On insanity and purchasing an apartment …

On insanity and purchasing an apartment …

Doron Afik, Esq.
December 13, 2020

Section 34H of the Israeli Penal Code provides for the protection of insanity for criminal offenses. Similar protection does not exist for someone who decides to buy or sell an apartment unaccompanied by an experienced lawyer from a reputable firm, who holds professional insurance of a sufficient coverage, or purchasing an apartment from a contractor without an experienced lawyer who will review the agreements prepared by the contractor's lawyer. While purchasing or selling an apartment without a lawyer is not a criminal offense, it certainly indicates insanity. Why, then, do so many do so?

A transaction for the purchase or sale of an apartment is for most people one of the biggest transactions they will make in their lifetime. This is a transaction that not only is usually in very high amounts, but is in a field that an ordinary person is not sufficiently acquainted with, often stems from an emotional decision rather than economic considerations, involves enslavement to bank obligations (a mortgage) for decades, and although it seems, on the face of it, simple, when things get complicated and there is no representative lawyer, or when there is a lawyer who has no experience in complex transactions and a deep understanding in real estate or when the lawyer does not have sufficient insurance coverage, the damage can be enormous. When purchasing an apartment from a contractor, the transaction seems much simpler than purchasing a second-hand apartment. Here specifically, and especially because the purchaser is required to pay for the contractor's lawyer, many purchasers "save" the costs of the independent legal advice and prefer to assume that the contractor's lawyer (or the lawyer of the marketer of the apartments) will take care of their interests as well. This is a very problematic assumption that can entail many future costs – certainly more than the "savings" in independent legal advice.

Israeli law does not require a lawyer to have experience in a particular field (or at all) in order to engage in it and does not require a lawyer to hold a professional insurance. Thus, many young lawyers, in lack of any experience, turn to real estate – a field where fees come in a short time and are relatively high, and one can usually take an agreement template from someone or ask the other party to send it. These inexperienced lawyers usually also reduce the price they ask for and rightly so ... For them this is a job that involves mainly the use of the "copy / paste" keys of the word processor.

However, a real estate transaction, and certainly the purchase of an apartment from a contractor, certainly when the apartment has not yet been built, is a very complex transaction. A lawyer who has never appeared in Court in a real estate dispute (or is part of a firm that represents in such legal cases and such lawyer can, thus, consult with the firm’s partners) will have a hard time understanding the subtleties of legal wording. A lawyer who has not done complex real estate transactions does not know how to notice that a transaction that seems simple but is actually a complex transaction. A person who is not represented by a lawyer will certainly not be able to do so.

So what should one do? Make sure you work with a reputable law firm. Ask for confirmation of a valid professional insurance at least in the amount of the cost of the apartment (the professional insurance promoted by the Israeli Bar Association for 2021, for example, is only ILS 2.25 million coverage per case and is thus certainly inadequate for a serious real estate transaction) and when a lawyer publishes lower prices than accustomed in this field or is not part of a reputable law firm, run as if you saw a ghost. And not less important, if you have the thought of purchasing or selling an apartment or sell an apartment - certainly a purchase from a contractor - without the accompaniment of a reputable lawyer, urgently set an appointment with a shrink. It will save you a lot of money and heartache.