Most Americans are used to the idea that real estate commissions are only due upon the completion of the purchase or sale of property, also known as the closing. It’s worth noting that in other countries, customs and laws may be different, as is the case in Italy.
I recently a Facebook post with a series of comments lamenting the fact that in Italy, commission is due typically at the signing of the preliminary contract. This is due to a particularity in Italian law, specifically Article 1755 of the Codice Civile (civil code) that states: Il mediatore ha diritto alla provvigione da ciascuna delle parti, se l’affare è concluso per effetto del suo intervento (The agent has the right to commission from both parties if the deal is concluded as a result of his intervention).
But what does ‘the deal is concluded mean,’ exactly? Isn’t that the closing?
Italian law goes on to clarify that the deal is concluded con il sorgere di obbligazioni (with the establishment of obligations), which can be financial or otherwise. In Italian real estate practice, there are three contractual stages to buying a property. The first is the Proposta (the offer) which establishes the purchase price, timeline, and other general details of the real estate deal. This is followed by the Compromesso or Contratto Preliminare (preliminary contract), which legally binds the parties to the complete the deal by creating financial and legal obligations. The final stage is the Rogito (closing), where both parties sign the deed and the final sum is due.
The Italian courts have established that a vincolo giuridico (legal obligation) is also a necessary element for determining when the commission is due and that this legal obligation is most often established by the preliminary contract.
Great! So commission is always due at the signing of the preliminary agreement?
Well…no. There are instances where a preliminary agreement is not used in a real estate deal as the preliminary is not required by Italian law. In these instances, there is often a clause in real estate contracts that reads something like this: “in the instance a preliminary contract is not used, the commission is due at the notification of the acceptance of the offer.”
Remember to always read contracts carefully and search out the help of a translator or bilingual agent if necessary.
Is there a way for me to know ahead of time exactly when the commission is due?
YES. When the commission is due will be established by the first document you sign with an agency. If you’re using an agency as a property finder, it will be established in their contratto d’incarico di ricerca e di mediazione (real estate search and brokerage agreement). As a seller, this will be established in the contratto d’incarico (real estate brokerage agreement) for the sale of the property, or as a buyer, it will be established in the proposta (offer). By signing these documents, you are legally bound to pay the commission at the time established in the contract. If you don’t like the timeline established there, feel free to negotiate for a timeline that works better for you before signing them.
And if I don’t pay?
Many commenters in the above mentioned Facebook thread went on to say things like ‘don’t pay it’ or ‘never pay before the closing.’ BE CAREFUL WHEN MAKING THESE TYPE OF DECISIONS IF YOU SIGNED A CONTRACT ESTABLISHING WHEN THE COMMISSION IS DUE.
You typically have 20 days to pay the commission after the invoice has been issued by the agent or agency. If you don’t pay, the agent or agency has the right to ask for a judicial injunction demanding payment. In the case that this injunction goes ignored, the agent or agency can request that a lien be put on your property or accounts in Italy to satisfy payment.
What if the deal falls apart before the closing? Do I still owe the commission, or do I get that back?
If the deal falls apart after the signing of the preliminary contract, the commission is still due. A deal can fall apart for a variety of reasons, but a good agent will do everything they can to avoid letting that happen. The Italian courts have established that the commission is NOT due if the deal falls apart after signing the preliminary contract in the instance that the deal fell apart due to the failure of the agent.
When else might commission not be due?
It’s also important to note that by law, an unlicensed agent is not owed any commission. The phenomena of unlicensed agents in Italy is rampant. When in doubt, ask to see their license. You can refuse to pay commission to unlicensed agents.
“Real estate lawyers” are a very new thing in Italy. A “real estate lawyer” without a real estate license is considered an unlicensed agent and is not legally owed any commission. They may ask for fees related to legal advice, contract services, etc, but not for commission. As above, when in doubt, ask to see their real estate license.
Commission is also not due in the instance that you are buying directly from a private seller or in if you are buying a property that is owned by and being sold by the agent.
Using a licensed, professional, bilingual real estate agent who can clearly explain and communicate the intricacies of Italian real estate can save you time, headache, and money.
