Chapter 11: Choosing a Lawyer
From finding out at what price the seller is willing to sell to you or if a particular property owner is interested in selling, to helping you define your needs and making sure you are always keenly aware of the perspective of the seller, to performing negotiation on your behalf – not to mention writing an airtight contract and closing your agreement – good legal representation is invaluable when buying an apartment in Israel. In fact, besides the actual choice of property, hiring a competent Israeli Lawyer might be your most important choice throughout the transaction.
Although choosing a lawyer is not an exact science, experience is the most secure parameter to guarantee competent legal service. Different lawyers can specialize in different aspects of purchase transactions (taxes, contracts, negotiation, and other aspects), but any experienced Israeli Lawyer should know the ropes. When choosing a lawyer, it is advised to look for the following:
• Reliable Experience. Find out how long a lawyer has been practicing law. If a client list is available, take a look at it to see what kinds of people the lawyer has represented in the past. If not, don’t be embarrassed to ask, and don’t ever be “wowed” by names of big corporations and organizations, because such previous clients might have nothing in common with you.
• Good Communication. Do you need your lawyer to be fluent in a specific language? Do you want them to have experience dealing with institutions in a specific foreign country?
• Convenient Geographical Area. Israel is not a large country; however, if the case in hand is in the Tel Aviv area, for example, it would be more convenient for all parties to seek an attorney from the center of Israel.
• Relevant Biography. If the lawyer has a website, look at their biography and review their published areas of expertise. Look for expertise that appears relevant to any pointed questions you may have about the process.
• Strong Reputation. Perform basic internet research, and find out what kind of publicity has a lawyer gotten in the past. Has the lawyer ever been subjected to a malpractice lawsuit?
• Good Faith. Research any potential conflicts of interest. Does a lawyer have any personal interest in an aspect of your apartment search? If so, does the personal interest create a potential conflict of interest?
Never hire a lawyer unless you understand one another. If you find yourself in doubt or have further outstanding questions on any matter, it is highly recommended to get a second and third opinion before hiring any lawyer you might be considering. Moreover, it can be risky to allow a lawyer to begin work on your behalf without putting in place first a clear written agreement outlining the payment of legal fees and the obligations of the lawyer.
Chapter 12: Getting the best tax rate on your apartment
There are in principle no exceptions to the responsibility to pay taxes, and the rates of taxes for real estate transactions are published transparently, and updated regularly by the Israel Tax Authority. However, the rate you end up paying could be dependent on various factors, such as if you qualify for tax relief, or if you currently are, or plan to become, a resident of Israel. For certain types of tax, a request for exemption can be submitted to the Israel Tax Authority by you or by your Israeli lawyer.
It should be noted that the legal framework governing Israeli tax law changed in 2014. Before then, Israeli citizens were entitled to receive tax relief when buying a property even if they were not residing in Israel. After that point, tax reliefs were given to Israeli residents only (even if they are not Israeli citizens). The new framework has imbued new weight to the matter of domicile when planning tax solutions, because if it can be proven that the center of your life is in Israel, you are now more likely to qualify for a form of tax exemption. It should be noted that it is still relatively easy and straightforward for a foreigner to buy property in Israel, although the documentation packet required by the Israeli Tax Authority is now different for a foreigner and Israeli resident.There are today four types of taxes which are most likely to be interesting in the case of a property transaction in Israel. The first and most significant one, is the acquisition tax (or purchase tax), which is a tax applied to the buyer amounting to a marginal fee of the value of the purchase. The cheaper the price of the apartment, the lower the tax rate will be. The top rate is 10%. New immigrants to Israel and first time apartment buyers that fit specific profile requirements are entitled to lower rates. In general, however, there are no exemptions on this tax; moreover the deed to a newly bought apartment may not be registered under your name if the acquisition tax has not yet been paid to the government.The second type of tax is the capital gains tax, imposed on the seller of an apartment, and relatively correlating with the amount by which the value of the apartment has increased during the time the seller has owned the apartment. However, this tax is not irrelevant to you as a buyer. Due to recent changes in Israeli law, exemptions on capital gains tax are now easier to obtain for sellers, and it is recommended to consult your lawyer on ways to avoid allowing the seller to use the capital gains tax to justify increasing the price of the apartment.A third type of tax is the local municipal tax, or arnona, which must be paid to the local municipality continuously on a monthly basis, and is based on an apartment’s size and the desirability of its location with the municipality. Certain full or partial exemptions can be sought for arnona, such as for religious and cultural facilities, or being based on exceptional socioeconomic status.The fourth kind of tax, income tax, is paid on income generated from the apartment, such as rental income. Note that a recent amendment to the income tax law allows Israeli residents who own only one apartment, which is rented for residential purposes, to offset the rent they pay personally against the rental income from their apartment.
Chapter 13: Signing a Contract
Before even drafting a contract, you and the seller should establish not only the price of the property but also the date of evacuation, the date of payment, and the presence and/or absence of furniture in the property. As your representative, your lawyer is responsible for verifying the existence and authenticity of any and all documents needed before signing a contract. Among other things, your lawyer can and might do the following:
• Verify the status (payment/exemption) of property tax from the seller.
• Verify the status (payment/exemption) of land appreciation tax from the seller.
• Ascertain the status of any mortgage and/or third-party involvement.
• Obtain authorization from the mortgage registry.
• Verify that the sum of all utility bills prior to the transfer of occupancy is deducted from the price of the property.
• Establish a trust fund from which the price of the property will be paid to the seller.
Once all parameters are in place, it is highly important that your contract be drawn up or reviewed by your attorney before you and the buyer sign it, in witness whereof, paying attention to the following questions among others:
Which rights in relation to the apartment are being transferred
Although most apartment purchases involve long term lease rights, and rights to most apartments are sold “as is” (following a thorough investigation by the buyer), there are exceptions to the rule. There is a wide spectrum of legal rights which can be transferred by contract, ranging from ownership to short and long term lease.
Are any contractual rights in relation to the apartment being created?
Contractual rights are be rights that arise from an agreement itself between buyer and seller, such as a seller allowing a buyer to erect a structure on his land which then becomes the house to be sold, and other creative arrangements. To a certain extent, all contracts involve certain contractual rights, such as liability for physical defects, and it is important that your lawyer try to tailor your contract to any such concerns or special requirements you may have.
Even if your lawyer is the best in the business, it is strongly recommended to read and re-read any contract carefully before agreeing to sign it. You don’t want to buy rights to a property, and later find out that the rights contained in your contract do not mean what you thought they did. With that being said, if your lawyer is competent and experienced, you can generally trust that the contract he will prepare will represent your interests well.
Chapter 14: Registry
The registration of ownership rights in the apartment at the Land Registry Bureau is the last and final step in the sale transaction, and is the step through which your rights to the apartment are confirmed. The date for registration of rights to the buyer is typically in the post-delivery phase of the possession of the apartment to the buyer, or in parallel with it, after payment has been make to the seller, and the registration is done by the buyer’s lawyer using documents forwarded to him by the seller’s lawyer after payment of the balance to the seller.
It is a unique peculiarity of the Israeli legal system that there are a number of places in Israel where people can register real estate ownership rights – even with private entities; however, the LRB is the only place which legally guarantees the accuracy of the registration. Note that if your purchase was financed by a mortgage, a lien in favour of the mortgage bank will also be registered at the LRB.
The documents your lawyer will use to register the rights under your name are:
• Application for land registration signed by the seller and duly verified.
• Bills of sale, signed by both parties and duly verified.
• Power of attorney (if the documents are signed via power of attorney)
• Land appreciation tax approval and municipality approval validly directed to the Land Registry.
• Land Registry Fee Approval
• Application for real estate registration and mortgage notes (if a mortgage was taken to finance the purchase).
• Photo ID of the parties.
To implement registry, your lawyer will physically bring the documents to the local office of the LRB, where they will be submitted for approval and filing. A few days later, your lawyer will receive notification of successful registration, or will receive the documents back with a notice of failure and the reason. Occasionally, it is impossible to register rights at the LRB, such as in the case of buying from a construction company and/or before the relevant authorities have surveyed and mapped out the land, or before architectural plans have been filed with the land registry. In such cases, the rights of a purchaser can be registered temporarily with an attorney, until it becomes possible to register them in the land registry, at which point the attorney is legally and ethically mandated to do so immediately and for your security.
About Cohen, Decker, Pex, and Brosch
Cohen, Decker, Pex & Brosh is an Israeli law firm. We are four partners with different areas of legal expertise. Our main office is located in Petach Tikvah, one of the oldest cities in modern Israel. For our clients’ convenience, we also have an office in Jerusalem. The firm provides legal services on a wide range of issues including, but not limited to, immigration law, commercial law, Israeli real estate law, inheritance law, labor law, corporate law, laws regulating nonprofit organizations, tax law, contract law, and legal representation in Israeli courts.
Our law firm specializes in immigration law. For immigration to the United States, we provide expert advice for green cards, work visas, citizenship, family visas, tourist visas, and more. For immigration to Israel, we provide assistance in aliyah, naturalization, work visas, family unification, and representation before the Ministry of Interior offices in Israel.