The Guide to Saving Money, Time and Aggravation on Your Way to a Successful Real Estate Acquisition in Israel.

So you’ve decided to buy a second hand property in Israel. A number of simple steps are likely to save you lots of money and plenty of aggravation, in addition to ensuring that you are on the right track to closing a successful deal.

Due Diligence on the Property

1. Headlines in recent years proclaim that the prices of Jerusalem apartments continue to rise due to acquisitions by foreigners. One of the reasons behind this is that the foreigners oftentimes pay more than would the average Israeli.

One manner of ensuring that you pay fair market value is to retain the services of an assessor. (We estimate that one should cost between $500-$1000.) A good assessor will provide you with a valuation for the property and will also issue a professional opinion which can serve as evidence in court if the need arises.

2. Building faults inspection: Most of the structures in Jerusalem are not very new. While this is part of the city’s character, it also means that some of the buildings are in various states of repair. Therefore, it is imperative to retain a professional to carry out an inspection for cracks, water-damage, the condition of the floor and any other building faults which may have developed over the years.

We have no doubt that this will instill a measure of peace with those living overseas and particularly buyers of investment properties in Israel. It should be noted that in sale contracts the seller usually stipulates that he takes no responsibility for damages which exist in the property and even in cases where, on the contrary, the seller expressly undertakes responsibility for potential faults, it will be difficult to impose liability in practice upon a seller if such issues arise. Therefore, a thorough inspection by a professional will mitigate the potential for unforeseen damage and prevent unnecessary disputes down the road.

Verification of Seller’s Rights in the Property

3. An Extract from the Land Registry Office is a crucial document to begin with. The Extract will include details of the rights of the seller, any associated property (such as parking space, storage unit, roof-top) as well as the proportion of the communal area which is considered to be associated with that specific apartment. Furthermore, any liens or pledges (such as a mortgage) should be evident on the Registry Extract.
Because of the tumultuous history of pre-state Israel and the disorderly transfer of powers between the Ottomans, the British and the fledgling Jewish state, some parcels of land are not registered at the Land Registry Office, and the rights of ownership and so forth must be investigated at the offices of the Israel Lands Administration (ILA).  The ILA is the owner, on behalf of the state, of state lands, and can issue a Confirmation of Rights which is similar in nature to the Land Registry Extract in that it shows ownership, third party rights and liens.

4. A situation is possible whereby the rights of the seller are registered with the housing company (the builder of the building.) In such instance a Confirmation of Rights must also be obtained from the housing company.

5. The Registrar of Pledges is the governmental body responsible for registration of mortgages and pledges. In cases where the rights are registered with the ILA and/or a housing company, the records of the rights of the sellers must also be examined at the Registrar of Pledges, located at the Clal Center on Yafo St. in downtown Jerusalem.

The Sale Agreement

6. When drafting a sale agreement for real estate, one must ensure inclusion of the following items:

- The names of the parties, including identity (passport) numbers and addresses.
- Exact price for the property.
- The exact amount of the mortgage (if such exists.)
- The date of the delivery of the possession of the property (key).
- Date for removal of liens and pledges by the seller (if such shall have been created prior to registration of the rights of the new owner at the Land Registry Office
- The amounts of the payments and a timetable for payments.

7. It is important to note that in the event that the sellers have a mortgage on the property, it is crucial to ensure that the buyers’ initial payments are used to discharge and remove the mortgage from the property, and therefore they should be transferred directly to the mortgage lender. Only after removal of the mortgage and the presentation of proof that this has been done (such as a clean Registry Extract or Confirmation from the ILA or housing company) should the remainder of the funds be transferred directly to the seller.

8. Withholding of final payment until completion of the transfer of the rights: In the framework of the agreement it is vital to withhold a large sum until all of the rights in the property have been formally registered in the name of the buyer at Land Registry Office or the ILA (if needed) or a housing company (if needed.)  Retaining a large final sum as mentioned is intended to provide an incentive to the sellers to cover any of their potential debts to the municipality and/or the tax authorities, or any other debts on the property, because so long as there are any debts attributed to the property, the ownership of the property cannot be transferred.

Professional Legal Services

9. In order to successfully acquire a property in Israel and maintain your peace of mind, it is highly recommended to locate a reliable and professional law office which deals with Real Estate transactions to ensure that all of the above does in fact take place. It should be noted that law offices in Israel for the most part are not responsible for conducting negotiations over the price or ensuring that the condition of the property is satisfactory, but rather they focus on verifying the situation of the rights in the property and safeguarding their clients’ interest in the framework of the sale agreements.

10. Therefore it is highly recommended that a comprehensive examination of the apartment and its rights is carried out, if possible by professionals in the field. A good law office can recommend assessors, inspectors and can assist its clients in retaining any other services required. The lawyers are responsible in practice for approving the transfer of payments, maintaining escrow accounts and verifying transfer of rights and so forth.

This article was prepared by Inor Bertental, a Jerusalem based Attorney.  If you need legal assistance with a potential Real Estate purchase or have questions you would like to ask Inor, write him at lawyer@gojerusalem.com.
 
Disclaimer: this information is brought to the reader as advice only, and the user is solely responsible for any action being made as a result of what has been written here.