One of the issues that most affects our clients is the management of the sale of a property of donative origin.
The third party purchaser of the donated property, in addition to the possibility of having the property taken away by the heirs of the donor, could find himself in difficulty if he needs to apply for a loan for the purchase: the bank may not grant the loan due to the lower mortgage guarantee on the property subject to donation.
Let's see what are the cases that may occur and the remedies available to protect the buyer.
The donation is a consensual contract with real effects "with which, in a spirit of liberality, one party enriches the other, disposing in favor of this of one of his rights or assuming towards the same an obligation" (art. 782 Civil Code).
The person who benefits from the donation is called the "donee".
From the codicil definition it is clear that the donation :
. is a gratuitous contract ("in the spirit of liberality", known as "animus donandi");
. consists in the impoverishment of the donor's patrimony;
. realizes an enrichment in the patrimony of the donee.
The donation requires the consent of the donee and is perfected by the latter's acceptance, expressed at the same time as the deed or notified to the donor by a separate deed; before the contract is perfected, both parties may revoke their declarations.
The donation of a real estate property must be drawn up, under penalty of nullity, by public deed (forma ad substantiam).
When the donation has as its object an immovable property, transcription is necessary (art. 2643, no. 1, Civil Code).
The law does not admit the preliminary of donation providing for its nullity: the donated goods must be present in the donor's assets at the time of the donation.
DONATION AND SUCCESSION
When the donor dies, the donative events intersect with the succession of the donor.
Even if the donated property is outside the donor's estate, and does not fall into probate, the donee and his or her successors may be exposed to claims by the donor's heirs.
The typical example is that of a third party purchaser who has acquired the donated property.
Two scenarios may occur:
1. The donee is a legitimator
Legitimate heirs are those heirs to whom the law reserves a share of the inheritance (so-called "legitimate") even in the presence of a valid will: the spouse, children and ascendants (parents and grandparents).
In the event that the equal treatment of coheirs has been altered, the law offers the remedy of collation.
2. The donee is not a legitimate heir
In this hypothesis the legitimated heirs can contest the donative dispositions creating repercussions on the third purchaser, should the donated property be subsequently alienated.
The remedies offered by the law to protect the legitimates are actions of reduction and restitution.
The purpose of the action of collation (art. 737 Civil Code) is to re-establish equal treatment between co-heirs (spouse and descendants) and not to alter the relationship between the quotas.
The institute finds application within the hereditary division; it consists in the obligation, on the part of the heirs who have accepted the inheritance and received donations when the de cuius was still alive, to confer the same goods to the hereditary mass, unless the deceased has dispensed them from this. In this case the dispensation operates exclusively within the limits of the available share (that of which the deceased could freely dispose).
What happens if the donated property has been sold in the meantime before the collation takes place?
In this case the third party purchaser does not run any risk: the collation, in fact, can be made in kind (the donee returns the asset received) or by imputation (the donee returns the countervalue of the asset).
THE ACTION OF REDUCTION
Unlike the collation, the action of reduction (articles 553 et seq. Civil Code) directly protects the heir legitimately injured or the legitimately excluded from the inheritance (pretermitted).
The purpose of this action is to have the provisions of the donation, the value of which exceeds the quota available, declared ineffective vis-à-vis the legitimates.
Here are the main features of the action of reduction:
. it may be brought by:
a) the legitimate heirs (spouse, children, parents, grandparents) who have accepted with the benefit of inventory (that is, requesting the separation of their assets from those of the deceased), their heirs or successors in title (art. 557 Civil Code);
b) pretermitted legitimates (i.e. who have not acquired the quality of heirs), their heirs or assignees;
. it is a personal, non-transferable action;
. it can only be renounced after the death of the donor (otherwise it would fall under the prohibition of agreements on inheritance).
If the legitimate beneficiary entitled to the reduction has accepted with the benefit of inventory, the reduction cannot be requested, nor can the legitimate beneficiary benefit from the reduction.
If the legatee entitled to the reduction has accepted with benefit of inventory, the reduction cannot be requested, nor can they take advantage of it :
. the donees;
. the creditors of the deceased.
The action of reduction is prescribed in 10 years from the opening of the succession (or rather, from the acceptance of the inheritance, Civil Cassation sentence 20644/2004).
ACTION FOR RESTITUTION
Once the judgment accepting the application for reduction has been obtained, the legitimator can recover the asset by means of an action for restitution, even when it has been sold to third parties, if the donor's assets prove to be inadequate.
The action of restitution is, therefore, a real action. The third party may release himself from the obligation to return the property by paying the equivalent in money to the legitimator.
The action of restitution is time-barred 20 years after the transcription of the donation.
OUT-OF-COURT OPPOSITION TO THE DEED OF GIFT
The twenty-year limitation period is suspended if the donor's spouse and relatives in the direct line notify and transcribe in the land registers against the donee and his successors in title an out-of-court deed of opposition to the donation.
Unlike the action of reduction, the opposition is not intended to establish a judgement but merely to prevent the extinction of the right to the restitution of the property.
The opposition must be renewed before 20 years have elapsed since its transcription, under penalty of loss of effectiveness.
Renunciation of the opposition never implies renunciation of the reduction, but only the impossibility, after the terms provided for by law, of requesting the restitution of the asset from the donee or his assignees.
CIRCULATION OF THE DONATED ASSET
Law 80/2005, converting the decree on competitiveness, has made some changes in order to eliminate the legal uncertainty affecting the circulation of donated property.
The current legislation provides for a double deadline after which the injured or pretermitted legitimary can no longer recover the property from the third party purchaser:
a) 10 years have elapsed since the opening of the succession and the spouse and relatives in the direct line of the donor have not notified and transcribed in the land registers against the donee and his successors in title an application for reduction. Similarly, the third party purchaser is safe if, although the 10 years have not yet elapsed since the opening of the succession, he has obtained from the legitimates a formal act of renunciation of the action for reduction (after the death of the donor);
b) 20 years have elapsed since the transcription of the donation and the spouse and relatives in the direct line of the donor have not notified and transcribed in the land registers against the donee and his successors in title an extrajudicial act of opposition to the donation.
Similarly, the third party purchaser is safe if, although the 20 years from the opening of the succession have not yet elapsed, he has obtained from the legitimates a formal act of renunciation of the action for restitution.
REMEDIES TO PROTECT THE PURCHASER OF THE DONATED ASSET
So, what safeguards does the law offer the purchaser of a donated asset to avoid the return of the asset to the heirs of the donor? Let's see them together.
1. Dissolution of the donation by mutual consent
With the agreement of the parties, the donation contract can be dissolved (even partially). In this way the effects of the deed of gift are dissolved, and it is as if the asset had never left the donor's estate.
Should the donor wish to sell the asset, the sale will take place directly between the seller (donor) and the purchaser.
2. The insurance remedy
The insurance policy cancels the risks connected with the purchase of a real estate property of donative origin; it can be stipulated both by the donor and by the donee, at the same time as the donation or with a subsequent act.
The duration of the policy coincides with the prescription of the restitution action. The sums insured take account of the commercial value of the property at the time of stipulation.
3. Waiver of the action for restitution
Whilst the action of reduction can only be renounced in the event of succession (articles 458 and 557 of the Civil Code), the renouncement of the action of restitution is valid even if the donor is still alive (the prohibition is not mentioned in article 563 of the Civil Code, which regulates the procedures for exercising the action of restitution).
The actions of reduction and restitution, although connected (restitution presupposes that the action of reduction has been carried out and declared victorious in court) are in fact independent and meet different needs.
The decision to purchase a property of donative origin must be carefully weighed up, considering all the concrete circumstances and the convenience of the individual remedies available case by case.
Have you received a property as a gift and are thinking of selling it? Are you interested in buying a property encumbered by donation but do not know how to protect yourself?
Contact us, we will help you to choose the most appropriate way.