29.05.2019
Purchasing an apartment from a previous owner: Eyal Gur , Avocat ,
When buying an existing apartment from a previous owner you should obtain legal advice from a lawyer specializing in real estate, who will ensure that your money and rights are safeguarded as far as possible. At the end of the process the rights in the property (and everything attached to the apartment, such as the parking space, storage room, roof etc) will be registered in your name when they are free of all debts, liens, mortgages or any third party rights.
Your lawyer will carry out many legal checks on your behalf that touch on ownership, contractual, planning and construction issues etc.
Rights in the property applicable to the apartment – land in Israel is divided into lands in private ownership, for which the owners’ names are recorded at the Land Registry (known as “Tabu”), and lands that are owned by the State, managed by the Israel Lands Authority, the Jewish National Fund (JNF/KKL), a development authority or others. Leasing rights (long-term rental, generally for 49 years with the option to extend the rental period) are in accordance with leasing agreements recorded at the Authority, housing companies or at the Land Registry. In such a case you must check that the lease is capitalized (i.e. that capitalization fees have been paid) and that there is no need to pay consent fees (that apply to the seller) to transfer the rights in the apartment to the Israel Lands Authority.
Rights in the apartment are free and unencumbered – you must verify that the rights being sold in the apartment (including the attachments to the apartment) are indeed registered exclusively in the seller’s name and are unencumbered of any mortgage or pledge, lien, court orders (demolition orders), caveats, expropriations, special declarations (antiquities) etc.
Check of planning status and other hazards – it is recommended to check the municipal development plans, additional building rights, and the designated purpose of adjacent property. It is important to verify the position in the building of the apartment being purchased, its directions, as well as that in the vicinity there are no ecological or environmental hazards, such as industrial buildings, noisy roads, cellular antennas, electricity substations etc.
Sales contract for previously owned apartment – important points:
A lawyer specializing in real estate and property taxes who represents you in the purchase of a previously owned apartment will certainly pay special attention to several important points in the sales contract.
Registering a caveat – the lawyer must ensure that a caveat is registered in your name at the Land Registry and/or on the mortgage on the seller’s contractual rights at the Registrar of Mortgages in favor of the purchaser, and to report to the Israel Lands Authority or the housing company that the transaction has taken place.
Eliminating a mortgage or lien on the property and the payments schedule – in the event that there is a mortgage or lien on the rights in the apartment, it is important to ensure following the initial payment to the seller that is paid when the sales contract is signed (typically 10% of the transaction value), sums up to the value needed to clear the mortgage are paid by the purchaser direct to the bank that has a mortgage or lien registered in its favor.
Only after receipt from the seller of clearance and removal of the mortgage or lien is it possible to continue to pay the seller on account for the purchase price.
For the date of handover of possession of the apartment, as stipulated in the contract, a significant proportion of the purchase price should be left over (preferably more than 20% of the contract value), which shall be paid to the seller in return for handover to the purchaser of vacant possession of the apartment, together with confirmation of the seller’s taxes, as detailed below.
Confirmation of taxes – in order that the rights in the apartment can pass to the name of the purchaser and be registered in his name at the applicable authorities (the Land Registry (“Tabu”), the Israel Lands Authority, the housing company etc), the seller must provide the buyer, inter alia, with receipts in respect of this transaction, such as payment of or exemption from Betterment Tax and Sales Tax, confirmations from the local authorities on the payment of local taxes (including any improvements levy).
If the seller is unable to provide the receipts and confirmations by the date of handover of the apartment, it is important that money be deposited in escrow (from the final payment), in order to ensure payment of the taxes that are the seller’s responsibility. It is accordingly important to stipulate in the sales contract an appropriate payments schedule together with specific instructions from the seller to the escrow holder.
Registering the rights in the purchaser’s name – following receipt of possession and the confirmations in respect of taxes, the final matter is to ensure to register the rights in the purchaser’s name at the authorities where registration of rights in the apartment are handled, and to register any mortgage in the name of the lending bank (in the event that purchaser makes use of bank finance to purchase the apartment).
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