Advocates and Attorneys at Law

Epstein & Co.

Advocates and Attorneys at Law

28 Alfasi St, Rehavia, Jerusalem 9230313 Israel

Tel: 972-2-654-1046 Email:

Buying an Apartment in Israel Made Easy

NineThings You Should Know before Purchasing

an Apartment on the Open Market

(Separate article about buying an apartment from a contractor)

We at Epstein Law can guide and accompany you through each step.

You’ve finally found the apartment that you love. You have negotiated the price and terms. Before signing a contract however, be aware of important information that will save you money and spare you aggravation and legal difficulties.

1.Memorandum of Understanding (Zichron Devarim)- Often after the parties have reached a mutual decision to buy and sell an apartment, they summarize the terms in a document called a Memorandum of Understanding ("Zichron Devarim"). This document can include information such as the dates of payment, the agreed upon apartment price among other terms. In many cases this seemingly informal document is considered a legal contract, enforceable in Israeli Courts, despite the fact that both parties might have expressly written that a contract will be prepared by an attorney. Do not sign a Zichron Devarim but insist on a meeting with an attorney who is expert in real estate transactions. This attorney can prepare a proper contract that will protect your interests.

2.Taxes - Before buying an apartment, you should obtain legal advice regarding applicable taxes. As a result of changes in Israeli real estate laws, taxes can be substantial, especially for non-residents. Advance planning and getting sound legal advice can save taxes!

3.Improvement Levy (Heytel Hashbacha)–ThisLevyis a type of tax that the municipality requires the apartment owner to pay if thereis a local planning improvement plan that raises the value of the apartment. The municipality requires that each property owner pay the tax on the upgraded value once the apartment is sold or once the municipality's improvement plan is implemented by the apartment owner. If you purchase a second hand apartment, the seller will be required to pay the Municipal Improvement Levy (“Heytel hashbacha)”.Obtainingapre-rulingregarding the seller's obligation (if it exists) in this area can help you negotiate the apartment price and prevent many problems that might arise. With careful research and planning the seller's Improvement Levy may be reduced or exempted.

4.Municipal Debts –When you register the apartment under your name in the Land Registration Office (TABU or others) you will be required to obtain confirmation from your local municipality that all debts have been settled. Before you sign an agreement, you must ensure that there are no outstanding municipal debts on the apartment.This process can delayor even block the registration of the apartment but if your attorney checks this in advance you can savepossible delay and distress.

5.Mortgage Eligibility - People often sign a purchase contract before receiving mortgage approval. Be careful. If you are a non-Israeli resident, mortgage approval can be more time consuming and complicated. If the bank rejects your mortgage application, you might not be able to complete your payments. Non-payment can lead to a breach of contract and subsequent penalties. Currently, Israeli citizens are eligible for loans of up to 70% (in unique cases up to 90%) of the apartment’sactual value, but foreign residents usually qualify for loans of up to 50%. Working with the bank in advance can improve the chances of getting a highermortgage at a lower rate. Please also refer to our article regarding mortgages in our series: "The Ins and Outs of Real Estate in Israel" for non-Israelis on

6.Foreclosures, Debts, Contradicting Transactions - Before purchasing an apartment, request the "Confirmation of Rights" (Nesach TABU) regarding the acquired apartment/property. The Nesach TABU should state if there are any foreclosures or caveat registration warnings (“Heorot Azahara”) on the apartment. In addition, the buyer must check the TABU (or other Land Registration offices) to determine whether the apartment has been registered properly. In some cases the buyer should also check with TheRegistrar of Pledges(“Rashsam Hamashkonot”) to verify whether the rights of the seller are in order.

7.Planning Information – It’s important to check whether there are any parts of the apartment that were built illegally and/or that were not included in the original building permit. Purchasing an apartment that has undergone illegal construction can impose a criminal liability on the buyer. This alsoapplies even if the seller assures you that they received a permit for additions or changes to the apartment. Don't rely on unsubstantiated claims. You must independently research the construction history of the apartment you want to buy.

8.Carefully Examine the Physical Condition of the Apartment- We recommend against buying an apartment without first thoroughly inspecting it. It is important to either check the apartment yourself or hire an expert to look for problems and defects. This simple effort could helpyou negotiate a better price and can preventunpleasant and costly "surprises".

9.Always Consult with a Real Estate Lawyer Especially DuringYour Negotiations!This will save you much time, stress, money and legal complications. As you have read above, the issues are many and the possible complications can cost you dearly. Be smart and hire an experienced real estate lawyer who will advise you throughoutyour purchase process. Please feel free tocontact outto us with any questions.

Warning: This information is not intended to constitute legal advice and should not be relied upon in lieu of consultation with the appropriate legal advisors.

Please refer to other articles in our series: "The Ins and Outs of Real Estate in Israel" for non-Israelis on .