The Guide for the Average Non-Lawyer Person to Buy a Property in Israel

First of all, it is important to precise that this guide isn’t a substitute to consulting a lawyer. We strongly recommend that you seek advice with a professional before making any critical decisions.

It is unquestionable that purchasing a property in Israel, whether for investment, residence, vacation or any other aspiration is a significant expense. Therefore, it is important to be aware of the numerous peculiarities of the process and to be prepared to address issues that may arise.

Hiring a Lawyer

Israel lawyers often represent both sides of the purchase and sale.

  • The significant disadvantage is that the lawyer,
    who must be fair to both sides, may not be able to
    represent your interests in the best possible way.
  • However, this arrangement reduce the expenses and facilitate negotiations.

Identifying and Evaluating

There are several crucial features which need to be examined while searching for a property.

Type of property – Important matters include:
• Apartment or villa
• View
• Surface
• Balcony
• Garden
• Parking
• Storage
• Elevator
• Readiness to renovate
• Neighborhood – Proximity to schools, shops, religious and social centers.
• Local area noise

Budget – Once you have decided on the type, size and location of property you want, take into account the price, mortgages and additional costs. We recommend consulting an economic advisor for that matter. Typically additional costs such as upgrades, improvements and renovations can add 5%-15%.

Legal Status – Be careful who you deal with and make sure they are licensed properly. Make sure you have possession of all the information concerning who has title to the property and any outsider liens.

Property Inspection – We strongly recommend to perform a property inspection in order to discover any hidden glitch, problem or malfunction and spare additional renovating fees.

Negotiation

• Pay attention that property in Israel is sold with just the bare walls unless otherwise agreed.

• Consider the location and condition of the property and the market conditions
before agreeing on a price.

• Determine beforehand when the property will be vacated. It must be after
the final payment is made and can be from immediately after the signing of the contract to up 2 years from then.

• Determine how payments are to be made and in what currency. The parties agree on a binding contract that contains penalties for
non-performance. A typical first payment is between 15%-30% of the
purchase price.

• Take into account that in Israel, there isn’t such a thing as earnest money deposits.

We strongly recommend that you have your lawyer negotiate the terms of a definitive purchase contract with the seller’s lawyer and not to sign any document before that contract is acceptable to your lawyer.

Memorandum (Zichron Devarim)

Agreements to purchase real estate in Israel must generally be in writing in order for them to be enforceable. Hence, we strongly recommend not signing any Memorandum, even if the seller pressures you, and certainly not until it is reviewed by a lawyer on your behalf.

Please note that the Memorandum is a binding contract which must be reported to the tax authorities.

Examining the Seller’s Rights

It is your lawyer’s responsibility to investigate the title and of the property.

This includes:

• The seller rights to the property.
• Whether there are any conditions, liens or caveats on that ownership.
• Whether the ownership is registered in the Land Registry. Without performing this basic examination, a buyer risks transferring money to someone who cannot deliver clean title to the property.

Your lawyer must determine then the legality of the property in the Municipality’s property files, i.e. no Building Violations have been recorded and no Demolition Orders have been issued against it.

Ishur Ekroni

It is a general mortgage approval from the bank. You will need to provide all of the documentation at this phase, and the bank will give you a general approval indicating the amount it is willing to lend.

Generally it takes 3-10 day to obtain this approval and it is valid for three months while the interest rate is for 12 days. If the three months period expires before you take the mortgage, you will need to update the application form.

Contract Signing

A typical contract includes:

• The description of the property as it is registered in the Land Registry. It should include the percentage in the joint property of the building and attached property, such as parking spaces, garden and storage areas. What is not
detailed in the contract is usually not included in the purchase.

• The payment schedule. It should include a detailed list of the amounts to be paid
at the signing, when a caveat is registered, when possession is given, when
Powers of Attorney are delivered and when title to the apartment is finally
transferred to the buyer.

• Agreed Compensations in the case that one of the parties breach the contract.

• Additional commitments. It includes the removal of any mortgage lien, the
settlement of outstanding debts (gas, electricity, and municipal taxes), and the
registration of a caveat in the buyer’s name.

HeArat Hazhara

This is a note in the land registry advising any prospective purchaser that there is a sales contract in progress for this property. It must be added immediately after the contract is signed as to indicate your rights to the property.

Finalizing the Loan – Mashkanta

A signed contract is necessary prior finalizing the loan.
For new apartments, the bank only requires a copy of the contract and approval from the seller, however, for second hands apartments, the bank also requires proof of registration.
The bank should notify you within a few days that the loan contract is ready for signature.

Registration

Your lawyer should handle the registration, the transfer of the property deed under your name, and the remove of the Hearat Hazara. In order to accomplish this, you must submit to the Land Registry a number of documents such as a formal request to the Property, a copy of the Sales Contract and confirmation from the Tax Authority that all the relevant taxes have been paid.

It is important to note that jointly owned property does not grant a right of survivorship, instead, each spouse owns a 50% interest in the jointly titled property and when a spouse passes away, that 50% interest becomes part of his/her estate and does not automatically vest in the surviving spouse.

Tax Payment

Several types of taxes and fees may be associated with your property:

• Property acquisition tax – Mas Rechisha: A progressive/graduate tax, which increases with the price of the apartment.

Within 40 days after signing the agreement to purchase the property, the buyer must submit a declaration to the Land Tax Authority, containing the details of the transaction, consideration paid for the rights to the property, calculation of taxes owed and relevant tax exemptions. Failure to report to the tax authorities a transaction in real estate constitutes a criminal offense.

• Arnona – City taxes. Determined by the size of your propriety and its location.
• Property maintenance or Vaad Bait – Usually a requirement in apartment
buildings. This fee may become fairly expensive, hence, we strongly
recommend to consult with the Vaad Bait prior to signing your contract.

Move in

You have certain time periods determined by law in which to inspect your propriety and ask the developer to fix any problems. Make sure to take advantage of these time periods before your rights expire. Also, prior to transferring the propriety, make sure the previous tenant paid all his debts, taxes and utility bills.