10 Commandments when Buying Pre-Owned Real Estate in Israel

It is such an exciting time in life when one can finally realize the dream of purchasing real estate in Israel.

Whether it is a first home, second home or vacation property, the rule of buyer beware applies.

As with all things in life, you must enter this process with eyes wide open and be prepared to scrutinize every minute detail.

The following article outlines the ten most important and core items that a buyer must investigate, research and request before purchasing property.

While this list is thorough, it is not all encompassing, and every purchase of property is case specific, and requires an in depth background search conducted by an attorney.

1. Research the Rights of the Seller in the “Tabo”:

The first step in the process of purchasing property is to make sure that the seller is the legal owner of the property and has the legal right to sell the property.

Today, it is easy to ascertain the legal owner of a property. One may log onto the website of the Ministry of Justice and research the specific piece of land via the gush/chelka numbers, and determine who is the lawful owner of the property.

2. Research the Rights of the Seller at the Israel Land Administration:

Over 90% of the real estate in Israel belongs to the State of Israel.

If someone would like to purchase property that is built on government land they must request permission from the Israel Land Administration before they can legally purchase the property.

There are parcels of land in Israel that are not documented in the Tabo for a variety of reasons. In order for the buyer to guarantee that the property in fact legally belongs to the seller, they must demand from the seller to provide an “Ishur Zchuyot”, a document issued by the Israel Land Administration that verifies that the seller is the legal owner and has the legal right to sell the property.

3. Research the Rights of the Seller at Chevra Meshakenet:

In cases where one intends to buy a piece of property from someone that bought the property directly from the builder, or from a third party that bought the property from a seller who bought his property directly from the builder, it is necessary to demand from the seller from whom you are purchasing the property that he provide you with an Issur Zcuyot from the builder, in case the rights of the property are not yet documented in the Tabo.

4. Investigate all Prior Debts of the Seller with Mas Shevach Makarkin:

In Israel there is a tax called “Mas Shevach Makarkin” that the seller of the property needs to pay to the state for the rise in the value of his property from the date of purchase until the date of sale.

There is a list of exemptions to which the seller may qualify in order to avoid paying these taxes. As a buyer you must make sure that the contract clearly states that you as the buyer are not obligated to pay the purchase price of the property until the seller proves through documentation from Mas Shevach Makarkin that he has either satisfied the payment of the taxes or has qualified for an exemption.

It is necessary to emphasize that if the buyer doesn’t prove that all the taxes for the property were paid, legal title may not be transferred to the buyer, thereby resulting in the buyer not being documented in the Tabo.

As a result, the property will remain in the name of the seller and the state will only recognize the seller as the legal owner.

5. Investigate all Prior Debts of the Seller of the Property at Heytel Hashbacha:

“Heytel Hashbacha” is the local authority in charge of assessing the value of property in their jurisdiction.

They monitor the value of property and any rise in the value of the property due to:

a) Municipal ventures and improvements that raise the value of the property;

b) municipal permits for additional building or beautification of the property and neighborhood “Heter Bniya”; or

c) change of the nature and purpose of the use of the property. The buyer must check with Heytel Hashbacha to determine whether they have assessed a tax on the property in question.

In general the authorities don’t give the buyer the exact amount of tax owed, rather they only reveal if the property is subject to the tax or not.

In the instance where the authority notifies the buyer that the property is subject to the tax you must deduct this amount from the contract price. The seller is responsible to pay this tax.

6. Investigate the Prior Debts of the Seller of the Property at Reshut HaMekomit:

If the buyer wants to ensure that legal transfer of title will be granted he must make sure that the seller will give him a letter of guarantee from the Reshut Hamekomit that the seller has paid all taxes associated with the property in question.

These taxes include: municipal tax (Arnona), water and sanitation.

7. Research the Status of the Building Structure:

The buyer must research the status of the building. The buyer must verify:

a) if the seller illegally built an addition to the property without permission from the appropriate authorities;

b) if there is an order from the court to destroy the property, or part of the property.

If the seller has in fact built an illegal addition to his house the innocent buyer will be prevented from transferring legal title of the property to his name.

In the case where there is an order from the court to destroy the property, if the buyer has already purchased and paid for the property without researching this detail, he will unfortunately forfeit all of the money paid for the property.

Therefore, it is imperative to hire a professional engineer to inspect the property and research the background of the property to ensure that the property is not restricted by the above.

8. Research if the Property is Subject to Prior Mortgages, Loans and/or Liens on the Property:

Most property owners in Israel purchase property with the financial assistance of a mortgage. The bank that provides the mortgage places a mortgage on the property.

While there is an existing mortgage on the property the buyer can’t legally transfer title of the property to his name. If the buyer discovers that in fact there is an existing mortgage, he must request from the seller to immediately remove the mortgage from the property.

In the event that the mortgage is not completely satisfied and/or rescinded by the seller, the buyer must incorporate into the purchase contract that the buyer will not be responsible for the current and future mortgage payments of the seller.

The buyer retains the right not to transfer the purchase funds until the seller removes the mortgage in its entirety.

9. Research if the Property is Subject to Seizure and/or Foreclosure:

In cases where the seller is in debt and owes substantial sums of money to the government, the government can place a note on the property.

This note is documented in the Tabo and indicates that the seller’s rights are frozen due to foreclosure on the property in question.

In this case, where there is a foreclosure on the property, the buyer can’t legally transfer the property to his name, unless and until the seller settles the debt with the authorities and the foreclosure is rescinded.

10. Obtain an Irrevocable Power of Attorney from the Seller for the Title of the Property:

An irrevocable power of attorney is issued a priori to the buyer or his advocate in order to prevent the seller from breach of contract.

Without the irrevocable power of attorney, the seller may, without just reason, break the contract and refuse to sign the legal documents that are necessary to transfer legal title of the property to the buyer.

This article does not substitute nor obviate the necessity of consulting with professional legal counsel regarding your specific property and circumstances. Use of this article, and the contents contained herein, is permitted, but you do so at your own risk and liability. It is always highly recommended to confer with an attorney before entering into any legally binding agreement.

Related: Current Interest Rates in Israel & First Israel’s Mortgage Services.