Below please find a list of a few of the changes:

1. Change in the purchase tax. Purchase tax for single apartments was lowered while purchase tax for an additional apartment was raised. This helps young couples and families purchasing a home (where this is going to be the only apartment they own), as it greatly reduces the purchase tax they will have to pay.  Indeed, if the apartment is less than 1,350,000 NIS there won’t be any purchase tax to pay at all.  However, anyone who already owns an apartment and would like to invest in real estate by purchasing an additional apartment then they will pay a much higher purchase tax. Indeed, if the additional apartment that they buy is a 1,000,000 NIS they will pay 5% of this – a whopping 50,000 NIS!
2. Ways to get around the extra tax: In the case of the purchase of an additional apartment where the purchase will be higher there are a few ways to lower the tax. One way is to register the new apartment in the name of someone else who does not own another apartment in Israel.  However, should this person wish to purchase an apartment in the future he may then have to pay the higher purchase tax since this second purchase will not be his only apartment.  This purchaser will have to unload the first apartment somehow.   Another way to get around the tax is to separate the worth of items included in the apartment which can be dismantled, such as air conditioning, cabinets etc. from the price of the apartment. This will lower the price of the apartment thereby lowering the purchase tax.
3. Change in Capital Gains Tax. In all real estate transactions the sellers are liable to pay capital gains tax.  In the case of residential apartments there are several types of exemptions from this tax under the previous law.  If a person owns more than one apartment then he can sell one of his apartments with an exemption from capital gains tax every four years.   If the seller has only one apartment then he can get an exemption from capital gains tax once every year and a half.  This means that someone (who only has one apartment) can buy an apartment, sell it and get an exemption and then buy another apartment instead of the one he just sold and sell that apartment in a year and a half and get an exemption from capital gains tax.  There are also exemptions for the sale of apartments gotten through inheritance, giving apartments as gifts between close family members, the sale of two small apartments in order to buy one large one etc.  Under the new law (which will be in effect for a period of two years unless extended) sellers will be able to get an additional two exemptions in addition to any exemptions they could have gotten under the existing law. This means that people with multiple apartments can sell some or all of them and get exemptions from capital gains tax for these sales without having to wait the four years between sales with exemptions.
4. Limit to the exemptions from capital gains tax: The additional exemptions in the new law are limited to a price of 2,200,000 NIS.  This means that if the price of the apartment sold is less than 2,200,000 NIS then the seller will get a full exemption from the capital gains tax.  If the price of the apartment sold is more than 2,200,000 NIS then the seller will get an exemption from the capital gains tax for the amount of the price up till 2,200,000 NIS and he will be taxed for the amount of the price above 2,200,000 NIS.
5. What happens to the exemptions under the previous law: Sellers can use the exemptions from capital gains tax that were in effect under the previous law.
6. Tax planning: The changes in the law make it necessary for sellers to do some tax planning with their real estate attorney.  For example, if a seller has an apartment that is worth 3,000,000 NIS and an apartment that is worth 2,000,000 NIS he can get an exemption now for both apartments without waiting four years between sales.  He should use the previous law for the exemption from the capital gains tax for the apartment selling for 3,000,000 NIS  because the previous law did not have a price limit and even apartments that sell for more than 2,200,000 NIS can get a full exemption from the capital gains tax under the previous law.  For the apartment selling for 2,000,000 NIS the seller should ask for the exemption under the new law.  This is just a simple example of how a little tax planning can save a lot of money.
7. Procedural changes: The new law has brought with it some procedural changes.  One of the most prominent changes is the fact that in a deal where the seller is not entitled to any exemption from capital gains tax the seller’s lawyer must do an exact calculation of the tax. This was not the case before.  It is important to use a lawyer with experience and understanding of the intricacies of the calculations of capital gains tax. 
8. The Sale of Non-Residential Property – Under the previous law the exemption from capital gains tax was given to apartments used for residential purposes.  If the apartment was used as an office there would be no exemption from capital gains tax.  Under the new law this type of property will be allowed an exemption as well under certain circumstances.
9. Changes for the period after December 2012. As stated above this new law is only in effect until December 31, 2012. After that date there will be no extra exemptions beyond the exemptions that existed under the previous law.  However, if under the previous law a person who owned more than one apartment at the same time could get an exemption from capital gains tax once every four years, from the beginning of 2013 a person owning more than one apartment at the same time will only be able to get an exemption from capital gains tax once every eight years.

I call the old law the “previous law” even though it is still in effect and will continue to be in effect. The new law which is in effect for two years only, has brought with it problems as well. We will have to wait and see if the changes in the law will bring about the desired effect of bringing down the prices of apartments in Israel or at least of stopping the rise in prices. 

1. The apartment is so small 

When my client came to look at the apartment the walls weren’t up yet and the floor had not yet been poured. He went to look at a similar apartment in the next building that was the same size and layout and that had a floor. He was taken aback by how small the apartment was. My client is living in a large suburban house and he is used to more space. Before signing the contract he had seen the plans. However the plans that he saw were in square meters not square feet.

The lesson to be learned is that you should have the plans translated into square feet if that is what you are used to. This can give you an idea of the size of the rooms.
It should be noted that the rooms always look very small at this stage. When the floor is poured and the walls are up and whitewashed things should look more promising.

1. Upgrading Is Very Expensive

When you purchase an apartment from a construction company at the preconstruction stage, you sign on specifications and plans for the apartment. These “specs” set out what the apartment is built from, how many electrical sockets, what the tiles and floors are made from etc. The plans show the size of the rooms and the layout. If you want to change the floor plan, add electrical sockets or upgrade the tiles or closets be prepared to add a lot of money to the price of the apartment. My client discovered that many of the things he wanted to do in the apartment would cost a lot of money. He was basing his calculations of what he knows things cost in the States. He discovered that in Israel things were more expensive than he thought they would be.
My client had opted on moving the location of the kitchen only to find out that the porch next to the new kitchen location could not have a succah. The porch for the succah was closer to the original kitchen location. This was very disappointing to him.

The lesson to be learned is that it is important to consult with an Israeli interior designer before signing the contract. This designer can look at the plans and the specs, find out from the company what changes can be made and how much they cost and advise the purchaser as to what the upgrades will cost and whether this apartment can be made into the apartment that the purchaser wants. This way the purchaser knows before he signs on the dotted line what he can and cannot do and how much to expect to pay for changes. Based on the answers to these questions the purchase may decide to buy a different apartment.

1. When Will the Dollar Stop Devaluating?

The price of the apartment was set in New Israeli Shekels (NIS). The NIS is legal tender in Israel not the dollar, the euro or the pound. In addition to this the prices of apartments purchased from construction companies are usually linked to the building index. This means that if the building index goes up one month by half a percent the outstanding amount of the price still owed on the apartment goes up by half a percent. It is therefore best to try to pay the bulk of the money during the months when the building index is low and not spread the payments out over a long period of time. It is also wise to convert your dollars or whatever currency you have to shekels when you have the money available and not wait for the currency to rise again against the NIS. It may rise and then it may fall and then you will have less NIS left after the conversion of the currency with which to pay for the apartment. My client did the above but there were times in which he speculated and held back on converting the money and this might have been a mistake.
Converting you currency into Israeli currency costs money and this expense should be factored into the cost of the purchase as much as you can.

My client is feeling disappointed right now but I am sure that as the construction progresses and his new apartment begins to take shape he will begin to feel the first excitement of purchasing an apartment in Israel. All it needs is some planning and good old “SAVLANUT” (patience).

A different client of mine purchased a second hand apartment. She does not live in Israel yet and she did the whole purchase while she was abroad. She gave me a power of attorney and I signed all the paperwork in her name. I opened up an escrow account and she wired all the money to this account. I converted the money to NIS and make the payments necessary for the deal. At the end of the transaction I did the walkthrough of the apartment with the seller and accepted the apartment for her.

She came to Israel a few days after the possession of the apartment was given over to me. She was very happy with the smoothness of the whole transaction. She had a good time buying furniture and appliances for her new apartment. I referred her to various professionals who helped her set up the apartment the way she wanted. I just recently finished the registration of title in the Israeli Land Registry and she is now the legal owner of her first apartment in Israel.

Some transactions run into problems but many run smoothly. If you surround yourself by good real estate professionals they can help you solve any problems you may run into.

1. Is there a real estate bubble in Israel? This question has been on everyone’s mind.   The press is full of articles about this. The Governor of the Bank of Israel, Mr. Stanley Fisher has been concerned with this as well. The fear of many government officials is that if there is a real estate bubble this can have an adverse affect on the economy just like it did in the United States. There has been an increase in real estate investments in Israel due to the fact that many people who invested in real estate abroad lost a lot of money when problems arose there and many people lost money on the stock market as well.  Many people with money to invest began to look towards real estate investments as a safer form of investment and they chose to invest in Israel, which remained relatively unaffected by the real estate crisis in the rest of the world.  Therefore, the government has put into place a series of changes designed to lower the prices of real estate in Israel.  These changes include raising purchase tax for additional apartments in order to deter people from purchasing additional apartments as an investment and allowing for more exemptions from capital gains tax thereby freeing up the market for more apartment sales by people who own more than one apartment,  but did not want to sell until this point so as not to incur capital gains tax.  The Bank of Israel has made new rules pertaining to the different mortgage tracks and how high a percentage of financing a purchaser can take.  More land was freed up for the construction of new apartments, thereby bringing into the market more apartments under the old rules of supply and demand. However, many complain that there are not enough new apartments being built to really bring the prices down and the construction companies are complaining that construction costs have gone up.One thing that I personally feel will help the situation is if the Israeli Land Authority (the government body that controls most of the land that is being used for this new construction) would lower the prices that they charge for land for new construction projects.

1. Strengthening Buildings Against Earthquakes. Experts predict that there will be an earthquake in Israel.  They don’t know when but they know there will be one. There has been much debate in Israel about what would happen if there was an earthquake in the country.  Buildings built after a certain year are safe because by this time many laws and building codes providing for the construction of buildings that could withstand an earthquake were in place.  However, this is not the case with many buildings built before the 1970’s.  On the other hand not many people can afford to pay for the strengthening of their buildings by themselves.  The zoning authorities have passed a national zoning law called “Tama 38”.  This allows for owners of apartments in a building needed to be strengthened against earthquakes to enter into a contract with a contractor who will do the work.  It is a win-win situation for both the apartment owners and the contractor. The apartment owners get an upgraded, modernized building (able to withstand an earthquake with new plumbing and electrical wiring etc.) and an additional  room added to their apartment (this is usually a security room built of reinforced concrete which strengthens the apartment and building even more). The owners of the apartments sell building rights to the contractor who can add a few floors to the building, construct new apartments which he can then sell thereby getting reimbursed for the construction work on the existing building and making a profit as well.  Tax breaks have been given to apartment owners for this type of project.

1. The Preservation of Historical Buildings.  This has been a hot item in the past few years.  On the one hand the State of Israel is a very young state but on the other hand the Jewish people have been around for thousands of years and there has always been a Jewish presence in the holy land.  Although, buildings built before the 1700’s have always been preserved, this was not always the case with buildings that have been built in the last 150 years, thereby ignoring the more recent history of the State of Israel and its development. Many beautiful buildings that should have been preserved were demolished.  One striking example of this is the demolition of the beautiful “Gymnasia Herzliya” in order to construct “Migdal Shalom”, the first Israeli skyscraper in Tel Aviv.  In the 1980’s, 1990’s and later new laws dealing with the preservation of historical buildings have been enacted.  The authorities have also looked for ways to finance these types of projects.  In the past twenty years many of these historical buildings have been bought and renovated while preserving the original architecture of the building.  One only needs to walk through Neve Tzedek, and historical Tel Aviv (Herzl, Rothschild, Nachalat Binaymin, Allenby, Yehuda Halevi streets and more) to see all the preservation work that has been done and that is still under way. There is a huge trend of urban renewal going on that when completed brings with it tourism, new businesses, an enhancement of the quality of life in those neighborhoods and a rise in the worth of the apartments in those places.  Examples of this is,  Nachlaot and the German Colony in Jerusalem,  historical Zichron Yaakov, Jaffa,  Neve Tzedek, historical Tel Aviv,  Sarona  (the German Colony of Tel Aviv) the American Colony in Jaffa and more.  This has brought with it the new trend of boutique hotels housed in many of these historical buildings.  In 2003, Unesco declared Tel Aviv (the White City) a national heritage site due to the fact that it has the highest number of buildings built in the Bauhaus style than any other place in the world. Many of these buildings are located along Shederot Rothschild and the vicinity (in Tel Aviv) and they add to the feel and style of the city.  Last year, the Israeli Land Authority sold part of Sarona (the German Colony across from the Azrieli towers) to a group of investors. About 34 small houses that made up the German Colony built in the second half of the nineteenth century by German Templars are being renovated. When the site opens up next year these houses will be galleries, stores museums and restaurants and will be another place for tourists and Israelis to enjoy.

1. From Government Owned Land To Privately Owned Land. As I wrote in my article “The Powers That Be in Israeli Real Estate” 90% of the land in Israel is owned by the government and administered by a government agency called the Israeli Land Authority.   Anyone buying apartments built on this type of land would get a long term lease for 49 years. In recent policy and law changes it has been decided to give over the private ownership in the apartments to the holders of these long term lease rights.  This process has already begun and many apartment owners have been given direct ownership in their apartments by the Israeli Land Authority. 

1. Changes in the Laws Governing Purchases of New Apartments from Construction Companies. Although there were already laws in place to protect purchasers in these types of projects several changes to the law were enacted to add to this protection.  This is due to the fall of a large construction company several years ago.  All money paid to the construction company building and selling the project is paid with a pay slip directly into the special account set up for the project. The purchaser’s money is protected as soon as this deposit is made even if the bank guarantee has not yet been issued. In addition to this, construction companies are now obligated to give more details in the specs of the apartment as to what materials are used in the construction of the apartment where as before the construction companies were allowed to be vague on this issue.

1. Purchasing Groups.  I can’t write an article about issues that concern Israeli real estate investors without mentioning the purchasing groups that have arisen left and right. A purchasing group is basically a group of people who get together, purchase a plot of land and hire professionals to build the building for them.  The original idea was to save money on construction costs by cutting out the middle man (the construction company).   Indeed, the purchasing group in its purest form could do just that but this did not always turn out to be the case as my article called “The Pros and Cons of Purchasing Groups” points out. In addition to this, new decisions by the Ministry of Finance vis a vis purchase tax and value added tax (probably instigated by the construction companies) have diminished some of the “pros” of purchasing through a purchasing group.  

1. The Falling Dollar Rate.  In the past all second hand real estate transactions were linked to the U.S. dollar. After 2006, when the U.S. dollar began to fall against the Israeli shekel the linkage of prices of second hand real estate transactions more or less ceased. Now prices are quoted in shekels and Israeli sellers no longer heed the dollar rate of exchange.  This has made life very difficult for foreign purchasers who have to convert foreign currency into shekels in order to pay for their apartments purchased in Israel.

Above I endeavored to give a few examples of the some of the hot items concerning Israeli real estate professionals in recent years.  Although not all the above may affect you it is a good idea to know what is going on.  Knowledge is power they say.

Any previous articles that I referred to in this article can be found on the articles page of my website.

In steps the Israeli Ministry of Finance to save the day! I am being facetious of course.   In mid February of this year the Ministry of Finance enacted a series of changes to the existing laws governing purchase tax and capital gains tax.  The purpose of some of these changes is to stop the rising real estate prices.  Below please find a list of a few of the changes:

1. Change in the purchase tax.  Purchase tax for single apartments was lowered while purchase tax for an additional apartment was raised.  This helps young couples and families purchasing a home (where this is going to be the only apartment they own) as it greatly reduces the purchase tax they will have to pay.  Indeed, if the apartment is less than 1,350,000 NIS there won’t be any purchase tax to pay at all.  However, anyone who already owns an apartment and would like to invest in real estate by purchasing an additional apartment then they will pay a much higher purchase tax.  Indeed, if the additional apartment that they buy is above 1,000,000 NIS they will pay 5% of this – a whopping 50,000 NIS!

1. Ways to get around the extra tax:  In the case of the purchase of an additional apartment where the purchase will be higher there are a few ways to lower the tax.  One way is to register the new apartment in the name of someone else who does not own another apartment in Israel.  However, should this person wish to purchase an apartment in the future he may then have to pay the higher purchase tax since this second purchase will not be his only apartment. This purchaser will have to unload the first apartment somehow.   Another way to get around the tax is to separate the worth of items included in the apartment which can be dismantled, such as air conditioning, cabinets etc. from the price of the apartment.   This will lower the price of the apartment thereby lowering the purchase tax.

1. Change in Capital Gains Tax.   In all real estate transactions the sellers are liable to pay capital gains tax.  In the case of residential apartments there are several types of exemptions from this tax under the previous law.  If a person owns more than one apartment then he can sell one of his apartments with an exemption from capital gains tax every four years.   If the seller has only one apartment then he can get an exemption from capital gains tax once every year and a half.  This means someone (who only has one apartment) can buy an apartment, sell it and get an exemption and then buy another apartment instead of the one he just sold and sell that apartment in a year and a half and get an exemption from capital gains tax.  There are also exemptions for the sale of apartments gotten through inheritance, giving apartments as gifts between close family members, the sale of two small apartments in order to buy one large one etc.  Under the new law (which will be in effect for a period of two years unless extended) sellers will be able to get an additional two exemptions in addition to any exemptions they could have gotten under the existing law.  This means that people with multiple apartments can sell some or all of them and get exemptions from capital gains tax for these sales without having to wait the four years between sales with exemptions.

1. Limit to the exemptions from capital gains tax: The additional exemptions in the new law are limited to a price of 2,200,000 NIS.  This means that if the price of the apartment sold is less than 2,200,000 NIS then the seller will get a full exemption from the capital gains tax.  If the price of the apartment sold is more than 2,200,000 NIS then the seller will get an exemption from the capital gains tax for the amount of the price up to 2,200,000 NIS and he will be taxed for the amount of the price above 2,200,000 NIS.

1. What happens to the exemptions under the previous law:  Sellers can use the exemptions from capital gains tax that were in effect under the previous law.

1. Tax planning:  The changes in the law make it necessary for sellers to do some tax planning with their real estate attorney.  For example, if a seller has an apartment that is worth 3,000,000 NIS and an apartment that is worth 2,000,000 NIS he can get an exemption now for both apartments without waiting four years between sales.  He should use the previous law for the exemption from the capital gains tax for the apartment selling for 3,000,000 NIS because the previous law did not have a price limit and even apartments that sell for more than 2,200,000 NIS can get a full exemption from the capital gains tax under the previous law.  For the apartment selling for 2,000,000 NIS the seller should ask for the exemption under the new law.  This is just a simple example of how a little tax planning can save a lot of money.

1. Procedural changes:  The new law has brought with it some procedural changes.  One of the most prominent changes is the fact that in a deal where the seller is not entitled to any exemption from capital gains tax the seller’s lawyer must do an exact calculation of the tax. This was not the case before.  It is important to use a lawyer with experience and understanding of the intricacies of the calculations of capital gains tax. 

The new law which is in effect for two years only, has brought with it problems as well.  We will have to wait and see if the changes in the law will bring about the desired effect of bringing down the prices of apartments in Israel or at least of stopping the rise in prices. 

To see the new purchase tax levels please go to the following link http://levinlawoffices.co.il/free-stuff/purchase-tax/

Is this really the fulfillment of a dream or can it become a nightmare? Read on and decide for yourselves.

A  moshav is an agricultural settlement. The families that live on the moshav have banned together in a legal entity known as a cooperative society  (in Hebrew an “Aguda Shitufit”)  Each family has its own house  with about a dunam and a half of land around it, several dunams of land that it can farm and then the rest of the land is farmed communally by the moshav and the farm owners gets part of the profit.  This farm is called in Hebrew a “meshek” or a nachala”. 

Many of these moshavim were formed in the 1950’s by the Jewish Agency and the Israeli Land Authority.  The land belonged to the Israel Land Authority and the Jewish Agency sent settlers (usually new immigrants) to form the cooperative  ”Aguda Shitufit” and set up  the moshav.  The legal rights that the farmers were given in the land were of use only not ownership or a long term lease  (in Hebrew “Bar Reshut”). 

The farm or nachala is not considered part of a person’s estate.  At the death of one of the parents the farm goes to the surviving spouse.  Upon  the death of the surviving spouse the farm goes to the child who was appointed by the parents  during their lifetime as the one to continue the farm (in Hebrew “ben mamshich”).   The farm cannot be divided up between the children .  The son who is to continue the farm is allowed to build his house on the farm when the parents are still alive.  Upon the death of both parents this son, the “ben mamshich”, gets it all.

This situation caused a lot of friction between siblings.  Parents very often found it hard to choose the one child who would get it all – the “ben mamshich”.   In addition to this, many of the moshavim fell into  debt.  The only way to get out of the debt was to take agricultural land ask to have its purpose changed  from that of agricultural to that of  residential and sell the land off to developers, using the money to  pay off debts. 

It was therefore decided that every moshav would have its own extension.  The right to buy the first plots of land was given over to each family that had a farm (or member of the Aguda Shitufit) so that this family could give the plot of land to one of the children, thereby having another child, in addition to the “ben mamshich”  continue living on the moshav. This child was able to buy the plot at a lower subsidized price from the Israeli Land Authority.  The remaining  plots in the project were to be sold on the open market to people from out of the moshav at higher prices set by the Israeli Land Authority.  The rights that these purchasers got in their plot is one of a long  term lease with the Israeli Land Authority.

Unfortunately, the privilege that the farmers were given was very often abused.  The plot that they could buy for their child at a lower price was very often sold to someone from out of the moshav at a higher price than the price their child would have paid to the Israeli Land Authority. However, the price reported and paid to the Israeli Land Authority was the lower price at which the plot was offered to the farmer  and the additional money was pocketed by the farmer.  In this way many farmers made a profit off national lands!

In addition to this, anyone wishing to live on the moshav has to be accepted by the committee of the moshav.  Very often, the purchaser was asked to pay bribery money under the table so that he would be accepted to the moshav by the committee.  Even after people were accepted to the moshav, built their house and lived on the moshav for a few years they could still fall victim to the old timers tricks.  I recently represented the purchaser of a house built on one of these projects.  The sellers were not people who were born and raised on the moshav but rather bought the plot from the Israeli Land Authority and built their house.    When the purchaser went before the committee he was delayed  again and again.  We soon found out that there was an old timer from the moshav that wanted to buy the house for his son and he therefore told the committee not to accept any buyer that the owner of the house would bring in.   When my client backed down, the seller began to negotiate with this old timer only to find that the guy wanted to pay him a lot less than he could have gotten from my client.  You see the old timer thought he had the seller by the throat and he was right.

These are just a few of the problems.  Does this sound like a dream come true?  If it does then you should really be careful what you wish for.

 
At the present time V.A.T. in Israel is 16% of the fee. In the U.K. V.A.T. is presently 17.5% of the fee but is scheduled to go up to 20% from January 2011.

I would like to thank John Chart, a (partner/ solicitor) with the firm of Barnett Alexander Conway Ingram LLP in London for writing the U.K. side of this article. John Chart can be reached at J.Chart@bacisolicitors.co.uk or at 020 8349 7680.

In 2008 the Tel Aviv Municipality passed a town plan for the preservation of historical buildings. Over 1000 buildings in what is called historical Tel Aviv (or the “White City”) were declared historical buildings that were slated for preservation. This means that the building cannot be demolished and its renovation is governed by strict rules that limit the owner as to what he can and cannot do with his own property.  Indeed, there is now a debate as to whether or not an historical building should be taken from an owner who does not preserve the building as set out in the law.  Needless to say this type of preservation work is very expensive.

As with all new town plans, the owner of the property is subject to a Betterment Tax when he sells or asks for a construction permit.  If the worth of the property is enhanced as a result of the new town plan then the owner will pay a hefty Betterment Tax. However, the law stipulates that if the worth of a property is damaged as a result of the new town plan then the local municipality will have to compensate the owner for this loss.

In a recent decision concerning a building slated for preservation in Tel Aviv the national appraiser found that the worth of the building was not only not enhanced by the new town plan for the preservation of historical buildings, he found that the worth of the property would be worth 4,000,000 NIS more if it was demolished and rebuilt.  If this is the case then we may see a flood of claims for damages from owners of historical buildings in Tel Aviv against the Tel Aviv Municipality.  According to the law the statute of limitations for the submission of these claims will end in about a year so if any of these owners intends to sue it will have to be done so soon.

The question is what this will do to the city of Tel Aviv in the long run?  Tel Aviv was originally established in 1909 as a bedroom community to the older city of Yaffo. Despite many difficulties Tel Aviv eventually evolved into a large vibrant city.  Some call it the city that never sleeps or the White City.  The architecture of its first buildings is predominantly in the eclectic style but during the 1930’s and later the many buildings were built in the Bauhaus style.  Tel Aviv has the highest number of buildings built in the Bauhaus style in the word and therefore UNESCO declared Tel Aviv a World Heritage Site.  All these buildings are located in what is called historical Tel Aviv.  Each building has its own story and architectural style.  Each building tells the story of a strong brave people who built one of the first modern, Hebrew cities. Many people feel that this history and heritage is something worth preserving.  During the years that followed Tel Aviv’s star dimmed.  Not much thought was given to the preservation of its historical buildings and many beautiful buildings fell to ruin or were demolished.

 In the 1960’s a beautiful building called Gymnasia Herzliya (the first Hebrew High School) was demolished to make way for the first sky scraper, Migdal Shalom.   After this, there was a policy shift and many people began to understand that if these buildings are not protected they would be gone in a matter of years.  Gone too would be the stories and the history of the people who built Tel Aviv from sand dunes.

If the municipality is to be made to pay damages to the owners of these buildings this may deter the Municipality of Tel Aviv and indeed other municipalities from enforcing programs for the preservation of historical buildings.  Where would the old cities of Jerusalem, Yaffo, Acre or Zefat be today without preservation?  Where would neighborhoods such as Neve Tzedek, Yemin Moshe or Nachlaot be?  One only needs to walk around these neighborhoods or Tel Aviv today and observe the many buildings that have been renovated and preserved and turned into museums, hotels, apartments and shops to see the effect this has on the neighborhoods where this work is taking place. 

In the short run, preservation is a burden on the owners.  In the long run everyone, including the owners reap the rewards of preservation.

• Linkage. The prices of these types of contracts are always linked to the U.S. Dollar or to one of the Israeli price indexes. It is important to understand what this means. If you don’t, you could find yourself very short of money.

• Linking to the dollar. This means that the price in the contract appears in shekels. The payments are made in shekels but they are linked to the representative rate of exchange of the dollar. The representative rate of exchange is published by the Bank of Israel every afternoon except on Saturdays and Sundays. In order to protect themselves against the falling rate of the dollar, construction companies put in a clause that the rate of exchange cannot go below a certain rate. This means that if the dollar rate falls below the minimum rate set in the contract, you will pay according to the minimum rate of exchange and not the actual rate. Consequently, if your money is in dollars and you have to convert those dollars into shekels at a rate that is higher than the actual rate, you could find yourself in a situation where you need to sell more dollars to make up the difference. 

• Linking to one of the Israeli indexes. On the 15^th of every month the Israeli Bureau of Statistics publishes the Israeli price index. This measures the rate of inflation in Israel. There is an index in every category, including a building index. The average of all the indexes is called the Consumer Price Index. The prices of apartments purchased from construction companies are linked to either the Consumer Price Index or the Building Index. This means that the more you spread out your payments over a longer period of time the more the price will go up as inflation rises. You can minimize any rise in the price of your apartment caused by the rise in inflation by planning out your payment schedule accordingly. 

• Late Payments. All contracts with construction companies contain clauses dealing with compensation in case of late payment. Make sure you read and understand these clauses. In most cases, the construction company will not agree to any changes your attorney might want to make, and these clauses will be enforced at every opportunity. The compensation for lateness is usually about 2% of the debt a month. On top of that you are still paying the linkage described above. If you find yourself making a late payment, that payment will first be deducted from the interest you owe, and not the principle. The principle will continue to accrue interest and linkage until it is paid off. This can add tens of thousands of shekels to the price depending on how late you are with the payments.  

• Compensation for breach of contract. If you are in a fundamental breach of contract due to late payments, the construction company can charge you a compensation fee in addition to the interest and the linkage fees. The stipulated fee in your contract is usually about 10 – 15% of the apartment purchase price.

• Additional costs. The additional closing costs involved in this type of deal are the construction company’s legal fees, your lawyer’s legal fees, purchase tax and the cost of hooking up to the utilities.

• Avoiding the pitfalls. While linkage cannot be avoided completely, your Israeli real estate attorney can help you minimize the extra costs due to linkage by advising you on how best to plan your payment schedule. Once you’ve figured out the price, the linkage and the closing costs and you have your payment schedule in place, plan your finances accordingly. Make sure you make your payments on time. If you see that you have a problem, let your attorney know so that he or she can contact the construction company and work out an alternative payment schedule. Very often the construction company will agree to a revised schedule with no problem. Remember to deal with any issues as they come up. At the end of the deal the company won’t give you possession of the house if they feel you owe them money – even if you have paid the price in full and all you owe is interest for lateness.

1. Check the permits. Have a professional check the building permit to see that the construction company actually has a permit to build the floor on which your apartment is located.  Very often construction companies obtain a building permit for a certain number of floors but then apply to the municipality for a permit to build additional floors.  They begin to sell the apartments on the floors that they do not yet have a permit for. Sometimes a construction company will attempt to sell apartments even though a building permit has not yet been issued for any part of the project at all.  If this is the case, your real estate attorney should make sure that the contract contains a clause allowing you to withhold payments until the building permit is issued, and that allows you to cancel the contract if the permit is not issued within 6 months from the signing or if the municipality demands significant changes in the plans of the apartment before it issues the permits.

1. Check the zoning. Have a professional check the zoning for the neighborhood.  It is good to know if there are extra building rights to the building.  It is useful to know what type of structure is planned for that empty plot across the street.  Is it a school, a synagogue,  a park or something less desirable? 

1. Check the plans. Go over the plans of the apartment with a professional.  These plans are the company’s obligation to you regarding what the apartment will look like.  If you would like to make changes to the internal structure of the apartment consult an architect or interior designer.  Once you’ve done this, it is important to inform the construction company of any changes or additions as soon as possible, so that they can make these changes during the construction.  Very often these changes cost extra money.  The further along the construction company is in the construction, the harder it is to make changes. 

1. Plan for delays. All building contracts contain clauses allowing the construction company to be late without paying any compensation to the buyer.  These contracts usually state that there can be a delay of up to three months with no need to state the reason for such a delay.  It is rare that a construction company completes a project on time, so plan accordingly from the beginning. Even if the company finally does compensate for lateness (when the delay is beyond what it is allowed under the contract), the compensation never really covers added expenses such as rent or storage etc.

1. Check for Problems. On the day you receive the keys to the apartment, you and a representative from the construction company will complete a walk through of the apartment to check its condition.  A protocol is written listing all the defects.  Consider hiring an engineer to do this with you, so that you do not miss any problems at this stage. The company does not have to fix something that could have been seen at this time and was not included in the protocol.  Hidden defects that could not be detected at this point must repaired by the construction company when they are discovered.

1. Protect your money. Usually the construction of a project takes about two years.  During that time you make payments to the construction company as stipulated in your contract.  The law mandates that your money be protected by either a bank guarantee or an insurance policy.  These documents are there to protect your money.  They stay in effect until you take possession of the apartment and your rights to that apartment are registered.  It is critical that you pay all payments into the special escrow account associated with the project.  Any payment made “under the table” will not be protected by the bank guarantees or insurance policies.  Should the construction company go bankrupt before the completion of the construction, the bank giving the financial backing will either refund your money or continue the construction with another company.

1. Plan your payments. The price of an apartment to be purchased from a construction company is usually linked to the building index.  This means that if inflation rises, the outstanding amount still owed on the purchase price increases accordingly.  It is wise to plan your payments in such a way as to minimize the effect of the building index on the price.

1. Pay on time. Late payments accrue interest in addition to the linkage.  The construction companies enforce this interest clause very strictly and they usually do not agree to changes in the clause.  Try not to be late in making payments as this can increase the price of the apartment by tens of thousands of shekels.

1. Get registered. At the end of the construction, the company is obligated to register the whole project in the land registry.  This registration can take several years and in the meantime temporary registrations are made to protect your rights in the property and to ensure the transfer of rights in an orderly fashion in the event that you sell the apartment before the registration.  It is for this reason that you are asked to pay the company’s legal fees.

Contracts to buy from a construction company are typically very long and complex. Before you sign on the dotted line make sure you have legal representation to protect your interests and   help you to navigate the different issues involved in these types of transactions.

Here are the steps for the probate of a foreign will in Israel:

1. The foreign must first go through the probate process in the country in which the deceased lived at the time of his death.

1. The original will (with original signatures) together with the probate order is then sent to Israel.

1. A request for the probate of the foreign will is submitted to the Registrar of Inheritances in the district where the property is located. Attached to this request is the original copy of the will and a certified copy of the probate order from the foreign country, a certified copy of the death certificate, and a legal opinion from a lawyer well versed in the law of the country where the will originated. Notices must be sent to the heirs that this procedure was begun.

1. The Registrar of Inheritances then sends the file to the Family Court in the city in which the Registrars office is located.

1. A copy of the file is sent to the District Attorney for approval. If the will is a simple one then the District Attorney should have no objection to the probate of the will in Israel. If the will is complicated, then the District Attorney may ask for more documents or explanations.

1. Very often the District Attorney requests a notarized translation of the will into Hebrew. Depending on the length of the will this can be expensive.

1. A notice is placed in a daily newspaper and the official government publication that a request for probate was submitted. This is done to allow anyone who would like to contest the will to do so. If no one contests the will within the requisite period of time, and the District Attorney has no objections, then the probate order will be given.

1. If someone contests the will, the case will go to trial. This is rare when dealing with a will that was already probated in a foreign county. One can successfully contest a will if one can prove that the deceased was mentally incapacitated when he made the will or that he was coerced into signing the will or did not understand the will. If that is the case, it would seem incomprehensible that the will would be null and void in one country when it was successfully probated in another.

1. After the probate order is given, the will is taken to the Land Registry and the rights in the property are registered in the names of the heirs under the will. If the property is a bank account, the will is taken to the bank and the bank pays out the money to the heirs directly.

1. There is no inheritance or estate tax in Israel. The registration of the rights in land to the heirs under the will has no tax attached to it.

1. The process is a long one. Due to the fact that in some foreign countries there are estate taxes, wills are often worded in ways designed to avoid these taxes. This very often makes the interpretation of a foreign will difficult for those in Israel who have to disburse the money or register the rights, even if the foreign language of the will is understood by them. This lack of understanding often causes delays in the implementation of a will.

Despite the difficulties, this is a process that must be followed if the heirs under the will are to be allowed to take possession of the property and do with it as they want.