The Jerusalem Post: purchasing an apartment in Israel

Purchasing an apartment for most people is one of the biggest transactions they will make in their lifetime. Some, (especially when purchasing a newly built apartment from a contractor) treat such as purchasing any other commodity in the supermarket and sign documents or one-sided standard contracts (which are binding, even if the buyer didn't understand that it is) without first consulting with an attorney. In this short article we will try to briefly draw some of the major related issues, which should be considered.
Many real estate transactions commence with a short document usually entitled "Memorandum of Understanding," which states the main terms of the contemplated transaction. Such a document, in many cases, is not drafted by attorneys and is signed by the Buyer who is subjected to extraordinary pressure by the Seller, due to the dynamics of the present “Seller’s Market”. Many buyers, regretfully, do not understand that such document is a binding agreement that may create a large legal exposure if the Buyer later finds that the apartment does not stand up for the Buyer's needs or expectations. Too frequently, the Buyer will succumb to the Seller’s pressures for fear of losing the deal to another prospective buyer.
Israel has a very developed land registry call "Tabu," which should contain all data on any real property in Israel. Reviewing the land registry by a lawyer should be the first stage in any transaction and updating the registry is vital to ensuring that the bought real property is not re-sold. Such review is required not only to ensure that the Seller is indeed the owner but also to ensure that no unknown mortgage, lien or other attachment or encumbrance is burdening the land. Note that some apartments are not yet registered in the land registry (and only a "cautionary note" of the rights of buyers is registered) as the procedures for their registration have not yet finalized. In some cases the procedures may take years and the rights of the seller need also be checked with the construction company which erected the building.
No transaction in real property can be finalized without a written document and registration with the land registry. However, in order to register the transaction, one will need not only to sign an agreement but also to provide proof of payment of the related taxes and bring such approval from the Local Committee for Planning and Construction indicating that the apartment does not have any debts and is currently not violating or breaching any law. All of the above needs to be reviewed and ensure prior to finalizing any real property transaction.
Payment schedule for the transaction is also an important issue to be considered. This is affected by the manner of financing the transaction (e.g. self financing, selling of another property or mortgage) but also by other factors, such as the security given to the buyer allowing for the return of funds paid in case of breach of agreement by the seller. For example, it is not recommended to pay any amount to the seller until a Cautionary Note is registered with the Land Registry and until such time, funds should be held in escrow.
Another important issue to consider are additional costs that not many consider upon calculating the cost of purchasing an apartments. Such costs include legal fees and expenses, realtor fees (if a realtor is involved), or mortgage and assessment fees, if the purchase is financed by a mortgage and of' course, taxes. In the case of taxes, the tax due is influenced by certain factors and it is vital to consult with an attorney and sometimes a tax professional as to the different discounts and exemptions. This is especially relevant in the case of new ‘olim’ or new immigrants, returning residents and other holders of special status that may entitle them to certain tax breaks under the Law when purchasing new apartments or homes.
Finally, we note that in some cases buyers of apartments are also sellers of their old flats and will need to coordinate the two transactions. It is recommended that the two transactions be managed by the same legal counsel as the two transactions will affect one another. For example, the dates for payments and the date of delivery of possession will need to be coordinated and the tax burden of each of the two transactions will be influenced by the other.
It is important to emphasize again the purchase and sale of an apartment is not a simple transaction and it is important to be accompanied by a lawyer not only specializing in the field but also carrying a suitable professional insurance.