In previous articles we explored the Supreme Court ruling no. 8230/2019 and the importance of technical and legal due diligence in real estate purchases. But what actually happens when these checks are (or are not) carried out? Here are some real cases demonstrating how due diligence can make the difference between a successful investment and a costly mistake.
Case 1: The illegal veranda that cannot be repaired
A buyer was interested in an apartment with a beautiful enclosed veranda that increased the surface area by approximately 15 m2. The asking price reflected this “improvement”. Technical due diligence revealed that the veranda had been built without any building permit and, more seriously, was not remediable as it violated the minimum distances from the boundaries required by the municipal building regulations.
Result: the buyer, informed of the situation, was able to negotiate a price reduction of 25,000 euros, considering the costs and inconveniences associated with the need to restore the authorized state. Without due diligence, he would have paid a higher price for a portion of the property slated for demolition.
Case 2: The Forgotten Mortgage
In a seemingly simple transaction, legal due diligence revealed the existence of a mortgage registered on the property as collateral for a loan that the seller claimed to have repaid. Despite the repayment of the debt, the bank had not proceeded to cancel the mortgage.
Result: the buyer asked the seller to proceed with the cancellation of the mortgage before the final deed, avoiding purchasing a property burdened by a lien that could create problems in the future, especially in the event of resale or taking out a new mortgage.
Case 3: Hidden Structural Lesions
In a single-family villa, apparently in excellent condition thanks to recent painting interventions, technical due diligence revealed the presence of significant structural lesions cleverly disguised. A more in-depth analysis revealed problems of subsidence of the foundations, with estimated costs of restoration in several tens of thousands of euros.
Result: The buyer decided to walk away from the purchase, avoiding a potentially disastrous investment. Without due diligence, he would have found himself owning a property with serious structural problems, only to discover them after the purchase when the damage resurfaced.
Case 4: The enforceable lease agreement
An investor was interested in purchasing a commercial property to start his own business. Legal due diligence revealed the existence of a lease agreement with a six-year expiry, duly registered and therefore enforceable against the buyer based on the principle “emptio non tollit locatum”.
Result: the buyer, informed of the situation, was able to negotiate with the tenant the early termination of the contract before proceeding with the purchase, avoiding having to wait for the natural expiration to use the property.
These real-world cases highlight some key lessons:
- Due diligence is not a cost, but an investment: the costs of pre-purchase checks are always lower than the potential damages resulting from undetected problems.
- Looks can be deceiving: Many critical issues are not visible to a cursory inspection and require in-depth checks by qualified professionals.
- Due diligence strengthens negotiating power: knowing the critical issues of the property allows you to negotiate the price or request interventions to be paid by the seller.
- Technical and legal are complementary: a comprehensive due diligence must cover both aspects, as technical issues can have legal implications and vice versa.
Content by the Lawyer. Gianmaria Pesce
