I am so blessed in that I get mail every week from people with various questions about purchasing property in Italy.
A few times now I have received requests for information about leasehold estates vs freehold estates.
In California real estate, a “freehold estate” is one that is owned outright. A “leasehold estate” is a lease or rental.
In Italy and in the UK there are certain leasehold estates that to us might be similar to a co-op except that a leasehold is really just a long term rental.
It seems that certain real estate agents in our area of Calabria are now offering leasehold estates and the prices seem very low. On the surface it looks too good to be true.
So since people are wondering whether these leaseholds are a good option in the Italian real estate market, I did a bit of research and here is what I found.
How a leasehold works:
A leasehold is basically a long term rental. The “purchaser” has purchased only the right to live in the unit for a set period of time. The land the units are on is owned by a landlord or” freeholder” who charges rent for it and, through management company, maintains it.
One of the issues according to an article in The Guardian is that the landowner charges a fee for the maintenance of the communal areas. He or she can also charge for any work being done, decide who does it and how much it will cost. The leaseholders then have to pay for it.
The Guardian is a magazine in the UK and it discusses the situation specific to the UK however when we asked Ivan De Luca from Agenzia Immobiliare Casabella in Scalea, Italy, his concerns were similar.
In looking at the apartments that are available in our area under these leasehold contracts, it is unclear exactly what the situation is. It appears to me that these are individual apartments that are rented out with all of the rent paid up front to the owner of the property, but then monthly fees are paid to the management company.
The fees are not fixed and you never know when they will go up.
In addition, Ivan De Luca of Agenzia Immobiliare casabella warns that there may be hidden fees that you don’t find out about until you have paid the purchase price.
In short you are at the mercy of the property management firms. If they raise the fees you have no recourse.
Additionally property management agencies are highly variable in terms of honesty and ethics.
Another issue that concerns me greatly is the fact that it does not appear that a notaio is involved in the purchase of the rental contract.
In one of the ads I read for a leasehold through an agency, they recommended using the same attorney for the buyer and seller which could be a conflict of interest.
The role of the notaio in property purchases is clear. He is the one who makes sure everything is done according to the law. He makes sure the title is clear and that everything is in order.
There is a larger degree of safety in a transaction that goes through a notaio.
In a lease hold, you may not even know if the person leasing it actually owns the property as it appears to me that no title search is done. And you don’t know if any other encumbrances exist. In short you may buy the perfect property only to find that someone else has certain rights to it that you were not aware of.
You also do not know if the property management agents are honest. I hate to say it but I have heard of some shady deals in our area. The agents there may all be honest but you don’t know for sure.
And the Italian court system is painfully slow so that by the time you went through the courts on something like this, you will have paid out more money in expensive attorney’s fees than you would ever get back.
According to Ivan, a leasehold option may make sense in a very expensive city like Monaco or London where property prices are really high but in Calabria where you can purchase an apartment for very little money, the risks outweigh the potential benefits as you may be buying a bagful of headaches.
If you are looking for a property in Calabria, especially in the Riviera Dei Cedri regions (The prettiest place on earth) please contact us. We have purchased several properties there and have done renovations. We love to share our experiences and new found knowledge with you.
Hope you found this helpful!