1. Welcome
2. Featured Article – Nine Things to Consider When Purchasing an Apartment in Israel from a Construction Company at the Preconstruction Stage
3. Subscription Information
4. For Further Information

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 Welcome to Israel Real Estate Law Insights

————————————————

Welcome to the latest issue of the Israel Real Estate Law Insights, published by Nicole Levin Law Offices, experts in all aspects of real estate law in Israel. You are receiving this newsletter because you signed up for it on our website or because you filled out a form at a housing fair. Our newsletter focuses on the legal aspects of buying, selling and renting property in Israel.

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Nine Things to Consider When Purchasing an Apartment in Israel from a Construction Company at the Preconstruction Stage

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There are major differences between buying an existing apartment in Israel from a private individual (second hand) and buying a new apartment from a construction company at the preconstruction stage.  Below are a few things to remember…..

Read the complete article on our website:

http://levinlawoffices.co.il/2010/08/17/nine-things-to-consider-when-purchasing-an-apartment-in-israel/ 

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 Subscription Information

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Please feel free to forward this newsletter on to friends in its entirety. If you received this newsletter from a friend you can subscribe and get your own copy by signing up in the box to the left of this article. We only send out this newsletter with permission. If you no longer wish to receive it, you can unsubscribe by sending an unsubscribe email by clicking here.

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 For Further Information

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Additional information can be found at:

http://www.levinlawoffices.co.il/free-stuff/

Further interesting articles can be found at:

http://levinlawoffices.co.il/articles/

Previous newsletters can be found at:

http://levinlawoffices.co.il/newsletter/

If you have any further queries please feel free to make use of the Contacts page on our website:

http://www.levinlawoffices.co.il/contact-us/

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.

1. Welcome
2. Featured Article – The Probate of a Foreign Will in the Israeli Court System
3. Subscription Information
4. For Further Information

————————————————

 Welcome to Israel Real Estate Law Insights

————————————————

Welcome to the latest issue of the Israel Real Estate Law Insights, published by Nicole Levin Law Offices, experts in all aspects of real estate law in Israel. You are receiving this newsletter because you signed up for it on our website or because you filled out a form at a housing fair. Our newsletter focuses on the legal aspects of buying, selling and renting property in Israel.

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The Probate of a Foreign Will in the Israeli Court System

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What happens when a foreign resident who owns property in Israel dies? What happens to his Israeli property? Very simply, it goes to his heirs. If the deceased left a will then the property will go to those heirs mentioned in the will. Even if we are talking about a foreign resident who was living abroad at the time of his death, his Israeli property will go to the heirs mentioned in his will, assuming that the will is valid under the laws of his country of residence.Here are the steps for the probate of a foreign will in Israel:

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

Read the complete article on our website:

http://levinlawoffices.co.il/2010/06/21/the-probate-of-a-foreign-will-in-the-israeli-court-system/

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 Subscription Information

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Please feel free to forward this newsletter on to friends in its entirety.If you received this newsletter from a friend you can subscribe and get your own copy by signing up in the box to the left of this article.We only send out this newsletter with permission. If you no longer wish to receive it, you can unsubscribe by sending an unsubscribe email by clicking here.


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 For Further Information

————————————————-

Additional information can be found at:

http://www.levinlawoffices.co.il/free-stuff/

Further interesting articles can be found at:

http://levinlawoffices.co.il/articles/

Previous newsletters can be found at:

http://levinlawoffices.co.il/newsletter/

If you have any further queries please feel free to make use of the Contacts page on our website:

http://www.levinlawoffices.co.il/contact-us/

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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.

• What bank should you go to?
• What type of mortgage should you take?
• Will you be able to afford the monthly repayments?
• How will you navigate all the paperwork?
• Can you take out an Israeli mortgage when you are living abroad?

One of the most difficult parts of any Israeli real estate deal is getting the mortgage. Many people make the mistake of thinking that if the bank has approved their request for a mortgage, the money will miraculously be transferred to their account within a few days.

That’s simply not the case.

The truth is that while it’s perfectly possible to get a mortgage in Israel, you’ll need to understand how the system works in order to expedite the process.

1. The mortgage banks have their own goals.  

   They want to give mortgages because that’s their business. But they also want to protect themselves. They won’t approve a mortgage before confirming your ability to make the monthly mortgage payments. When they are satisfied that you can meet the financial commitment, they will grant what is called “approval in principle.”

   You can get “approval in principle” before a sales agreement is signed or before you even know what you are buying. However this “approval in principle” is conditional. The condition is that the purchase is a “good purchase” in the sense that the property is not worth less that the amount of the mortgage, and that the bank can protects its rights as a mortgage holder by registering the mortgage in the land registry. Meeting these legal conditions is the complicated part of the process.

   To meet the first condition necessary in order to get the “approval in principal” you will need proof of income. The mortgage banks usually ask to see pay slips, bank statements, Income tax statements, credit reports or score reports (for foreign applicants) or perhaps a list of assets that bear income.

2. You need to meet the legal conditions.  
   Make sure you leave enough time to do all the things necessary to meet the legal requirements of the bank.

   To begin the mortgage application process you need to bring the bank a copy of the purchase agreement and a copy of the proof of ownership for the property. The bank will then open up a file and issue a series of documents for you to sign. These include:

   • the loan agreement and its addendums
   • documents mortgaging the property to the bank
   • a standing order for your checking account to make the monthly mortgage payments,
   • a power of attorney that has to be notarized which empowers the mortgage bank to foreclose on the property in case you default on the mortgage payments.

   Since the mortgage money does not get paid to you directly, but rather to the seller, there are documents dealing with this as well. If the seller has a mortgage on the property then provision has to be made for this, since the bank will not give a mortgage unless the property is clear of debt.

   If money is needed from your mortgage in order to lift the seller’s mortgage, a series of letters between the two mortgage banks will be needed to settle this. The bank will usually demand that you pay the amount of the price that is coming from your own funds first, before they release their money, so you have to bring them proof of the sum you’ve already paid. The bank will also require an appraisal of the property to ascertain that it is valued at more than the mortgage. The banks have a list of approved appraisers – you cannot pick your own appraiser.

   All of the paperwork required requires a lot of running around. You have to register the mortgages in the Land Registry and Registrar of Pledges. You have to go to the notary and get the power of attorney notarized. You have to arrange and pay for the appraiser to visit the property. You have to bring paperwork to your attorney for signature. You have to bring paper work for the sellers to sign. When the seller’s mortgage is paid off you have to bring proof of this back to the bank so that they can give you the rest of your mortgage money if your mortgage is higher that your seller’s mortgage that was just lifted.

   If it sounds complicated – it is!

   While you can certainly do all the running around yourself, you risk wasting a lot of time and making mistakes because you don’t quite understand what to do or how to do it. If you’re abroad or unavailable because of work commitments or you simply want an easier time of it, consider asking your attorney or mortgage broker to help.

3. Expect the unexpected.  
   Beyond the regular paperwork, the Israeli mortgage banks have begun interfering more and more in individual transactions. For example, if the seller is a foreign resident, proof that any capital gains tax due has been paid must be shown to the bank before they release the mortgage money. If the capital gains tax has not been paid, the bank may demand that funds be placed with the seller’s attorney in escrow until the taxes are dealt with. Sometimes, the amount required to be held in escrow bears no relation to the amount of the expected tax bill. A bank may demand that this escrow account be opened in their own bank so that they can monitor when the money is actually released.

   The mortgage bank may also make additional demands if the seller of the property is not in the country and leaves his attorney a power of attorney to sign the documents necessary for the purchaser’s mortgage. If the legal department of the bank is not satisfied with the language of this power of attorney they will not accept the attorney’s signature. This means that the seller will have to sign a new power of attorney when he is abroad, forcing him to pay a visit to the Israeli consulate to get the power of attorney notarized. This will of course delay the mortgage process and delay can mean monetary damage to the parties.

4. Insurance on the structure of the property is a requirement.  
   Israeli mortgage banks also require that you take out life insurance in addition. The insurance can be arranged through the bank but you may use your own insurance agent if you choose. Should one of the borrowers pass away, the mortgage is paid in full by the insurance company. If you have some kind of existing or past medical condition you will need to check whether this will prevent you from receiving approval for the life insurance. If it does, you might not be able to get the mortgage so you must check to see if some other solution can be found to solve this problem before you sign a contract.

5. Israeli mortgage banks are large bureaucratic institutions.  
   To get the letters and confirmations needed for your mortgage take time. In general, the customer service leaves much to be desired and there is a lot of room for improvement on that score. Make sure that your lawyer leaves you enough time to organize your mortgage. Don’t expect to finish the process quickly.

6. Pick the right mortgage at the right bank.  
   What type of mortgage should you choose? Which bank should you go with? Israeli mortgage banks give many types of mortgages. There are fixed interest loans. There are loans linked to the Israeli Prime interest rates or to LIBOR. There are loans linked to the dollar or other foreign currencies. There are loans for 10, 20 or 30 years. There are different ways of computing the payment of the loans. All these factors influence what this loan will cost you in the long run and your monthly payment schedule. Determining the best mortgage for your particular circumstances can often be difficult and confusing. A mortgage broker can help you with this. Since a mortgage broker has the power to bring banks a lot of business, they are often able to get their customers better rates and this translates into a big savings for you in the long run.

7. Figure out your budget.  
   Many olim do not know how much it costs to live in Israel. How much does education cost? Babysitters? Entertainment? Transportation? Food? Municipal taxes? Your monthly mortgage payments? Make sure you have a realistic budget in place so you can be sure that you will be able to make you monthly mortgage payments. Consult a financial advisor or other professional if you need help.
   

Organizing a mortgage in Israel can be complicated but is perfectly possible. If you need the mortgage take it. If financing the purchase with a mortgage is favorable – take the mortgage. But don’t attempt to tackle the Israeli mortgage bank system by yourself.

Get help from people who deal with this daily and who can help you navigate the legal maze and survive with your sanity intact.

Many potential buyers prefer to use the services of a real estate agent who is familiar with the area in which the property search is taking place. Real estate agents will ask you to sign a form in order to do business with you. This form is a legally-binding contract which stipulates the terms and conditions of your business relationship and the fees you will owe the real estate agent. Make sure you understand the conditions written on the form and that you have a copy to keep with you. It is very important to write down which properties the agent showed you, especially if you are viewing properties with other agents as well. If you see that an agent is taking you to view a property that you have already seen with another agent, then notify him immediately and write it on the form.

When you find a property that you want to purchase, the next step is to make an offer. You can do this through your real estate agent. Any offers are made verbally and money does not change hands at this time.

In Israel, any document that you sign can be legally binding. Often, real estate agents will suggest that the potential parties sign a pre-contract “zichron devarim”. Be aware that this is a legally binding document. Most real estate lawyers advise against signing such a document because at this stage you have not had an opportunity to really investigate the legal particulars of the deal.

A good real estate agent will help you negotiate the price and the date of possession. The payment schedule (which is usually not 10% on signing and 90% on completion, as it is in other countries) is negotiated by the lawyers when they negotiate the terms of the contract.

Other questions that must be addressed and which may affect the terms of the contract include: Is the currency of the contract in shekels or dollars? Is the house in good condition? Is it built to code? Is the property registered in the seller’s name? Is the property encumbered by debts?

After the parties have come to an agreement about the terms of the transaction, you should ask to see the registration of the property. Your attorney will check to see if there are any problems regarding the registration which would preclude doing the deal or influence the deal in any way.

If all is well, the next step is to hire an engineer to check the property and answer some of the above questions. If you are planning to make any structural or design changes to the property you may also want to consult with an architect.

After checking the property registration and receiving reports from your engineer or architect, the lawyers will begin contract negotiations.

Very often deals fall through after the purchaser has invested time and money in checking out the property. This is obviously very upsetting and disappointing for the purchaser, but if the contract has not been signed there is very little that can be done.

In order to avoid this type of situation it is best to make sure that there is a real meeting of the minds between the parties before money is spent on engineers, architects and lawyers. It is important to say to the seller, “I am going to spend a lot of money checking this deal out. Are you completely on board? Have you settled any issues you might have? “

Recently, I worked on a deal that went to the lawyers before the sellers were ready. The sellers had major tax issues that they needed to settle, but the parties were rushed to move ahead. As a result, the purchaser hired an engineer to check the property and a lawyer who began working on the contract. In the end, the sellers pulled out due to their tax issues. The purchaser was very hurt, angry and disappointed, not to mention out of pocket. The whole experience was so upsetting to him that he decided not to purchase any property in Israel at all.

Sometimes, due to unforeseen circumstances, such situations are unavoidable. Sometimes, expecting the unexpected is simply a helpful mindset to have. Before investing time and money on any real estate deal, make sure that the sellers are completely ready to move forward. When I say completely ready, I mean emotionally, legally and economically. Very often people put their house up for sale to see how much they can get, but they are not yet ready to take the plunge. A good real estate agent will help you assess the situation and a good real estate lawyer will help you navigate what follows.

1. Purchase Tax: Purchase tax is a tax paid by purchasers when buying an apartment. In the last two years purchase tax for Israelis has been lowered. In fact, it has been lowered so much that purchasers of cheap apartments often get away with paying no purchase tax at all. In some instances it doesn’t pay for an oleh to ask for the partial exemption from purchase tax.In the past, anyone purchasing a second or additional apartment paid a higher rate of purchase tax than those owning only one apartment. The purchase tax for buyers in this situation has been raised even higher over the past two years.

   Foreign residents also used to pay a higher rate purchase tax. However, a treaty between Israel and many countries preventing double taxation caused purchase tax rates for foreign residents to fall. Foreign residents now pay the same rates as Israeli citizens.

   In a recent decision, the tax authorities have begun taxing vacation apartments at a higher rate of purchase tax than that of regular residential apartments.

2. Capital Gains Tax: This tax, paid by the seller when selling property, has been lowered in recent years.
3. Betterment Tax: This is a tax on the enhancement of property due to a change in the zoning laws. It is paid by the seller when selling a property or paid by the owner when asking for a building permit. While there has been no change in the actual tax, a change in the appeal process has taken place. The tax is based on the appraisal of the enhancement of the property by an appraiser. In the past one could appeal this appraisal by providing the appraisal of a private assessor. The two appraisers would come to an agreement regarding the correct appraisal. Now these appeals are decided by one of a pool of 10 appraisers nationwide appointed for this purpose.
4. Changes in linkage of apartment prices: It has long been part of the Israeli mentality to link the prices of apartments to something such as the dollar or the Building Index or even the general Consumer Price Index. This is because for years the Israeli economy suffered from a weak currency and triple digit inflation. Second hand apartments were usually linked to the dollar and new apartments from construction companies were linked to the dollar or the Building Index. This is a phenomenon unheard of in other places in the world. Recently, due to the falling rate of the U.S. dollar against the Israeli shekel, many Israelis have negotiated contracts to buy or sell second hand property in shekels without any linkage. Due to the rise in inflation in the past year, many second hand contracts are still in shekels but are now linked to the Israeli Consumer Price Index i.e. to inflation. Should the dollar begin to strengthen we may expect to see a return to dollar-linked sales agreements for second hand properties.
5. Changes in the law concerning the purchase of apartments from construction companies at the preconstruction stage: A couple of years ago a large construction company crashed leaving many people in the lurch. There was a real fear that many purchasers, especially those that did not hold viable bank guarantees as the law required, would not get their apartments. In this instance the Bank of Israel stepped in with a series of decisions protecting the purchasers. It was decided that so long as purchasers had deposited their money in the special escrow account set up for the project, their money was protected even though the bank guarantee was not yet issued. In addition to this, the law now requires that all payments to a construction company be made through pay slips directly into the special escrow account, thereby preventing money being deposited in another account by mistake.Additional legal changes have added further protection for purchasers concerning the quality of the construction. The law requires that every contract for the sale of an apartment under construction by a construction company have specifications attached to it. These specs describe what materials the apartment is built of, the number and location of electrical sockets and a myriad of other often small but important details. In the past, the list of specifications was not very specific at all and left a lot of room for the construction company’s imagination. Today the construction company is required to be very specific regarding what materials will be used. This puts a lot of pressure on the construction company to let the purchasers know what type of tiles, sinks and tubs will be installed in the property.
6. Purchasing Groups: In the past few years we have seen the emergence of property purchasing groups, particularly for new construction projects. A purchasing group is a group of people who purchase the land and build the project themselves. Although, this type of project does not have the protection of the law pertaining to the purchase of apartments from construction companies, many purchasers are drawn to this type of project because they feel that they will save money in the long run. These purchasing groups have become major players on the real estate scene. Whether or not they will continue to pose a challenge to the construction companies remains to be seen.

Below are eleven important things to consider when selling property in Israel.

1. Every real estate transaction in Israel involves two basic taxes: 1) purchase tax paid by the purchaser, and 2) capital gains tax paid by the seller. If you are selling residential property such as a house or apartment, you should consult with your real estate attorney before signing the sales agreement in order to determine if there will be capital gains tax and how much that tax will be.
2. Generally, sellers who own only one apartment at a time are entitled to an exemption from capital gains tax once every 18 months. Sellers who own more than one apartment receive an exemption from capital gains tax once every four years.In order to determine tax liability, the tax authorities look at the family as a unit. A husband, wife and minor children are considered a family unit. If one member of the family owns an apartment, that apartment is considered to be owned by the other family members as well, even if it is only registered in one name. So, if you own an apartment in your own name and also jointly own another apartment with your spouse, the tax authorities will treat you as if you both own two apartments. In this situation, you would have to wait four years between sales if you want to get the full capital gains tax exemption for the sale of both apartments.
3. If you are not selling the apartment at a profit it is prudent not to ask for the exemption. You will then be able to use the exemption for another sale, even if that sale is within the 18-month or four-year periods.
4. If the apartment you are selling was inherited and you are considering selling another apartment in the near future, it is important to do some tax planning at this stage to determine in which order the properties should be sold in order to minimize any tax liabilities.
5. If you are selling the apartment at a profit, expenses such as legal fees and real estate agent fees from the purchase and sale of the apartment, interest paid on the mortgage, purchase tax paid during the purchase of the apartment, and improvements made to the apartment may lower the tax due. Remember to save receipts from all transactions and renovations.
6. There is no capital gains tax if a parent gives an apartment to his child as a gift. The child will have to pay a 1/3 of the purchase tax.
7. There is no estate or inheritance tax in Israel. If you inherit an apartment you can register it in your name without incurring any taxes.
8. Before you sell your apartment, check whether or not there is a betterment tax. A betterment tax applies when there is a change in the zoning laws for a certain neighborhood, giving the owners of the apartments there extra building rights. This tax is paid once for each change in the zoning law, either when asking for a building permit to use the extra building rights or when selling the apartment. Betterment tax is usually paid by the seller so before selling it is wise to find out if the tax applies.
9. You don’t need to pay off your mortgage when you sell your apartment since a mortgage can be transferred from one apartment to another. If you plan on transferring your mortgage to another property, make sure your real estate attorney knows your situation, since it will affect the payment schedule in your contract.
10. If you need the money from the sale of one apartment to fund the purchase of another property, build a buffer zone into your payment schedule between when you receive payments from your buyer and when you need to pay that money forward towards the new property. A week or two between the two dates will help to protect your own payment schedule in case your buyer does not pay on time for any reason.
11. Take into account that the last payment you are due to receive for the sale of your apartment may need to be held in escrow by your lawyer. This frequently happens if all the documents necessary for the transfer of rights in the apartment you sold are not available. If you need this money to make a payment on the apartment you are buying you may need to take a bridge loan if this happens.

Until the late 19th century most of the land in Israel was unpopulated. The author, Mark Twain describes this clearly when he writes of his travels in the Holy Land at this time. During the second half of the nineteenth century, Jews began to make aliya to the Holy Land, driven both by changes taking place in their countries of origin and by ideological beliefs. It was at this time that the modern Zionist movement began to emerge.

In 1901, at the fifth Zionist Congress in Basel, the Jewish National Fund (Keren Kayemet L’Yisrael) was established. The goal of this organization was to purchase lands in Eretz Yisrael and develop them for Jewish settlement. The funding for this organization was to come from donations from Jews all over the world. The idea for this had been proposed by Professor Herman Shapiro at the first Zionist Congress in 1897. The concept of public ownership of land came to him from the Torah. It was decided that lands purchased by the JNF would always belong to the Jewish people and would only be rented out for long periods of time but never sold.

The activities of the JNF from the date of its inception and till today can be divided into two stages. During the first stage, from 1901 until the establishment of the State of Israel in 1948, the JNF acted autonomously, working in conjunction with the Jewish settlers in Eretz Yisrael who did not have sovereignty. During this period the JNF purchased large tracts of land in Eretz Yisrael. At the same time many private individuals purchased land, maintaining private ownership of the land. Baron Edmund De Rothschild purchased large tracts of land and established a number of settlements at this time, such as Zichron Ya’akov.

The second stage of activities began with the establishment of the State of Israel and continues today. With the establishment of the State, laws were enacted giving the JNF a special status and its activities and policies were adapted to those of the State.

There are three types of land in Israel. The first is land owned by the JNF. The second is land owned by the State of Israel, received at independence from the Mandate government. The third type is land that was abandoned as a result of the wars between Israel and her Arab neighbors. As a result, the majority of the land in Israel is publicly owned. This land is administered by a government agency called the Israeli Land Authority (Minhal Mekarke’ei Yisrael). The homeowners are granted long term leases for a period of 49 years. At the close of the 49 years the lease is renewed for another 49 years. The Israeli Land Authority usually charges rent for the new period of 49 years, but it is not a significant amount of money.

When an apartment built on this type of land gets registered in the Land Registry (“Lishkat Reshum Mekarkaim” or “Tabu”) then the registered owner of the land is either the Israeli government or JNF or the Israeli Land Authority and the purchaser of the apartment appears as the lessee. In most cases, where the land is owned by the government, the approval of the Israeli Land Authority must be given when registering the rights to an apartment in the name of the purchaser. The Israeli Land Authority gives this approval as long as all the proper paperwork is submitted. With government owned land, when asking for a building permit the approval of the Israeli Land Authority is necessary. This approval is also subject to the proper documents being submitted.

With government owned land, there is no problem mortgaging or selling the long term lease rights, as long as the conditions set out by the mortgage bank are adhered to.

National and regional zoning plans are decided by the municipalities, the Ministry of Housing, the Ministry of Infrastructure and the Israeli Land Authority. Committees headed by representatives of the above offices decide such things as town plans, the allotment of lands, the zoning of lands (agricultural or urban), roads and infrastructure.

Today there is an ongoing debate as to whether these lands should remain government owned or should be made available for private ownership. On the one hand we have the decision that the lands of the JNF are to remain in the perpetual ownership of the Jewish people. Should these lands be privately owned there is a danger of losing the ownership of the lands by the Jewish people. On the other hand, the administration of these lands by the Israeli Land Authority is costly and complex, causing undue annoyance to the public. In the past few years some of the government owned lands have been given over in direct ownership to the lessees. In these cases the lessees have been registered as owners of these lands or properties in the land registry.

The debate goes on…

In the past few years, financing for real estate projects was easily obtainable worldwide. Many Israeli companies embarked on real estate ventures outside of Israel, in a variety of far flung locations, such as Eastern Europe, Eastern Asia and North Africa. Indeed, many Israeli companies neglected the Israeli market in favor of foreign ones.

At the same time, the Israeli Real Estate market had its ups and downs. In the past few years the Israeli market had been on an upswing. There had been a rise in investments by foreign purchasers and prices had been rising. Then suddenly in 2007, Heftziba, a large construction company, failed under circumstances that dealt a blow to Israeli purchasers’ confidence in the local construction market. Fortunately, the crisis was handled well by the Bank of Israel in the form of decisions and legislation that provided added protection for a purchaser’s investment in a construction project. Confidence was restored and by the end of 2007 the Israeli real estate market was again on the upswing with equally good predictions for 2008. Investment in Israeli real estate was attractive to both Israeli and foreign investors. Life was good.

Then, as we all are aware, a crack in the armor of the Israeli real estate market began to appear during this past year and the crisis came to head during the second half of 2008 with the fall of markets and banks worldwide.

The banks requirements from construction companies concerning financial backing for real estate projects became far stricter. This resulted in fewer construction projects being initiated despite the fact that Israelis still needed places to live in. In the past, banks had demanded that companies invest 30% of its own money while they provided the other 70%. Today banks are demanding an extra 10% from companies. In addition, the highly unstable job market and a general feeling of uncertainty as to what the future holds for them has caused many potential purchasers to abandon their plans to purchase apartments. Also, despite the fact that the Governor of the Bank of Israel has lowered the Prime Interest Rate, the mortgage banks have raised their interest rates for mortgages. It is not surprising that all these factors have had an adverse affect on the real estate market, both for new apartments still under construction and second hand properties. Sales of second hand apartments had almost ground to a halt during the last few months of 2008. Many potential buyers, anticipating a drop in prices, were sitting on the fence waiting for the right price to the obvious dismay of sellers. This has been the situation for the past few months and we were all waiting to see who will blink first.

In addition, many of the mortgage banks are tightening their belts with regards to the mortgages they are giving to individual purchasers. In the past a purchaser could get financing of between 70% and 75% of the price of the property they were buying and if needed, they could apply for the additional assistance from EMI. However, EMI is owned by AIG which has been nationalized in the States causing many banks to stop working with EMI. Also many banks are now refusing to give more than 60% or 70% financing leaving the purchaser to find the rest of the money on their own.

So what do people do if they really need to purchase an apartment now? They purchase a smaller or cheaper apartment. In the past, a young couple would initially purchase a one or two bedroom apartment, with the knowledge that they would have to relocate as their family grew. In recent years many people felt that it was important to start with a larger apartment in order to avoid having to move home in the future. Now, due to the above circumstances, many young couples are again looking for smaller apartments, with future building rights allowing them to expand the apartment in the future.

It goes without saying that this has had an adverse affect on the prices of expensive luxury apartments. The newspapers are full of stories of prices being slashed in the luxury home market. This presents a great opportunity for those who have the capital and are looking for an investment other than the stock market. They can purchase now at an extremely reduced price, hold on long enough to weather the storm and then see a significant return on their investment.

It is also important to remember that Israel is a small country with limited land reserves. The percentage of land that can be used for residential purposes is low. It is predicted that by 2040 there will be about 13 million people living in Israel. This will require widespread construction projects with an emphasis on high rise buildings. Future plans for real estate development will have to include use of underground space, renovation or reconstruction of older buildings, expansion by adding floors to existing buildings, a higher standard of industrialized construction and more environmentally friendly buildings. The preservation of historical building has becoming more widespread as can be seen in places such as southern Tel Aviv, Jaffa, Jerusalem, Haifa and Zichron Yaakov.

The beginning of 2009 has seen a return to the market of sales in small and mid sized apartments.

The present may not look so good, but the future looks promising.