Judicial property auctions in Italy: 6 things you need to know

Property auctions in Italy are on the rise, and 300,000 auction proceedings are expected by 2023. Francesca Cardia, industry expert at national level, reveals some interesting facts about the world of real estate auctions in Italy. Before considering buying a house at auction, here are 6 things you need to know about judicial property auctions in Italy that you probably didn't know. 

• The former owners of repossessed properties rise in priority in the ranking for the allocation of social housing.

According to Presidential Decree 616/1977, the State implements national planning in the public housing sector, but the administrative functions concerning public housing are transferred to the regions in agreement with the municipalities, which provide for the allocations. For example, the Lombardy Regional Regulation no. 1 of 2004 in Art. 14 entitled "Allocation as an exception to the ranking list" provides in its first paragraph that "The municipality that has called for the call for applications, as an exception to the position in the ranking list, or in the event of non-submission of the application for the purposes of the last published ranking list, provided that the requirements for access to the ERP as per Article 8 subsist, may provide by specific deed, as a matter of urgency, for the allocation of ERP housing to families that a) must forcibly vacate the accommodation in which they are living as a result of an enforceable measure and it is not possible to provide housing for the family nucleus according to the timeframe envisaged for the ranking, except for eviction for delinquency of ERP accommodation and/or squatting". Recall that the Transfer Decree issued by the Execution Judge, by which the ownership of the property awarded at auction is transferred, is an executive measure ordering the release of the property into the availability of the new owner.

• The costs of auction are borne by the debtor and are charged in advance from the auction revenue.

They increase over time until the conclusion of the enforcement procedure.
That is why it is important to take action now to have the auctions concluded as soon as possible, with the adjudication or clearance sale for example. The Observatory of the Italian Execution Study Table conducted an analysis showing that court costs can be up to 25 per cent lower than the adjudication price.

• Even after repossession, the debtor remains the owner of his property.

In fact, the repossession deed is transcribed in the public real estate registers, like a mortgage, but is not a title for the transfer of ownership. Therefore, all the related charges remain with the debtor owner (condominium, taxes, etc.) until the Transfer of Ownership Decree is issued by the judge, or the deed of sale is issued by the notary (Balance and Severance). In addition, all justice costs related to the foreclosure and auction are charged to the adjudication price, which is thus reduced and will serve less to cover debts. Justice costs increase exponentially with the passage of time, which is why adjudication in the shortest possible time helps the debtor to obtain a larger settlement of his debts. Listings at real estate auctions contribute to the so-called 'auction livening': the system of getting as many people as possible to participate in the auction bidding process, driving up the adjudication price in favour of the debtor (but also the creditor).

• An auction does not necessarily wipe out all debts.

If the adjudication proceeds do not cover them all, the remainder is still owed by the debtor. This point is linked to the previous one. In fact, the adjudication price, minus court fees, serves to cover the debts. But if it is not sufficient for all the creditors, the remaining difference is always due. These debts are classified as unsecured, i.e. not backed by real estate collateral. The remaining debts are the reason why the alert in the Central Risk Centre as 'bad payer' remains active, until 36 months have passed since the last debt was settled.

• The auction does not necessarily cancel all encumbrances

There are prejudicial transcriptions that, if present, cannot be cancelled by the Judge in the Transfer Decree. In Italy magistrates 'work' by competence. The judge is competent only for the execution itself, with the corresponding attachments and mortgages, but not for other possible transcriptions. For example: purchase and sale preliminaries, criminal attachments, dwelling rights, etc.

• In the event that the successful bidder does not make the due payment of the price, not only will he lose the deposit paid, but he will also have to pay any difference with the next new adjudication.

The payment of the adjudication price is a necessary prerequisite for the acquisition of ownership of the repossessed property by the successful bidder. In fact, only after payment of the price does the judge issue the Decree of Transfer of the property. If the successful bidder fails to pay the balance of the price, he will incur the provisions of article 587 of the Code of Civil Procedure: "If the price is not deposited within the established term, the execution judge by decree declares the debarment of the successful bidder, pronounces the loss of the deposit by way of fine and then orders a new auction". A new auction will then be called, but the defaulting successful bidder is subject to the sanction of the last paragraph of the same article: "If the price obtained [from the new auction], together with the forfeited deposit, is lower than that of the previous auction, the defaulting successful bidder is obliged to pay the difference".

• Find property for sale at auction in Italy