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Legal Aspects and Advice on Home Buying in Israel |
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By Ellen Porat, Adv.,
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DISCLAIMER: THE FOLLOWING ARTICLE IS MADE AVAILABLE TO VISITORS TO OUR WEBSITE AS A COURTESY. IT
IS NOT INTENDED AS LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. PERSONS SEEKING LEGAL
ADVICE CONCERNING ISRAELI LAW SHOULD CONSULT WITH A QUALIFIED ADVOCATE ADMITTED TO PRACTICE
IN ISRAEL.
The legal aspects of buying and selling a home in Israel are complicated and the process is
confusing, especially to someone coming on “aliyah” who is completely unfamiliar with the
Israeli real estate scene.
It is imperative to check the legal status of the property before considering buying a home. It
is most important to verify the identity of the title-holder or owner of the home. The purchaser
must also verify if there are any charges obligations and restrictions that are associated with
the property. This information can be obtained at the Land Registry Office by reviewing the
extract which is a concise description of the legal status of the property. It provides
information about the area of the plot, the area of the home, the identity of the owner, the
rights of the owner, and all caveats, liens or mortgages, which are registered, on the property.
It is also important to keep in mind that a contract alone does not give you title to the property
and in spite of popular opinion possession is not 90% ownership. Ownership is not actually
transferred until the "conveyance" (transfer) is registered at the Land Registry Office.
The question of whether to include a spouse or other family member as owner of the property,
involves legal issues and consequences. The purchaser must also decide who shall be the
designated owner (title-holder) of the acquired property before the signing of the contract.
Changes made afterwards will undoubtedly entail more taxes and costs.
The contract usually includes a payment schedule to which the purchaser must adhere. The
difficulty is that the purchaser assumes a risk by paying considerable amounts to the seller
before receiving possession and title. Therefore the contract should include mechanisms
securing the purchaser’s rights to receive possession and title. Once a contract is signed the
purchaser has the right, according to the law, to register a caveat (warning note) at the Land
Registry Office. The caveat gives the purchaser priority over third party rights (which were not
registered at the Land Registry prior to the registration of the caveat). It is therefore advisable
to immediately register a caveat at the signing of the contract. Since this is usually impossible
it is advised to deposit the first payment in escrow until the caveat is registered. Since
possession is conveyed at the last payment it is advisable to leave a considerable amount of
the purchase price for the last payment. At the last payment the purchaser should also
receive all of the documents enabling transfer of title at the Land Registry. Such documents
include authorization from the tax authorities regarding the payment of relevant taxes by the
seller, exemption thereof such as land appreciation tax, authorization from the municipality
that all municipal taxes have been by the seller, and an irrevocable power of attorney from the
seller to the purchaser’s attorney conveying the property to the purchaser. In the event that
any of the documents are not available at the last payment then it is advisable to leave a
considerable amount of the consideration in escrow until all the documents have been
conveyed to the purchaser.
A common situation is the discovery of physical problems of the purchased home, after the
closing. The general legal principle is that a seller has the duty to disclose to the buyer
deficiencies in the home if he knew of the problem before the signing of the contract. It
sounds like ample protection for the purchaser, but the reality is that the legal costs involved
in a lawsuit may prevent the purchaser from seeking legal recourse against the seller. The
best way for the purchaser to minimize the risk of additional costs for repairs or replacement
after closing is to hire an engineer that will inspect the home. This is especially true when
purchasing a house. Another important thing to check is if there are any building code
violations, which could result ultimately result in municipal lawsuits and possible demolition
orders. It is also advisable to check municipal plans relevant to the property and its
surroundings, which could affect the value of the property.
Buying a home can be a harrowing experience but informed legal advice can help bypass the
potential pitfalls.
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