By Yitzchak Steinberg and Shia Getter
Why you need a lawyer when drafting your contract:
Identification. First of all, the lawyer will check that the seller is the seller. You have to verify that his documents match and, if not an Israeli citizen, that there are no issues with his passport.
Title. In Israel you do not need title insurance as you might in the States, because the property registration in Tabu (land registry) is decisive and binding. So in this case, the best title insurance is actually an experienced lawyer who will carefully look into it for you.
Never lay out money before the seller has proven title. You could, however, place these funds in escrow. If the seller fails to prove the title is clear, or to clear the title by the agreed-upon date, you would receive your money back.
Lease. Most apartments are leased from the Israel Land Administration (Minhal Mekarka’ei Yisrael). When the lease ends, the Administration usually renews it for 49 or 98 years. However, in certain areas, such as Rechavia or Talbia, properties are leased not from the State of Israel, but from the church, and many of those leases are up in 2051. Nobody knows what will happen at that point.
Condominium vs. Joint Ownership. Next, look into how the property was built and registered. It is not uncommon for the Tabu of a building not to be organized properly. A building should be registered as a condominium, where each owner officially owns his individual apartment, and a proportionate, non-specific share of the common property and assets.
However, in some buildings, all the apartment owners are registered as joint owners of the entire building. In such a building, you can only get a mortgage if the owners have a co-op agreement (heskem shituf) in place. Illegal additions, common in certain neighborhoods, will also bar proper registration, and therefore make it difficult to get a mortgage. Keep in mind that you could face difficulties selling the property in the future for the same reason.
What are you buying? Make sure that the property you think you are buying is the property you are signing for, and that we are all talking about the same thing. Make sure that the way it is registered reflects all the areas, and find out if there are permits to the other areas, or whether the municipality submitted an indictment because of illegal building, or if there is a demolition order on the property.
Say you bought a top-floor apartment, plus the roof in order to build a second story. But roof and building rights are two separate things. Apart from paying for possession of the roof, clarify that you can also buy the building rights, which are jointly owned by all the residents.
Adding clauses to protect your interests. Although the law insists that the seller provide certain guarantees, the contract is one-sided concerning its obligations to you, and, when buying “on paper,” concerning the contractor’s obligations with your apartment after he delivers and the ramifications of future building on your view and access. The clauses your lawyer inserts to protect your interests are often where he ends up benefiting you the most.
Payment schedule. When you buy an apartment from the owner (secondhand), as opposed to from a developer, the payment mechanism differs from that in the States. Here you make a deposit, which is your first payment, usually of 10%—20%. You register a cautionary note on the apartment with the Land Registry, and then, over about three to six months, you pay the contract sum. The last payment is against possession and all the approvals on behalf of the seller who registered the title. There is more risk involved this way, and you need a lawyer to plan the payments. The more you have paid, the more you are exposed as a buyer. Your lawyer is basically your insurance policy.
Building specifications. When purchasing an apartment through a contractor, the buyer receives the detailed plans of the interior of all the apartments in that project: how many outlets per room, the type of tile to be used, etc. The buyer can then personalize the design for his own apartment. The cost for any changes, however, adds up very quickly.
Lawyers who have a lot of connections and experience working with contractors can be very successful in negotiating good prices for all these arrangements. For example, I usually ask that, if I specify my client’s individual needs before construction begins, other than the cost of additional materials, the changes will be free of charge.
Legal support goes beyond the above list, however. A contract does not cover whatever may arise in the future, months after signing. Choose a lawyer who will guide you throughout the entire period. v
Shia Getter is the CEO of the Shia Getter Group, a full-range real-estate services firm in Jerusalem catering to the Anglo investor. He is a noted expert, columnist, and author of the forthcoming book The Guide to Investing in Jerusalem Real Estate. He and his professional team manage many upscale Jerusalem properties and have helped countless people buy, sell, and renovate property in Israel.