Published by carratelli4 years ago

A sale with reservation of title is a sales contract, under which the acquisition of ownership rights is, however, subject to a suspensive condition, namely payment of the full price agreed upon by the parties...

The sale with retention of title A purchase and sale contract, under which the acquisition of ownership rights is subject to a suspensive condition, namely payment of the full price agreed upon by the parties. This is a special type of purchase and sale contract used for sales with deferred payment terms and serves as a guarantee for the seller. In practice, the property is delivered to the buyer upon the closing of the deed, with the stipulation that ownership remains with the seller until it is transferred to the buyer only with the payment (split over time) of the final installment, i.e., when the buyer has paid the full price. It is similar to the buyer paying a mortgage (and in fact the price may also include interest). This is a form of installment payment, often a substitute for a mortgage, which can allow the closing of a real estate sale in cases where the buyer is unable to obtain access to bank financing. By deferring payment (in whole or in part) of the price, which is paid in installments, the seller effectively finances the purchase transaction by the buyer and is protected against the risk of default by the retention of title mechanism. The buyer immediately assumes all risks related to the property, even if they do not own it, and must therefore cover the costs of ordinary and extraordinary maintenance of the property from the time of the deed. The indirect taxes required for the transfer of ownership of the property also apply from the time of the deed, despite the inclusion of the retention of title clause. 

 

How is a sale with retention of title carried out? 

The sale of a property with reservation of ownership must be completed by notarial deed and is recorded in the public land registers as a sale subject to a condition, also to prevent the purchaser with reservation from disposing of the property during the entire period of the condition. Upon full payment of the price, a notarial receipt will therefore be required, which will allow the cancellation of the reservation and therefore the transfer of ownership to be recorded in the land registers. 

 

What are the benefits for the buyer?

  • The first advantage is certainly the immediate availability of the property.
  • The tax burden, for direct taxes and local taxes that weigh on the property, remains the responsibility of the seller.
  • Opposition of the purchase to third parties since the sale with retention of title is transcriptible.
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What are the advantages for the seller/owner?

  • He retains ownership of the property until the full agreed price has been paid.
  • Maintenance costs and the risk of deterioration of the goods are the responsibility of the buyer.
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What if the buyer stops paying? 

If the buyer defaults on payments, the seller can have the contract terminated by a judge, and the release of the property is not subject to the suspensions and risks typical of evictions. If the termination occurs due to the seller's breach of contract, the seller must return the collected installments, without prejudice to the right to fair compensation for the use of the property, in addition to damages. The compensation is determined by the judge, but the parties can stipulate in the contract how much the seller will be entitled to withhold for each month of occupation of the property.

Carratelli

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