Seven issues to settle before signing an apartment purchase agreement
Most problems in real estate transactions do not surface on the day of signing, but months later. Almost all of them could have been detected by a proper review before signing.
This article brings together the seven legal issues that must be settled before signing, in any kind of apartment transaction. If you are buying a second-hand apartment and are looking for a detailed working list, you will find it on the firm's site for apartment transactions: 12 checks you must carry out before signing a sale agreement, in order of importance.
1. Who holds the rights, and where they are registered
The starting point is an up-to-date Land Registry extract. Not every property is registered at the Land Registry Office: some properties are registered with the Israel Land Authority, and in others the rights are managed by a housing company. Each route involves different documents, different timetables and different costs.
It is important to verify that the seller is indeed the registered holder of the rights, that there are no gaps between the registered position and the actual position, and that where the sellers are heirs, a trustee or a corporation, the appropriate authority to sign is in place.
2. What is registered against the property: mortgages, attachments and cautionary notes
A registered mortgage does not prevent a transaction, but it requires a proper mechanism for paying it off out of the purchase price and for removing it from the register. An attachment, a cautionary note in favour of a third party or a note concerning insolvency proceedings changes the picture entirely, and sometimes means the transaction must be halted.
3. The planning and physical position
What you see when you visit the apartment is not necessarily what is approved in the building file. Unauthorised construction, an enclosed balcony, or a storeroom or residential unit that has not been approved may make it harder to obtain a mortgage, expose you to demands from the local planning committee, and affect the value.
It is also worth checking what is planned in the surrounding area: plans deposited for objections, permit applications for neighbouring properties and urban renewal projects all change what you have bought.
4. Taxation, before signing and not after
Purchase tax, betterment tax and betterment levy are part of the real price of the transaction. The question of a sole apartment versus an additional apartment, exemptions, spreading and deadlines can sometimes make a difference of tens of thousands of shekels, and these decisions are better made before an agreement is signed.
As to reporting: section 73 of the Real Estate Taxation (Betterment and Acquisition) Law, 5723-1963, requires both the seller and the buyer to submit a declaration to the Real Estate Taxation Office within 30 days of the date of the sale or purchase.
5. The payment schedule and security
A simple principle: every payment should be secured by something. The first payment against registration of a cautionary note, the interim payments against the discharge of charges, and the balance against delivery of possession and of the documents that allow the rights to be transferred. Where the seller has a mortgage on the property, a precise mechanism is needed for paying it off and obtaining a letter of intent.
When buying from a developer, the security under the Sale (Apartments) (Assurance of Investments of Purchasers of Apartments) Law also comes into play, and you need to make sure it is actually provided against every payment.
6. What happens if there is a delay
A good contract is not one that assumes everything will work, but one that governs what happens when it does not. Late delivery, late payment, delay in obtaining tax clearances or in discharging a charge: each of these needs a mechanism, reasonable and mutual agreed compensation, and a defined grace period before any sanction applies.
7. What is handed over, and in what condition
The delivery date, the condition of the apartment on delivery, what is left in it, vacating occupants and tenants, house committee charges, municipal property tax (arnona) and current debts. These are the details that cause most of the friction on delivery day, and they are easy to settle in advance in one clear clause.
Bottom line
A proper review before signing costs a tiny fraction of the value of the transaction, and prevents the risks that turn into lawsuits. If you are about to buy, you are welcome to contact us for a short conversation to understand what your case requires.
Nothing in this article constitutes legal advice or a substitute for it, and each case is examined according to its own circumstances.
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