the buyer against the risk of bankruptcy, or more generally the insolvency, of the builder. The provisions in force show an imbalance of interests of the parties since, on the one hand, the buyer has a guarantee, which has often proved insufficient, while on the other hand, for the builder it is unduly burdensome to obtain the required bank guarantee.
Purpose of the proposal. What are the benefits?
With this proposal we have attempted to balance the needs of both parties by encouraging the stipulation of contracts for buildings under construction.
In particular, the manufacturer is obliged to give the purchaser a bank guarantee not in all cases but only where he has received interim payments or part of the price from the buyer.
The same guarantee is also required whenever the price includes finishing work that the builder must complete but has not yet completed.
A further more specific option provides that the buyer may waive the bank guarantee in the event that the preliminary contract on the property to be built has been registered, so that in the event of default by the builder the purchaser may request the court to order performance of the final contract.
In the event that the manufacturer does not furnish a bank guarantee, the proposal provides, instead of the current nullity of the contract, a fine equal to 5% of the price of the asset.
The proposed amendments will make the builder’s obligations less challenging and more sustainable without affording fewer guarantees to the buyer who is still protected if he has paid advances or part of the price, as well as if he has registered a preliminary contract.