Why buying a hotel in Italy? What is the purchase procedure? Italy is one of the most visited tourist destinations in Europe due to its impressive cultural heritage and rich natural resources. Investors are paying close attention to the Italian hotel property market, monitoring the emergence of attractive offers in major cities and resort areas.
Hotel in Rome with Piazza del Popolo view
The Italian hotel market is dominated by small hotels with 30/50 room and managed directly by the owners. There is an increased trend towards the share of hotel chains, as well as an increase in the business segment and a decrease in 1-2 star hotels. In Italy, is is possible to buy a pre-owned hotel with a ready-made business and management company, repair or modernize a pre-existing business, or build up a hotel from scratch.
The procedure for buying a hotel property in Italy is significantly different from purchasing residential property. Let’s consider the key aspects of this process, which takes place throughout several stages.
Hotel selection
For the hotel selection to be effective, it is necessary to clarify the request according to the following criteria:
- Estimated hotel location – city, sea, spa;
- Number of rooms and type of hotel (mini-hotel, business hotel, hotel on the coast, resort hotel, thermal hotel etc.);
- The proposed activity is a ready-made hotel with a tenant, a hotel for its subsequent management, a hotel or a building subject to reconstruction, starting a hotel and resale or lease to a management company.
Professional search order
The signing of a professional order to search for a hotel in Italian with a translation to Russian, where the compnay data for the potential buyer must be indicated and presented.
Non-disclosure agreement (NDA)
In addition, a specialist from the agency selects suitable options for hotels, including hotels outside the “off-market.” The offers that are sent indicate the main characteristics of the objecrts and the requested price. For details on eligble properties, a Confidentiality Agreement (NDA) must be signed. A potential buyer recieves confidential information about the hotel – name, address, floor plans, and key financial indicators.
Letter of interest LOI
In case of interest in the acquisition of an object, a Letter of Interest (LOI Letter of Interest) is drawn up in the name of the hotelier. A security deposit of an agreed amount is transferred to the deposit account of a trusted notary to confirm sincere intentions. The object is removed from the sale, and the potential Buyer has access to the data (data room), which is the documentary base of the hotel (cadastral extracts, ownership documents, balances, commercial permits, licenses, leases, contracts with suppliers , documents and permits, etc.).
Due diligence
From this moment on, a potential buyer begins to conduct a technical due diligence examination with the involvement of his trusted specialists: auditors, engineers, technicians, a notary. Usually the examination lasts from 1 to 1.5 months, the work of specialists is the responsibility of the buyer. At the end of the examination, the specialists draw up a report on the real estate of the object.
Irrevocable offer
In the event of a positive outcome of the examination, an irrevocable offer is drawn up for the purchase of a real estate property, which specifies the data of the Buyer and the Seller, a detailed description of the object, the terms for drawing up the Preliminary and final sales contracts, and payment terms. If, during the examination, land registry or building violations, tax arrears or other inconsistencies have been found, the Seller must eliminate them before concluding the final sales contract.
Upon signing the Irrevocable Offer, a cash advance is paid (usually 10% of the offered price). If the Seller accepts the Irrevocable Offer, this amount becomes a confirmation deposit. If the Buyer fails to fulfill his obligations under the Irrevocable Offer, the deposit amount will not be returned to him, in case of default by the Seller, he is obliged to return the confirmation deposit in double amount to the Buyer.
Preliminary agreement
The next stage of the transaction is the preliminary contract and before signing the buyer or the buyer’s company must obtain a tax code from the local tax authorities and open an account with an Italian bank. When signing the preliminary contract, 20% – 25% of the property value is paid as a confirmation deposit. Usually, the preliminary contract for the purchase and sale of a hotel is drawn up by a notary and is subject to mandatory registration with the tax office.
Final purchase agreement
The final phase of the transaction is the final sale contract, signed in the presence of a notary, who registers with the competent authorities. The original contract is kept in the archive by the notary, and the copies certified by him are delivered to the Buyer and the Seller and constitute a document of ownership. If the Buyer has recourse to a mortgage loan, the presence of a bank representative on the contract is mandatory. After signing the final sale and purchase contract, the procedure for the transfer of licenses, permits, contracts to the new owner begins.
If you are interested in purchasing a hotel (hotel) property in Italy, you should contact competent specialists at an Italian real estate licensing agency. The final balance with the agency takes place at the time of signing the final hotel purchase contract.