In the real estate industry, we still find ourselves, in 2018,  in the same legal havoc and turbulence that we were in 8 years ago.

Advice and tips for real estate buyers

The purchase of an apartment is undoubtedly one of the largest and most expensive transactions a person makes during his lifetime. Unlike a car purchase, an apartment purchase transaction requires full and appropriate attention to detail.  Hiring a real estate attorney should be considered before when dealing with any type of real estate deals.

Below is basic information and practical advice to guide you through all the issues related to the transaction when purchasing any type of real estate property?

It should be emphasized that the advice presented below is basic and preliminary and do not constitute a substitute for comprehensive and professional advice regarding specific cases.

It is recommended to use the services of a lawyer who specializes in the laws related to buying and selling real estate property.  The attorney should accompany the transaction through all of its stages,  perform the necessary legal examinations on your behalf and guide you to perform other necessary inspections, either by you or through a suitable professional.

A preliminary memorandum should not be carelessly signed

According to the law, a memorandum of understanding is a binding agreement for all intents and purposes, which under certain circumstances may be construed as a complete and complete sale agreement for all intents and purposes, and even if certain details are missing, these may be supplemented by external evidence and/or supplemental law provisions, so that it will be considered as a sale agreement (also regarding the purchase of an apartment) for all intents and purposes and therefore it is recommended not to sign en passant a memorandum of understanding.

Sometimes, after the signing of a memorandum of understanding, the purchaser is informed about some arising legal, planning or physical conditions of the apartment or details relating to the seller of the apartment, which would lead the buyer to the decision not to continue with the transaction, or constitute an obstacle that renders the transaction not executable at all. In a situation in which the memorandum of understanding has already been signed, it will make it difficult for the purchaser, who wishes to disengage from it, to cancel it and sometimes it will entail payment of compensation to the seller, according to the terms of the memorandum.

Once the parties have signed a memorandum of understanding, the parties are bound by it.  Sometimes if and when a final agreement cannot be reached regarding the terms of the agreement, then the disengagement may involve payment of compensation.

According to the law, after signing a memorandum of understanding, there is a duty to declare the transaction to the real estate tax authorities. In light of all the above, when buying an apartment it is recommended to avoid signing a memorandum of understanding.  In order to conclude the transaction with the seller, it is preferable to make do with a general summary of the main points of the transaction, such as price and date of handing over the possession on the property, and to leave the work of drafting the agreement to your attorney who will do this only after carrying out all the necessary inspections and investigations.

If the parties are interested in securing the agreement between them, it is possible to do so in a cautious manner without taking unnecessary risks, by depositing a sum of money in a trust that will be handled by an attorney.

Performing necessary inspections and investigations.

Before signing an apartment purchase (a binding sales agreement), it is very desirable to perform all necessary inspections and investigations with the help of a real estate appraiser.  They will work on your behalf to ensure that the actual legal, planning and physical situation of the apartment is indeed presented to you. Below we will review the main inspections and investigations to be performed.

Seller identity

Make sure that the seller of the apartment, who presents himself as the owner, is indeed such. This is essential in order to avoid buying an apartment from a crook trying to sell with forged documents.

The legal status of the real estate property

Buying an apartment (or any real estate property) also involves transferring the rights of that real estate property, and therefore its legal status must be examined in order to ensure that the rights can indeed be transferred to the buyer.

Make sure that the rights are registered in the seller of the apartment’s name, and also check whether it is subject to cautionary notes, mortgages, liens or various foreclosures.

Therefore the Tabu registration should be examined in the case of an apartment registered in the Land Registration Bureau (Tabu) and if an apartment where the rights have not yet been registered with the Lands Registry Office, the Israel Lands Administration and/or the Mortgages Registrar Office.

If a mortgage on the apartment is registered in favor of a bank from which the seller received a housing loan, that mortgage must be paid off and removed prior to signing the sale agreement, or  alternatively, through an appropriate mechanism, be paid off and removed during the execution of the transaction,  in order to ensure transfer of the rights to the purchaser when they are free of liens, foreclosures or other rights of any third party.

Check out the planning status prior to signing an apartment purchase transaction

The building portfolio should be examined at the relevant local planning authority and the plan should be compared to the actual situation, in order to ensure that the entire apartment, as it is “in real” was built according to a lawful permit. It must be ascertained that there are no building violations, that no demolition orders are issued, and that there are no legal proceedings against the owner and/or the occupier of the apartment.

It is also recommended to carry out an examination regarding the designation of areas adjacent to the building, including the development plans and/or new city building plans that apply to the area in which the dwelling is located and which may affect it. If necessary, an architect should be used for this examination.

The physical condition of the apartment (or the real estate property)

Before buying an apartment it is important to inspect the physical condition of the apartment including the integrity and functionality of its auxiliary systems and facilities, such as electrical systems, plumbing, and air conditioning, as well as to check if there are defects in the structure such as cracks and moisture. If necessary, an engineer may be consulted for this test.

Examination of the expected taxation related to the transaction

It is especially important to examine the taxes that are expected to apply to the parties following the execution of the transaction. The law says that the purchase of an apartment is subject to various taxes, especially capital gains tax, purchase tax and betterment levy, which may amount to tens of percent of the value of the entire transaction and may, therefore, affect the profitability of the transaction. Therefore, consult with a lawyer specializing in the field of tax on the tax amounts expected before the signing of a sale agreement and also check the eligibility for various exemptions that can be obtained by law.

Signing a purchase agreement

The sale agreement must include provisions regarding the price of the real estate property, and none the less it must deal with the removal of the mortgages and other liens that apply to it, refer to the transfer of ownership and to the transfer of registration of the rights therein, and deal with the settlement of the payments of the debts lying thereon and the taxes applicable in respect of the sale transaction.

Immediately after the signing of an apartment or any real estate property purchase agreement, the buyer’s registration rights must be ensured by writing a cautionary notice in the Land Registration Bureau and / or giving notice to the Israel Lands Administration and / or to the mortgage company regarding the execution of the transaction and / or the registration of a pledge with the Registrar of the Pledges in order to protect the rights of the buyer against the execution of an adverse transaction and the sale of the apartment to another purchaser.

In addition, after the signing of the sale agreement, and within the period permitted by law,

a report must be filed and presented to the real estate tax offices regarding the execution of the transaction. In order to avoid unnecessary arguments and disputes, it is recommended to specify in the sales agreement the extras included in the price of the apartment, such as air conditioners, built in closets etc.

Actual payment of debts and taxes

The buyer should take care that all debts imposed on the apartment be clarified and paid, and this includes both debts due to various current payments applying and yet unpaid and the tax payments that apply to the seller as a result of the purchase of an apartment.

It is necessary, to verify and settle the payment of the debts by the seller before signing the sale agreement or alternatively by means of a mechanism determined in the agreement according to which a certain amount of the consideration to be paid to the seller for the apartment will be transferred to him only after the presentation of appropriate confirmations regarding the payment of the debts.

It should be emphasized that in order to complete the transfer of ownership rights, confirmations must be presented at the Land Registration Bureau regarding the tax payments that apply to the transaction, such as purchase tax and capital gains tax, as well as the approval of the local authority regarding its consent to transfer the rights. Therefore, if there are arrears in the payment of various debts in respect of the apartment or in respect of the sale transaction, it will not be possible to transfer the rights therein.

Transfer of rights after completion of a purchase transaction

Immediately after payment of the full consideration for the apartment and receipt of possession thereof, the registration of the rights in the apartment in the name of the purchaser must be completed. Many purchasers tend to neglect the proceedings for completion of registration for years, which may be an unexpected obstacle when they need to sell the apartment. A lawyer specializing in apartment transactions will accompany the execution of the transaction and thus will ensure the registration of rights within the framework of his assignment.

The detailed advice for buying an apartment above is basic and preliminary and the information presented above is general information only and does not constitute a substitute for comprehensive and professional legal advice regarding the specific case. For detailed advice on the specific case, you may contact our office for a personal consultation, phone consultation or e-mail, without any obligation on your part.

This article was prepared with the cooperation and courtesy of Adv. Yaacov Levy, a senior partner in the Levy Law Firm and the director of the real estate department at the firm


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