Auctions and non-performing loans: what do you really buy, and what can the debtor do?

Enforcement begins with the attachment of the property (pignoramento) and continues before the enforcement judge of the local court. The judge appoints an expert to value the property; the expert's report must state the Italian gross saleable area, the value per square metre and, separately, the deductions for planning regularisation, condition, occupation, charges that cannot be removed, unpaid service charges and the absence of any warranty for defects ². On that basis the judge sets the base price ²³. As a rule the judge delegates the sale to a notary, a lawyer or a chartered accountant (art. 591-bis of the Code of Civil Procedure), orders at least three sale attempts within a year, and the delegated professional receives the bids instead of the court registry ⁴³⁰.

The notice of sale must appear on the Ministry of Justice's public sales portal (Portale delle vendite pubbliche) and, for real property, with the order and the expert report on specialist websites, at least 45 giorniNormattiva before the deadline for bids ¹¹⁸. The valuation report is therefore public: read it before any site visit.

Two practical points. A bid "for a person to be named" can only be made through a lawyer ⁶. The judge may suspend the sale even after payment if the price is "considerably lower" than a fair one ⁸; but the Court of Cassation reads the fair price as the outcome of a regular procedure, not market value: it takes new facts after the award, unlawful interference or a flawed valuation, not price cuts after failed auctions or a market downturn ³¹. For a buyer after several regular reductions the risk is limited; for the owner it is not a route to count on.

In judicial liquidation (formerly fallimento) the rules differ: the court-appointed liquidator sells through competitive procedures based on valuations, with at least one attempt in the first year and two in each following year; after the third failed attempt the price may fall to half of the last one ²⁶.

The starting point is one line of the Civil Code: in a court-ordered sale there is no warranty for defects, and the sale cannot be set aside for an unfair price ¹⁴. Much of the discount to market is the price of that risk. One narrow exception remains: if the property is radically different from the one described in the order (aliud pro alio), the buyer can challenge the enforcement step within 20 giorniforoeuropeo.it of the transfer order or of discovering the problem ³². There are four risks to price.

Who occupies the property. Leases with a certified date before the attachment bind the buyer; leases longer than nine years bind only if registered before it, otherwise for nine years; the buyer need not honour them if the rent is a third below a fair rent ¹⁴. Even an undated lease does not simply disappear: if the tenant was in occupation before the attachment, it must be respected for the term the law gives to leases of indefinite duration ¹⁴. For a let shop or industrial building, you are buying a contract as well as the bricks. On vacant possession: if the property is not the home of the debtor and family, or the occupier has no enforceable title, the judge orders it vacated no later than the order for sale; if the debtor lives there, the order comes with the transfer order. Either way the custodian carries it out, at no cost to the buyer unless the buyer waives it ¹¹. For business property the law therefore pushes towards selling with vacant possession; whether the order has actually been carried out has to be checked case by case.

Unauthorised works. The rule that deeds on unlawful buildings are void does not apply to court sales; if the property qualifies for retrospective regularisation, the buyer must apply within 120 giorniNormattiva of notification of the transfer order ¹⁶. The law cures nothing by itself: it opens a window, and if the works cannot be regularised you have bought a problem. A special window of 120 giorniNormattiva also exists for older amnesty applications (art. 40, para. 6, Law 47/1985), provided the debt being enforced predates the amnesty law; a Ministry of Infrastructure circular (no. 2699 of 2005) extends this to the 2003 amnesty, with the debt predating Decree-Law 269/2003 and the works completed by 31 March 2003 ¹⁶³³. Note: This is an administrative reading that does not bind the courts: check the specific case with a surveyor and the municipality before bidding.

Costs the valuation report does not close. A new owner in a building in multiple ownership is jointly liable for the service charges of the current and the previous year ¹⁵. Registration tax is calculated on the auction price ¹⁷; the exception is an individual buying a home outside any business or professional activity, who may ask for tax on the cadastral value instead ³⁴. If the debtor is a business, the sale may fall within VAT, and the regime must be checked before bidding. Note: From 1 January 2027 the consolidated registration tax act is replaced and the provisions cited here are renumbered ¹⁷²⁸.

Time. The deposit is forfeited if the balance is late, and if the re-sale fetches less, the defaulting buyer pays the difference ⁹. Anyone relying on a mortgage needs it approved before bidding, not after.

NPLs are non-performing loans. The Bank of Italy sorts them into three classes ¹⁹²⁹:

Banks sell these loans, often in portfolios. A portfolio sale is made public by entry in the companies register and publication in the Official Gazette, and mortgages pass to the buyer with their ranking, without further formalities ²¹. The buyers are special purpose vehicles and funds; recovery is run by a servicer. Since Italy transposed the EU directive on credit servicers and credit purchasers (Legislative Decree 116/2024, with Bank of Italy implementing rules of 11 February 2025), servicing bad loans is reserved to banks, financial intermediaries on the art. 106 register and servicers authorised by the Bank of Italy; the purchaser must appoint one of them; the borrower must be told individually of the sale before any recovery step; and the servicer must act fairly and transparently, without "harassment, coercion or undue influence" ²². Mind the scope: these rules apply to loans classified as bad loans (insolvent borrower, even without a court finding) ²²³⁵; for a UTP loan that has been sold, the general rules on assignment and on the contract apply. Legislative Decree 208/2025 amended art. 58 of the Banking Act, but the paragraphs on publicity of the sale and survival of security are unchanged ²¹.

There is a tax point for buyers. Vehicles that acquire the properties securing securitised loans (so-called REOCOs) pay registration and mortgage and cadastral taxes at a fixed amount, and a business buying from them can do the same if it states in the deed that it will resell within five years; otherwise it pays the ordinary taxes, a penalty and interest (art. 7.1, paras 4-bis and 4-quater, Law 130/1999) ²⁸. The vehicle-to-REOCO channel is one of the ways a property leaves a loan without going to auction.

Small relative to the total, and that matters. Bank of Italy figures for 2025 ²⁰:

Three readings, with their limits. First, the regional market for problem loans is small and largely already sold: an owner with a bad loan a few years old is likely to face a servicer rather than the original bank. Second, construction is the only sector where the default rate rose clearly in 2025 ²⁰; that is where land, stalled sites and unsold buildings may surface. Third, high coverage on bad loans says the loan is already written down on the lender's books, not that the lender will accept a given discount: it is a hint about room to negotiate, not a measure of it.

More than most owners assume, and almost always against a deadline. The routes the law provides inside the enforcement:

Outside the proceedings there is the discounted settlement (saldo e stralcio): an agreement with the creditor – or with the servicer acting for the fund – to close the debt for less, often funded by selling the property to a buyer the owner finds in the market. The mechanics are simple: the creditor consents to the mortgage being cancelled against the agreed payment, the deed of sale is signed free of charges, and the proceedings end by withdrawal ¹². It works when the market price is credibly above what the creditor expects to recover at auction, net of time and costs, and when the offer arrives documented: an up-to-date valuation by an independent valuer, an identified buyer, proof of funds. Note: Writing off part of a debt can have tax consequences for a corporate debtor; review them with your accountant before signing.

For an investor, these are the windows in which you buy from a motivated owner rather than from a judge: with open access for inspection, complete documents and a contract that can carry warranties that do not exist at auction ¹⁴.

When the problem is a business, not a single property. The Business Crisis Code distinguishes crisis (likely insolvency: cash flows inadequate to meet obligations over the next twelve months) from insolvency (the debtor can no longer pay regularly) ²³.

Negotiated crisis settlement (composizione negoziata). A commercial or agricultural business asks the Chamber of Commerce for an independent expert to facilitate talks with creditors, even when the crisis is only likely, provided recovery is reasonably achievable ²³. It may ask for protective measures: from publication of the request, the creditors concerned cannot start or continue enforcement against the business's assets ²³. By the following day the business must ask the court to confirm them, or they lapse; the court confirms them for 30-120 giorniNormattiva, extendable up to a total of 240 giorniNormattiva; employees' claims are excluded ²³. The expert's appointment runs for 180 giorniNormattiva and can be extended once by the same period under statutory conditions ²³. What matters to a buyer: the court can authorise the transfer of the business, or part of it, without the buyer becoming liable for the business debts shown in the books (art. 2560, second paragraph, Civil Code), after checking that the buyer was chosen competitively ²³. It is not a clean slate: art. 2112 of the Civil Code still applies, so employment relationships and employees' claims follow the business ²³. And until 31 December 2026 a buyer of a business in a negotiated settlement or under a crisis procedure is not jointly liable for the seller's taxes and penalties, unless the transfer defrauds the tax authorities ²⁷. Note: From 2027 the tax rule moves into the new consolidated act on penalties ²⁷²⁸.

Restructuring agreements and composition with creditors (concordato preventivo). Agreements normally need creditors holding at least 60%Normattiva of the claims (half in "facilitated" agreements, where the debtor forgoes moratoria and protective measures) and court approval ²⁴. A composition must give creditors at least what they would receive in judicial liquidation, whether through continuation of the business, sale of the assets or a third-party assumer ²⁴. In both cases, if the debtor asks, creditors cannot start or continue enforcement from publication of the application; the court confirms the protection for no more than four months at a time, and all protective measures together, negotiated settlement included, cannot exceed twelve months ²⁴. A hotel in a composition with indirect continuity – sold or leased to a new operator – is a transaction the law allows ²⁴.

Debtors outside judicial liquidation (consumers, professionals, small businesses) have the over-indebtedness procedures, run with a crisis settlement body: the consumer debt restructuring plan, in which the judge may suspend enforcement that would undermine the plan, and the minor composition for those who carry on an activity, in which the judge, on the debtor's application, may bar enforcement until final approval ²⁵.

An estate agent does not replace the lawyer, the notary, the accountant or the delegated professional, and cannot promise an outcome. It does two things none of them does for a living. It reads the property as a productive asset: leases in place, permitted use, the cost of bringing it up to standard (priced by a surveyor), a possible operator for a hotel. And it looks for the buyer, who in these situations is often the missing piece: a binding offer with proof of funds changes the conversation with the creditor. The figure to set beside the court valuation and the creditor's expectation comes from an independent valuer, not from the party then looking for the buyer. For the investor the job is the reverse: pricing the risk that a court sale leaves with the buyer ¹⁴.

We read the valuation report and the documents as a buyer would; where there is room for a sale before the auction, we look for the buyer and bring them to the table with the creditor, alongside your own advisers. We do not value property or write expert reports, and we do not decide the price a judge or a fund will accept.