Technical and legal due diligence for properties and companies

Before purchasing a real estate property, its legal status and history and functional and technical characteristics must be known. Completing an exhaustive expert analysis both provides the buyer with a guarantee as to the status of the property and provides an opportunity for the seller to present their property in a trustworthy manner. The analysis should be carried out in coordination with real estate lawyers who research the property’s legal status, and surveyors or engineers who study the technical characteristics of the property.

A due diligence report is composed of several parts providing a comprehensive understanding of the property and its features. This includes its location and reachability, characteristics of the surrounding area, description of the estate including total area and disposition of the spaces, and a history of the property and its building. The introduction aims to familiarize the potential buyer with the property’s main characteristics and any documents related to it. The core of the report provides a thoroughly examined legal and technical analysis of the property to establish a comprehensive understanding of the property’s status. The report may also summarize any additional steps needed and the resources needed to complete these steps. Finally, recommendations and advice may be provided based on the findings.

Legal due diligence

The purpose of the legal due diligence is to ascertain if the unit complies with all regulations and is available for sale with or without any burdens. Research is done on the ownership title and the property and title transfer history. The purpose is to determine the seller’s right to sell the property and any complications that might arise. A comprehensive research of all related documents is performed. Burdens and complications may result if a creditor issues a claim, if mortgages exist on the property, or if the property has been used as collateral. In addition, there may be third-party rights to the property (easements) including the right of passage, the right of parking, the right of a view, or an easement by law. Easements do not endanger the ownership title on the property, but do affect the owner’s exclusive use of it. A research of the registries and documents concerned will be completed in order to establish if there are any rights to it.

Further legal advice can be provided as to the taxation scheme applicable for the deal. The due tax may vary depending on various factors. This part of the report is to be completed by competent real estate and tax lawyers.

Company due diligence

A company due diligence is part of the legal due diligence given a purchase of property owned by a company or other legal entity. The legal due diligence intends to establish the ownership titles, burdens and third party rights over a property subject to a sale, and purchase agreement. A technical due diligence, explained below, is usually done as well. The two documents give the potential buyer an exhaustive understanding of the real estate unit and its status and features. It is drawn up by the joint work of lawyers, accountants, engineers and surveyors.

A company due diligence for the purchase of a real estate property enables the buyer to avoid any potential future revocation actions by better realizing the financial status quo of the seller company. A creditor claim of company assets, including the company real estate, can hinder the sale of the property. Completing a company due diligence on a company owned property is a vital step for closing a successful purchase deal.

The content of a company due diligence generally includes basic information about the company and involves an analysis of the company’s solvency, shareholders’ rights, assets and liabilities, and recent balance sheets and income statements. These investigations are used primarily to determine the company’s ownership and ascertain whether there are any parties that might have rights over the given property. All the information obtained needs to be carefully analysed and presented within the due diligence report so that the interested party can analyse the financial capacity of the company and choose whether to enter into any contractual agreements with it. 

We provide attentive inspection of all publicly disclosed documents of the company assets; report, advice, and translate all documents; complete an exhaustive survey of the seller’s rights and solvency; do a comprehensive research on the property’s status; perform on-site visits of the property and research and review its plans; and provide a full summarization of our findings in a company due diligence report.

Technical due diligence

The technical part of the report aims to establish the unit’s characteristics and status and provides the potential buyer with an evaluation as to any steps that might need to be completed to guarantee full functionality of the unit. An expert surveyor/architect/engineer visits the site and studies the respective documentation to establish the state, maintenance, urban planning, and land registry status of the building. A report on the building’s installations and the unit’s planning status is included. An energy performance certificate and a certificate of habitability are included, both of which are mandatory documents in the case of sale and purchase of property. In addition, any building restrictions will be inspected and a verification on the data provided from the Land registry shall be completed. 

Form 

The property due diligence is not always an obligatory document for closing the deal. In some of Italy’s regions, however, the associations of notaries have reached agreements to require a legal and technical due diligence to be presented upon signing of the final deed. In these regions a due diligence report is obligatory for the transfer of property and for finalizing the deal in front of a notary. The document may also be required by banks when applying for a mortgage or when using the property to guarantee a loan.

OUR SERVICES

Our expert team of real estate agents, lawyers, accountants, architects, and surveyors leads foreign investors smoothly through the entire process of purchasing a property in Italy.

Specifically we assist foreign investors by:

• providing due inspection of all preliminary documents and informing clients on the content, providing translations when necessary. Documents include land register plans, energy rating certificates, and certificates of habitability;
• completing a survey of the seller’s rights and solvency in the case of a property owned by a legal entity;
• ascertaining property rights and burdens on the property;
• carrying out on-site visits, studying the property and its plans;
• evaluating the property;
• offering an itemized summary of our findings in a technical and due diligence report.