Principle A - Once you sign the contract there is usually no turning back.
By ARYEH RACHLIN / ISRAELHOMEOWNER.COMisrael homeowners banner(photo credit: )Aryeh Rachlin is a Jerusalem attorney with 15 years of experience representing clients in real estate transactions in Israel. You can contact Aryeh at +972-2-561-9111, or by emailing him at aryeh@bklaw.co.il.
Buying real estate is one of the most significant investments you will make in your lifetime, so you will naturally want to understand the legal aspects of purchasing real estate and be equipped with all the necessary information before you make the all-important decision to buy.
Purchasing real estate in Israel requires an even greater understanding, since the culture, customs and laws relating to the purchase of property in Israel are significantly different than in other countries. Although previous experience in purchasing real estate overseas is useful, certain unrealistic expectations can be created as you mistakenly attempt to apply your experience elsewhere to your proposed transaction in Israel. The following article discusses issues that need to be addressed before the contract is signed.
Israeli law requires that the purchase of real estate in Israel be executed by a written document. Though it is possible to make the contract conditional upon certain events happening (or not happening) before the contract comes into effect, it is not customary to do so, and in the vast majority of cases, the signing of the purchase contract is irrevocable. The Israeli system does not incorporate a cooling-off period during which parties who have signed a contract for the purchase of real estate are entitled to change their mind and cancel the deal. Israeli contracts typically include a provision that the purchaser has had an opportunity to examine the property and waives all claims in relation to its condition (e.g. no repairs can be demanded if defects are found after the signing of the contract). In light of the above, certain courses of action are recommended before the signing of the contract, two of which shall be discussed here:
1) The first rule is that it is critical to fully examine the property (from the physical, zoning and legal perspectives) prior to the signing and, in this regard, it is strongly recommended to hire a building engineer or surveyor to survey the property prior to the signing of any document. In the event of a purchase of a property that has not yet been built, it is advisable to have an engineer or architect review the plans and technical specifications (which the builder is required to provide) so that they can give you advice regarding any necessary changes or upgrades, etc.
2) The second rule is to be certain that finance for the purchase is in place before you sign the contract. For those who are financing the entire purchase from their private capital, this is obviously less of a difficulty. Those who are relying on external finance, however, and, in particular, a mortgage from a local bank, are strongly advised to make sure that they qualify for the amount of financing necessary to complete the purchase before they sign the contract. Israeli banks have regulations and policies which change from time to time regarding limits on the amounts available for mortgages: in the case of dollar mortgages, they will usually approve between 60 -70% of the purchase price or the value of the property as assessed by a surveyor certified by the bank - whichever amount is lower.
In certain circumstances, shekel mortgages can be approved for as much as 95%. In this context, it is particularly frustrating that most Israeli banks will not issue a formal letter of offer in relation to a proposed mortgage though they will give an oral "Ishur Ekroni" (confirmation in principle). The reason for this policy is that the banks will not formally commit themselves until they can assess the financing risks associated with the particular transaction which, by its nature, will only be done once the contract is signed and the details of the final deal are available to the bank.
Furthermore, certain banks will not give loans for purchases in certain parts of Israel, either because of risks associated with the political situation or because of the method of registration of ownership in such places.
In light of the potential pitfalls outlined above, it is advisable to adopt a cautious approach when purchasing a property in Israel. Remember that once you have signed the contract, there is no going back, so it pays to be prudent. Aside from the enquiries conducted by your attorney, make sure, before signing, that a reputable engineer or surveyor has thoroughly surveyed either the property, if it is a second-hand home, or the plans, if it is a first-hand home. You also need to ensure that you have secured the necessary finances for purchasing the property. Once you have taken these precautions, you can finalize your purchase with greater confidence and peace of mind.
Visit Israelhomeowner.com to view its full selection of articles.The contents of this article are designed to provide the reader with general information and not to serve as legal advice for a particular transaction. Readers are advised to consult with legal counsel before entering into any transaction.
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