Blog  / Real Estate

The housing shortage in Israel and the issue of urban renewal are constantly on the public agenda. This past year, there have been many discussions about the actions that must be taken to initiate and carry out urban renewal projects.

Since an apartment lease can contain several pitfalls, here are some important issues you should check in order to ensure you begin your lease on the right foot.

Here are a few rules of thumb to make it easier for you to receive the brokerage fee payment and to make it harder for your clients to evade such payment.

The residential real estate market in Israel has been subject to drastic changes for some months. After years of a steady sharp uptrend in apartment prices, the number of real estate transactions has diminished, and apartment prices in most regions in Israel have either stabilized or dipped slightly.

In most projects, the marketers/contractors/developers customarily require potential apartment buyers to sign a purchase application/proposal form. Read through these five points before signing.

Purchasing property is Israel is a complex process, especially for non-residents. It’s important to consider what type of property you want to buy, as well as to be aware of the multiple steps involved, including engaging an attorney, conducting negotiations, and paying the purchase price and accompanying taxes.

Major, long-established players in the real estate market have joined forces with young companies and entrepreneurs with the objective of resolving the many challenges inherent in the field of real estate transactions.  

Urban renewal construction projects, known in Israel either as an NOP 38/1 project (retrofit and renovate), or as an NOP 38/2 project (demolish and reconstruct) began in Israel as a result of the realization that residential buildings whose building permits predate 1.1.1980 must undergo earthquake retrofitting.   The mechanism that was devised provides various incentives, both to interested apartment-owners in relevant buildings and to various developers, to engage in an agreement for an NOP project.   However, ever since these national outline plans were approved, apartment-owners and developers have been encountering numerous internal and external obstacles that are preventing these projects from being carried out. There are numerous reasons why many projects are not even reaching the performance stage, despite the investment of considerable time and resources and despite the fact that the relevant agreements were signed.   Many times, apartment-owners find themselves unable to extricate themselves from the agreements they signed with the developer, and end up wasting years trying to make some progress on the project, without success.   Therefore, we’ve selected five important tips when engaging in an NOP 38 project:   Exclusivity agreement with the developer As a rule, you should avoid giving exclusivity to any particular developer and should negotiate with a number of prospective developers, although there are circumstances where a developer will insist on exclusivity before it expends substantial amounts of money and time in carrying out certain pre-project operations.   If you sign an exclusivity agreement, it is very important to limit it to a defined date, after which, the exclusivity agreement will be nullified.   To learn more, read the important provisions in the Urban Renewal Law, which came into effect recently.   Suspensive conditions The question of whether an NOP project will reach the performance stages depends, to a great extent, on the suspensive conditions in the agreement. The most prevalent suspensive conditions are: obtaining the signatures of the requisite majority of the apartment-owners on the NOP agreement, and obtaining a building permit at the volume of building rights that are needed for the project.   It is extremely important to set detailed timetables for the fulfillment of the suspensive conditions. The objective is to avoid unreasonable delays or a total freeze on the project without any ability to terminate the NOP agreement.   The consideration to the apartment-owners Due to the nature of this type of transaction, and in order to avoid future disputes, you should be especially careful during the stage of your commercial negotiations with the developer in relation to the precise consideration that the developer and each of the apartment-owners in the building expect to receive, and you should explicitly specify the consideration to each of the parties, to the extent possible, in the agreement between the parties. You should specify the floor and the directions of the new apartments to be built for the apartment-owners, carefully prepare the apartment specifications, define the order of selecting the new parking spaces and storage rooms, and stipulate the precise distribution of the existing and future building rights between the developer and any or all of the apartment-owners.   Another important, fundamental rule in an NOP project is the absence of discrimination between one apartment-owner and another; therefore, if the consideration is not being equally divided, the division should be balanced, and it is possible and recommended to hire a real-estate appraiser for this purpose.   Guarantees The guarantees are the main securities to apartment-owners in NOP 38 projects: Sale Law guarantees (for a demolish and reconstruct project) – make sure that you receive guarantees pursuant to the Sale Law, according to the value of the apartments as finished, with the value being determined according to the project’s zero report (financial feasibility report), while enabling the tenants to appoint an appraiser on their behalf, at the developer’s expense, to determine the value, and whose determination will be final and binding. Performance guarantee (for a retrofit and renovate project) – which is an autonomous bank guarantee. If at issue is a project with bank financing, the guarantee should cover the entire value of all works, with the sum to be determined according to the inspector, which is usually issued shortly before receiving a building permit for the project. It is important to note that the apartment-owners can use this guarantee for any purpose, without limitation and at their sole discretion, due to the very wide variety of payments that will be required in the event of a need to exercise the performance guarantee.   It is also important to demand a guarantee from the developer to cover repairs during the warranty period, a guarantee to ensure the registration or amended registration of the condominium building, as well as a guarantee for tax payments and a guarantee for rent payments (mainly in a demolish and reconstruct project).   Rent For an NOP demolish and reconstruct project, the rent payments are a compulsory, integral part of the consideration being paid to the apartment-owners, since they are vacating their apartments for the purpose of carrying out the project. It is important to obligate the developer to give sufficient notice about vacating of the apartments, after a lien has been registered in favor of the project’s lending bank. You should demand to receive a guarantee for the payment of rent, at the full extent of the rent for each of the apartment-owners for the entire duration of the construction period and, parallel to this, to demand that the moving costs from the existing apartment and the costs for moving back in to the new apartment once construction has been completed (moving and packing expenses, etc.) will apply to the developer.   For the most part, apartment-owners who continue to reside in their apartments during the performance of an NOP retrofit and renovate project suffer considerably during the construction, inter alia, from noise and dirt nuisances, from the blocking of sunlight, from the blocking of access paths to the building and to their apartments, etc. It is important to take this into account, and to retain your option to vacate your apartment at any time should you decide to do so, by obligating the developer to pay your rent and issue you a guarantee to cover these rent payments.   In closing, it is important to add that you should make sure that you select suitable consultants on your behalf for the project – architect, inspector, real-estate appraiser and an attorney, who are tasked with pushing the project forward, each within his purview, while representing you, protecting your interests, ensuring your rights and avoiding any undesirable complications.   One last thing – demand that the developer pay the aforesaid consultants’ fees.   Good luck!

In many ways, electronic communications dominate the world as we know it. We "talk" through email, text, and social media, to the point that the written letter is almost an anachronism. Still, some areas still thrive on paper. Real estate, for example, depends on paper deeds and documentation to confirm authenticity. Similarly, many corporations depend on paper records to demonstrate regulatory compliance. But blockchain is helping to change all of that. The technology that made Bitcoin work is expanding, in Israel and beyond, to help secure online processes and chains of custody in ways that can help shift paper-dominated fields into the 21st century.   Smart Contracts When contracts determine payments or other actions, they operate inefficiently. Before you move funds, you have to confirm conditions have been met, organize your information, and perform accordingly.   Smart contracts use blockchain technology to change this. Once information is entered, you move through the conditions required and the contract auto-updates. You can even update a smart will without creating a new will for every change. You complete everything more efficiently, using a cryptography-secured function that prevents problems the paper processes cannot.   Paper Bureaucracies Similarly, bureaucracies exist to create layers that protect information and ensure fairness and accuracy through process. Blockchain saves time and money by building this in electronically. Imagine a system that once required 12 forms, signed in triplicate to allow a decision to become implemented.    Blockchain technology creates a mechanism by which this process plays out online, all through secured processes. You need not worry about tracking down every person in the chain when something has to be done quickly. Rather, you move forward quickly and efficiently without losing any of the fail-safes in place.   Real Estate In Israel, you must move through the Land Registry Department, or Tabu, to purchase and register real estate. The property world remains a bastion of paper processes in an electronic world. But the legal functions that have long necessitated paper documentation can adapt to blockchain technology. It creates the security that paper has always done, but with a process that is efficient, transparent, and public. To sell or purchase property, this option can vastly improve on the time currently required.   Blockchain technology is exploding in Israel, with new startups and applications emerging constantly. To learn the ways in which you can navigate the legal landscape in the face of all this change, contact Barnea & Co.   Source: barlaw.co.il

Purchasing a residential property is generally one of the most profound, expensive and important decisions you make in your life. Even more so when purchasing a residential property in Israel. Following is a check list containing 10 most important tips on how to do it the right way:   1. Locating the right property- there are a few ways to proceed. The first way is via various web sites, which usually do not involve payment of a fee. Another way that is more common is via a real estate agent. It is important to confirm that the agent has a valid real estate license and is proficient in English. You must be aware that purchasing a property using a real estate agent increases the costs of the transaction as the agent’s fees range between 1% to 2% (V.A.T exclusive) of the purchase price. However, this extra cost can prove to be worthwhile, especially when dealing with a professional, experienced agent who has a thorough knowledge of the property market.   2. What to buy - it is very important to understand what you want to buy, for example a house or an apartment, whether to buy an apartment off plan (or under construction) from a contractor or to buy a finished apartment. Your choice to buy an apartment or a house can have important consequences. It is important to know that when purchasing an apartment from a contractor (off plan or under construction) there may be many unforeseen problems (such as late delivery, structural defects, financial problems of the contractor etc.). But the advantage of buying an apartment from a contractor is a lower purchase price (approx. 15%) when compared to a pre-existing property. Also, you can buy the apartment in a “shell” condition and design it to fit your personal requirements.   3. Property inquiry - it is very important to engage an engineer or similarly qualified professional. to check the quality of construction and to make sure there are no building irregularities. If you wish to buy a house it is important that you have its size measured to ensure that the correct specifications are recorded with the authorities, such as the Land Registry.   4. Engaging with the right lawyer - it is extremely essential that you engage a competent, experienced lawyer to represent you. It is vital that you are guided and assisted throughout the process, from the negotiation stage until the conclusion of the transaction, by a lawyer who will both protect and advance your interests. The lawyer’s fees generally range between 0.5% to 1.5 % (V.A.T exclusive) of the purchase price.   5. Financing - the purchase price for the property can be paid fully in cash or via a combination of cash and mortgage finance. Usually the lender will grant a non-resident a loan which will not exceed 50% of the purchase price. Receiving approval for mortgage funding from local banks for non-residents cannot be taken for granted and is not always successful.   6. Signing the contract - it is important to know that the provisions of the contract are negotiable and are not “cast in stone”. All the necessary legal checks in respect of the property should be carried out prior to the signature of the contract. For example, whether there any existing property mortgages, foreclosures or anything else that could affect the transaction. It is important to ensure that the structuring of payments under the contract is reasonable and attainable.   7. Receipt of possession -it is very important that at the time of delivery of the property the seller and buyer have drawn up a delivery protocol, which will specify any defects which need to be remedied by the seller. At the time of delivery you should arrange for the transfer of all utilities, rates accounts into your name.   8. Taxes - currently, non-residents are required to pay purchase tax of 8% of the purchase price up to NIS 4,896,165 and 10% of the purchase price which exceeds NIS 4,896,165.   9. Opening a bank account- in recent years the requirements for opening a bank account by non-residents have become quite stringent. The bank requires the foreign resident to sign a waiver of confidentiality towards the Bank, a statement about the place of residence and a deposit of a cash amount in the account. Alternatively, you can arrange for your lawyer to open a trust account to effect payments. Please note that opening a trust account will entail the signing of similar documents as are necessary when opening a personal bank account.   10. Post Purchase Issues- (I) Receipts - upon a subsequent sale of the property, you may have to pay Capital Gains Tax. However, for this purpose you are entitled to deduct various expenses, such as renovations, purchase taxes, legal fees, agent’s fees etc. It is therefore critical that you retain all relevant receipts, which must be under your name and must include all relevant details relating to the property and of course, keep a copy of all taxes paid upon the purchase as well as the purchase agreement and your passport.(II) Insurance - you must insure the property and its contents. Non-residents who do not intend to occupy the property on a continuous basis should ensure that someone inspects the apartment once every two weeks, otherwise the premiums will be more expensive and in some cases insurance cover may be refused. (III) Taxes - if you intend to rent out your property to a third person, you have a duty to report your income to the Israel Tax Authority if the rental exceeds approx. NIS 5,070 per month.   Source: barlaw.co.il

Buying an apartment is usually the biggest purchase of one’s life, and for most of us it represents a significant financial outlay. Therefore, once we’ve found an apartment we like but before we’ve signed a contract, it’s very important to check out several angles.   The surroundings: We recommend wandering around the neighborhood, both during the day and at night, and to speak with the neighbors and the co-op board (va’ad habayit in Hebrew) to find out if there are any problems with the building or its residents. Also, are there plans to renovate the building? What are the municipality’s plans for the immediate surroundings? Are there cell phone towers or high voltage power lines near the apartment and/or the building? What public institutions (schools, preschools, community centers, playgrounds, libraries, houses of worship, shopping centers, clinics, etc.) are nearby? Is there convenient public transportation?  It is especially important to find out if construction is planned for the immediate vicinity. Contact the local Planning and Construction Committee, a fixed feature of every local government, to gather this information.   The apartment: The physical condition: It is important to check the apartment’s physical condition. We recommend that an engineer do this to make sure there are no serious construction flaws. The state of planning: It is also important to check that the building and apartment were built with all the legal permits and there are no building code violations. This can be ascertained by looking at the building’s file kept at the Local Planning and Construction Committee. We recommend that an assessor or engineer do the check. If there are building code violations, the purchase agreement must contain a written clause that clarifies the understanding between the buyer and the seller about who bears responsibility for redressing these violations. The legal standing: It is important to ascertain that the apartment is registered to the seller in the relevant rolls at the Land Registration Office (commonly referred to as tabu in Israel), the Israel Land Authority, the housing company, and other similar sources. It is also critical to see if the seller’s rights to the apartment are in any way attached or mortgaged, and if there are any other obligations vis-à-vis the sellers rights to the apartment (such as liens, tenants’ rights, caution notes, etc.). This check is usually carried out by the real estate lawyer representing you. Make sure that, as part of the purchase agreement, the seller commits to removing all obligations and attachments related to the rights to the apartment, such that you take over the property only after its rights are free and clear of any third-party rights or obligations.   Purchase tax Anyone purchasing an apartment is obligated to pay a purchase tax. The difference between the purchase tax for a buyer who owns only this property and the purchase tax for a buyer who owns another apartment is quite significant. Therefore, we recommend you consult with your real estate lawyer to see what purchase tax you may have to pay for buying this apartment.   Mortgage: If you intend to finance part of the payment for the apartment with a mortgage loan, we recommend you ask the mortgage bank you intend to borrow from to preapprove you before you get to the contract stage. By all means, compare the terms offered by the various mortgage banks and choose the bank making the offer most attractive to your own personal circumstances. Furthermore, it is quite customary to negotiate with the banks over the terms they offer, and doing so can save you a significant amount of money.   Important points in the purchase agreement: The seller’s declaration: It is important to incorporate a seller declaration in which s/he declares that the apartment and its systems are in good repair, that there are no building code violations associated with the apartment, and that there are no conflicting rights and/or registrations associated with the property. Transfer of ownership and property rights: It is important that the document state that the apartment must change hands empty and clear of people and objects, with all systems fully functional and operating as they did when the buyer saw them. Payments: It is important that the first payment be held in trust until a caution note in your favor is entered into the Land Registration Office and only then handed over to the seller. Similarly, it is important that the last payment be made only in return for transferring ownership and property rights and taking delivery of the keys, with the rights of the seller to the apartment free and clear of any third-party rights or obligations. It is important to leave a certain sum of money in trust to ensure you receive all the approvals the seller has to provide in order to register the property rights in your name (the lawyer representing you can advise you on how large a sum to deposit). Registering the property rights in your name: It is important the seller has a deadline by which s/he must provide all relevant documents for you to complete the process of registering the property rights in your name. Mortgage: It is important to get the seller’s commitment to sign all relevant documents that the mortgage bank will demand before granting you a mortgage loan.   Given the importance and complexity of buying a home, we recommend you be represented by a lawyer specializing in real estate to represent your interests alone (rather than those of the seller too) in order to safeguard your interests and rights.

In recent years, more and more couples are opting to live together without getting married, for a variety of reasons. The State of Israel has enacted clear laws addressing the division of property for instances when couples who are legally married decide to separate; however, if a couple decides to not be formally married, they are deemed a “common law couple,” and then matters become more complicated.   Property rights of common law couples, in the event of a separation or, heaven forbid, if one of them dies, are anchored mainly in case law and not in legislation. In Israel, unlike in many other countries, the term “common law couple” is neither defined nor uniformly regulated in legislation.   In Israel, the definition of a “ common law marriage” has evolved over the years within the scope of court rulings, which prescribed two main criteria for recognizing a common law marriage: (a) intimate conjugal relations as a husband and wife, in a manner that shows that the couple indeed consider themselves a married couple for all intents and purposes; (b) cohabitation – the intention is not co-running of a household that derives from some need (financial, personal, convenience, etc.), but rather, a full domestic partnership as the natural outcome of two people who choose to join their destinies. Furthermore, the duration of the couple’s cohabitation is irrelevant; the couple’s intention is what matters.   It is important to keep in mind that the court will deliberate each case on its merits according to its specific circumstances, analyzing the entire set of facts with the aim of understanding how the couple categorized their relationship. The courts take a flexible approach when ascertaining whether the couple should be deemed in a common law marriage, since the court is cognizant of the fact that no two relationships are alike and each couple’s shared domestic lives have unique characteristics.   Have you separated? It is important to know that, when it comes to transferring rights in a shared residential apartment between spouses after they separate, common law couples benefit from the same reliefs as those that apply to a legally married couple. The salient point here is that a transfer of these rights is not deemed a real-estate transaction and therefore, is not subject to tax.   Section 55 of the Inheritance Law expressly refers to common law couples and prescribes that the testator is deemed as having bequeathed to the surviving (common-law) spouse whatever the surviving (common-law) spouse would have received as an inheritance by law had they been legally married to each other. Also, the surviving spouse may sue for alimony from the deceased spouse’s estate.   Sharing of assets – beyond the rights pursuant to inheritance laws, common law couples are exposed to a situation whereby one of the two attempts to apply the ‘presumption of sharing’ to their relationship when the couple separates, claiming that the assets accumulated during their cohabitation should be deemed the couple’s ‘common property’ for all intents and purposes. The intention here, when referring to “accumulated assets” during the period of their common law marriage, is the real-estate assets, corporate stocks, options and any other property.   About two years ago, a judgment was handed down by the Family Court in Haifa, which recognized a woman as the common-law spouse of the deceased for the purposes of section 55 of the Inheritance Law, despite the fact that they had not been living together on a permanent basis and, prima facie, failed to satisfy the second criterion: co-running of a domestic household. The woman succeeded in proving that the couple had regularly maintained family life and that their intention had been to formalize their relations. The court ruled that that the concrete case must be considered after examining the couple’s subjective intention regarding the formalization of their relationship and the steadiness of the relationship and, therefore, the court recognized the woman as the deceased’s common law wife for the purposes of the rights to the inheritance. We clarify that at issue is the ruling of the court of first instance and an appeal has not yet been filed.   If you are a common law couple and want to avoid disputes and disagreements that end up in court, we recommend drawing up and signing a non-marital conjugal cohabitation agreement to keep assets separate and to regulate and anchor your rights and obligations as a couple in a common law marriage during the period of your relationship and in the event of a later separation. It is also recommended to have this agreement ratified by a family court.   We also recommend that both spouses prepare a last will and testament to regulate the division of each of their estates.