Real Estate & Property

Buying an apartment is usually the largest financial transaction of a person's life. Alongside the excitement, it is a transaction that carries legal, planning, tax and financing risks. Signing a memorandum of understanding or transferring an advance payment before due diligence is carried out may create a binding commitment before it has been established whether the seller holds the rights, whether there are attachments or building violations, and whether a mortgage can be obtained and the rights registered.

Legal support in an apartment purchase does not begin with signing the contract and does not end with receiving the keys. It includes examining the property and the rights, structuring the transaction, conducting negotiations, protecting the buyer's funds, reporting to the Real Estate Taxation Authority, handling the mortgage and registering the rights in the purchaser's name.

The Or Rovner Law Office provides personal support in the purchase of second-hand apartments, new-build (developer) apartments and other assets, in coordination with the bank, the broker, the appraiser, the registration bodies and the relevant professionals.

Before Signing: The Checks You Must Not Skip

Examining the Rights in the Property

The examination varies according to where the rights are registered: the Land Registry Office, the Israel Land Authority, a housing company (chevra meshakenet) or another managing body. What is checked includes the identity of the rights holders, mortgages, attachments, caveats (warning notes), orders, charges, third-party rights, and whether there is a match between the seller and the register.

Planning and Physical Examination

A land registry extract does not necessarily show that what has actually been built conforms to the permit. It is necessary to check the building file, the building permit, the condominium plan, attached units, permitted uses, building violations, demolition orders, planning proceedings and the plans applying to the surrounding area. Where a concern arises, it is advisable to obtain the assistance of an appraiser, engineer or architect.

Examining the Condition of the Condominium

What is examined includes the bylaws, the common property, the attachment of parking, storage and roof areas, house committee decisions, debts, legal proceedings, anticipated renovations and urban renewal plans. An oral promise regarding parking or a storage room is no substitute for a registered right or a clear contractual arrangement.

Examining the Financing and the Mortgage

An approval in principle is not always a final commitment by the bank. The payment schedule must be aligned with the timing of the mortgage, the bank's appraisal, the equity available and the conditions for releasing funds. Where the seller's mortgage is registered on the property, a mechanism is built for its removal and for obtaining the bank's documents.

Assessing Purchase Tax and Transaction Costs

Purchase tax is affected by the purchaser's status, the number of apartments, the share of rights, residency and further circumstances. Alongside the tax, one must take into account legal fees, brokerage, appraisal, registration, mortgage, renovation and ancillary expenses. Planning ahead prevents a financing gap after signing.

Drafting the Sale Agreement and Protecting the Buyer's Funds

A purchase agreement must precisely regulate the description of the property and its attached units, the seller's declarations, the payment schedule, registration of a caveat or an alternative security, removal of mortgages and attachments, provision of tax and municipal certificates, the delivery date, the condition of the property, breaches, compensation and the transfer of rights.

Payments are set according to legal milestones and not merely according to the parties' convenience. As a rule, each payment should be tied to obtaining appropriate protection: a caveat, discharge documents, powers of attorney, tax certificates or a deposit held in trust. The purpose of the mechanism is to prevent a situation in which the buyer has paid most of the consideration but cannot obtain clear possession or register the property.

Ten Checks Worth Completing Before Signing

• The identity of the seller and the seller's authority to carry out the transaction.
• An up-to-date land registry extract or confirmation of rights from an official source.
• Mortgages, attachments, notes and orders registered against the rights.
• Conformity of the apartment, parking space and storage room with the plan and the registration documents.
• The building permit, the building file and possible violations.

• Town planning schemes, expropriations, building rights and urban renewal.
• House committee debts, proceedings within the condominium and approved special expenses.
• An engineering inspection of the apartment's condition by a suitable professional.
• Financing capacity, bank appraisal and the timetable for receiving the mortgage.
• Purchase tax, ancillary costs and the total amount required through completion of the transaction.

An Example of a Safe Payment Mechanism

Where the seller's mortgage is registered on the apartment, the full amount of the next payment is not necessarily transferred directly to the seller. Part of the consideration may be paid to the seller's bank under a letter of intent, against an undertaking to remove the mortgage. The balance of the payment is then transferred in accordance with registration of the security in the buyer's favour and completion of the milestones set out in the contract. The precise structure varies from transaction to transaction, but the principle is constant: every payment should be connected to a corresponding legal protection.

Documents Worth Requesting from the Seller at the Outset

• A land registry extract or confirmation of rights;
• Identity documents and personal status details of the rights holders;
• The previous purchase agreement and the registration documents;
• The outstanding mortgage balance and a letter of intent, if a charge exists;
• The municipal tax (arnona) account, block and parcel details and the condominium documents;
• The permit and the plans, particularly if changes were made to the apartment;
• Minutes or material information regarding urban renewal;
• A lease agreement, if the apartment is not vacant.

Buying a New-Build Apartment from a Developer

In a developer's contract it is important to check, among other things, the developer's rights in the land, the building permit, the bank financing arrangement, the securities under the Sale Law, the apartment specification, the plans, attached units, the linkage mechanism, changes and additions, the delivery date, compensation for delay, registration of the condominium and registration of the rights.

Points to Check in a Developer's Contract

• What security is provided for each payment and when it is delivered;
• Whether payments are made through a voucher book into the financing (escrow) account;
• What exactly is included in the specification, the plans and the attached units;
• Which parts of the consideration are index-linked and under what mechanism;
• What the developer is entitled to change in the design and the specification;

• The delivery date, permitted postponement periods and compensation in case of delay;
• The apartment inspection process, the delivery protocol and the handling of defects;
• Additional expenses, infrastructure connections and changes requested by the purchaser;
• The date and responsibility for registering the condominium and the rights.

The apartment price appearing in the advertisement is not always the final cost. One must also calculate linkage, purchase tax, changes, the mortgage, registration expenses, upgrades and housing costs during the waiting period.

The Seller's Identity and Possession of the Apartment

Beyond examining the register, the seller must be identified and it must be verified that he is the person authorised to undertake obligations in the transaction. In cases involving a power of attorney, inheritance, guardianship, a company or an owner residing abroad, further checks and documents are required.

It is also necessary to check who is actually in possession of the apartment. If there is a tenant, a family member or another person, the contract must regulate how and when a vacant apartment will be delivered and what will happen if the occupant does not vacate. Proper registration of rights does not in itself guarantee vacant physical delivery.

After Signing

After the agreement is signed, the matters handled include registration of the security, reporting the transaction to the Real Estate Taxation Authority within the period fixed by law, the purchase tax assessment, the mortgage documents, monitoring the conditions and payments, taking possession and completing the registration.

At the time of delivery a protocol is drawn up, the vacating of the property and the handover of the keys are checked, meter readings are documented and the ongoing payments are arranged. Once the certificates and transaction deeds have been received, the rights are registered in the buyer's name and the temporary security is released, as applicable.

A Real-Estate Transaction Begins with Proper Due Diligence

Preliminary checks and precise contract drafting can prevent disputes, delays and significant losses. The office provides support on a personal basis, from the initial examination stage through to completion of the registration.

Frequently Asked Questions

A safe apartment sale begins with an early legal review of the state of the title, the tax position and the documents – before the property is advertised or a memorandum of understanding is signed. Selling an apartment sometimes looks simple: you find a buyer, agree on a price and sign. In practice, undertaking to sell a property before checking the state of the title, the tax and the documents may expose the seller to breach of contract, penalties, delay in receiving the funds and even a tax liability that was not taken into account.

An early review makes it possible to identify mortgages, attachments, building violations, discrepancies in the registration, inheritance rights that have not yet been registered, leaseholds, prior undertakings and a possible liability for betterment (capital gains) tax or a betterment levy.

The Or Rovner Law Office accompanies sellers of apartments and real estate assets from the stage of preparing for the sale, through the negotiations and the contract, up to receipt of the full consideration, delivery of possession and completion of the registration of the rights in the buyer's name.

Checks before selling the property

The state of the title and the registration

We check where the rights are registered and who is registered as the owner. If there is an inheritance that has not been registered, an error in the register, a housing company, a leasehold, a mortgage, an attachment or a note – it must be examined how and when these can be resolved. A buyer and a financing bank will require clear documents before transferring significant sums.

Planning compliance

An added room, an enclosed balcony, a split of the unit, a non-conforming use or a change in the attached areas may affect the transaction, the appraisal and the buyer's ability to obtain a mortgage. It is advisable to check the building file and the permits in advance and to decide how to deal with any discrepancy within the disclosure and the contract.

Betterment (capital gains) tax planning

Entitlement to an exemption or the manner of calculating the tax depend, among other things, on the type of property, the date and value of the purchase, the number of apartments, the use made of the apartment, gifts, inheritances, recognised expenses and previous transactions. A review before signing makes it possible to gather supporting documents, examine an exemption or a suitable calculation, and understand what net consideration will remain in the seller's hands.

Betterment levy and payments to the local authority

A betterment plan, a relief or a non-conforming use may create a liability for a betterment levy. In addition, a municipal certificate is generally required in order to transfer the rights. The position should be checked with the local authority, rather than waiting for the stage at which the buyer is already entitled to registration.

Repayment of the mortgage and other undertakings

If there is a mortgage, the figures and a letter of intent must be obtained from the bank and a payment schedule built that will allow it to be repaid. Where there are attachments or other debts, it must be planned how they will be removed against payment and by which documents the buyer will be secured.

The seller's file: documents worth preparing in advance

• An up-to-date land registry extract or confirmation of rights;
• The previous purchase agreement and any document by which the rights were acquired;
• Payment confirmations and expenses that may be relevant to the calculation of the betterment tax;
• Inheritance, gift or divorce agreement documents, according to the source of the rights;
• The outstanding mortgage balance and information about attachments or undertakings;
• A building permit, plans and documents regarding changes made to the property;
• A municipal property tax bill, house committee details and a lease agreement, if there is one;
• Information about an urban renewal process or agreements with a developer.

Selling and buying in parallel

When the proceeds of the sale are needed in order to purchase the next apartment, the two transactions are dependent on each other in cash-flow terms. The payment and delivery dates must be coordinated, the bank and mortgage timeframes taken into account, and a margin left for delays in obtaining tax certificates or registration.

An error in coordination may result in the seller being obliged to pay for the new apartment before receiving the buyer's funds, or being required to hand over his apartment before the alternative apartment is ready. In suitable cases it is possible to consider a rental period, a bridging loan, an advance payment against security or holding a sum in trust – after a legal and financial review.

Common mistakes made by sellers

• Signing a memorandum of understanding before checking the tax and the title;
• Undertaking a delivery date that is not coordinated with the purchase of the next apartment;
• Automatically assuming that a betterment tax exemption exists;
• Failing to disclose damp, a building violation, a dispute or a known planning process;
• Setting a payment schedule that does not allow the mortgage to be repaid;
• Undertaking to provide certificates that cannot be obtained in time;
• Using the sale proceeds before taxes, repayment of debts and the trust amount have been taken into account.

Conducting the negotiations and the sale agreement

The sale agreement defines the property, the consideration, the payment dates, the delivery date, the condition of the apartment, the parties' declarations, the handling of the mortgage and attachments, taxes and levies, the registration documents, breaches and compensation.

The payment schedule must suit the seller's needs but also allow the buyer to receive reasonable protections and to pay by means of a mortgage. Sometimes part of the consideration is held in trust until tax and municipal certificates are obtained. The trust amount should be set in a way that protects the buyer without unnecessarily delaying funds belonging to the seller.

It is also important to regulate what remains in the apartment, its condition on the delivery date, repair of material damage, vacating a tenant, bringing forward or postponing delivery, payment of municipal property tax and house committee dues, and liability in the event of a breach.

The duty of disclosure and negotiating in good faith

A seller is not required to guarantee that the apartment is free of any defect, but must refrain from concealing material information known to him and from making an incorrect representation. Recurring damp, a building violation, a legal dispute, an expropriation, an urban renewal process or a problem with the title are the kinds of matters where it must be examined how to disclose them and how to draft them in the contract.

On the other side, the buyer must carry out reasonable checks and not make do with general statements. A professional contract divides the responsibility between the seller's declarations and the buyer's checks, and does not rely solely on a sweeping clause stating that the apartment is sold "as is".

What happens after signing?

After signing, the following are handled: reporting the transaction to the real estate taxation authority, the betterment tax assessment or the exemption application, registration of a caveat in the buyer's favour, repayment of the mortgage in accordance with the payment schedule, obtaining tax and municipal certificates and preparing the transfer documents.

On the delivery date the keys are handed over against the payment that was agreed, a delivery protocol is drawn up and the meter readings are recorded. After receipt of the full consideration and completion of the conditions, the registration documents are delivered to the buyer and the rights are transferred.

Transactions requiring special preparation

• Sale of an apartment received by inheritance or as a gift;
• Sale of an apartment in connection with a divorce or a dissolution of joint ownership;
• Sale of a property registered with a housing company or with the Israel Land Authority;
• Sale of an apartment with building violations or a registration that does not match the actual position;
• Sale of an apartment that is rented to a third party;
• Parallel sale and purchase requiring coordination of payment schedules;
• Sale of a property with a high mortgage, attachments or the rights of additional parties;
• Sale within receivership proceedings or of an estate.

A safe sale begins before the price is even agreed

Early legal and tax preparation makes it possible to negotiate with confidence, to build a workable payment schedule and to complete the transaction without unnecessary delays.

Dissolution of joint ownership in real estate is the process by which co-ownership of an apartment, a family property or land comes to an end. As a rule, the law grants every co-owner the right to demand dissolution of the joint ownership. Dissolution may be carried out by agreement – through division in kind, the purchase of one co-owner's share, or a sale on the open market – and, absent agreement, by filing a claim for dissolution of joint ownership before the competent court.

Joint ownership of a property may arise from a joint purchase, inheritance, a relationship, an investment or a business partnership. As long as the owners agree, the property can be managed, leased or sold. When relations break down, the co-ownership may become an ongoing source of dispute: who will use the property, who will pay the expenses, whether to lease it, how to determine its value and when to sell.

The manner in which the joint ownership will be dissolved – division in kind, purchase of a co-owner's share, sale to a third party, or sale within judicial proceedings – depends on the type of property, the feasibility of division, the agreements in place, the registered rights, and the family and planning circumstances.

The Or Rovner Law Office represents clients in dissolution-of-joint-ownership matters, both by agreement and in legal proceedings, including properties held among family members, heirs, former spouses and business partners.

Attempting Dissolution by Agreement

Before filing a claim, it is advisable to examine whether an agreed arrangement can be reached. An agreement may provide that one co-owner will purchase the other's share based on an appraisal, that the property will be sold on the open market through a broker, that a minimum price will be set, that expenses and rent will be allocated, or that division in kind will be carried out where that is possible.

An agreement allows the parties to control the price, the timetable and the costs, and reduces the risk of a forced sale. To prevent new disputes, the arrangement should regulate the appraisal mechanism, payment dates, financing, taxes, vacating the property, use of the property, and the consequences of failing to comply with the arrangement.

A Claim for Dissolution of Joint Ownership

Where there is no agreement, a claim is filed with the competent court. Which court has jurisdiction depends on the nature of the relationship and the source of the dispute; disputes among family members may be heard by the Family Court, while other cases will be heard by the Magistrates' Court or another forum as provided by law.

The claim sets out the rights in the property, the state of registration, the manner of use, the agreements between the parties, the feasibility of division and the ancillary remedies. The defendant may raise arguments regarding the manner of dissolution, the accounting between the parties, the validity of agreements, residency rights and other issues, but a general objection to a sale does not necessarily prevent the dissolution of the joint ownership.

The Main Routes to Dissolution

Division in Kind

Where the real estate can be divided into separate parts physically, in planning terms and legally, there is a principled preference for division in kind. The process may require a plan (survey drawing), planning approvals, measurement, balancing payments and appropriate registration. In a residential apartment registered as a single sub-parcel, a physical split does not in itself create two registered units; the permit, planning and registration position must be examined.

Sale and Distribution of the Proceeds

Where the property cannot be divided, or where division would cause considerable loss, the joint ownership may be dissolved by way of a sale and distribution of the proceeds according to the parties' rights, after the required accountings. The court may determine the method of sale that appears efficient and just in the circumstances.

Purchasing a Co-Owner's Share

Sometimes one co-owner wishes to remain in the property and purchase the other's share. This may be agreed upon, or a competitive bidding mechanism may be considered. A valuation, financing capability and a clear timetable are required. The fact that a co-owner lives in the property does not automatically grant them a right to purchase it at a reduced price.

Appointment of a Receiver

Where the parties are unable to carry out the sale themselves, the court may appoint a receiver. The receiver acts under supervision, commissions an appraisal, advertises the property, receives offers, conducts a competitive bidding process and seeks approval of the sale. After payment of the debts and expenses, the balance is distributed among the owners.

Ancillary Remedies and Accountings

Dissolution proceedings sometimes involve additional financial disputes:

• Fair use fees where one co-owner makes exclusive use of the property
• Allocation of rental income and other revenues
• Reimbursement of mortgage payments, municipal tax, building-committee dues, insurance and repairs
• Investments and improvements made by one of the co-owners
• Debts encumbering the property
• Betterment (capital gains) tax, betterment levy and the costs of the sale
• Claims of set-off or of prior agreements

What Does the Process Look Like in Practice?

• Gathering documents and examining rights: land registry extract, co-ownership agreement, purchase or inheritance documents, mortgage, lease agreements and payments.
• Valuing the property and the alternatives: an initial appraisal, examining the feasibility of division, an internal purchase or a sale on the open market.
• Approaching the other side for a settlement: a written proposal including price, appraisal mechanism, dates and accounting.
• Filing a claim: if no agreement is reached, a claim for dissolution of joint ownership and the appropriate ancillary remedies is filed.
• Determining the method of dissolution: division in kind, competitive bidding, a supervised sale by the parties, or appointment of a receiver.
• Realisation and distribution of funds: payment of debts and expenses, determination of the accountings, and distribution of the balance according to the parties' rights.

The duration of the process depends on the extent of the dispute, the number of co-owners, the need for an appraisal, the state of registration and the level of cooperation. Agreeing in advance on an appraiser, a minimum price and a timetable can save a considerable part of the process.

What Should Be Clarified Before Filing a Claim?

• Whether a co-ownership agreement or a family agreement exists that temporarily restricts dissolution
• Whether the rights are registered and whether all rights holders are known
• What the property is worth and what the mortgage and debts amount to
• Whether there is a genuine planning possibility for division in kind
• Who holds the property and who receives the rental income
• What payments and investments each co-owner has made
• Whether an interim remedy is needed to prevent a sale, a lease or a change to the property
• What the tax implications are, and whether a division agreement, an internal purchase or a sale is preferable

A Practical Example: An Heir Living in the Estate Apartment

Where one of the heirs lives in the apartment and the others wish to sell, it is not enough to say that he "has always lived there" or, conversely, to demand use fees automatically. It is necessary to examine when the exclusive use began, whether the other heirs agreed to it, who bore the mortgage and the expenses, whether a demand to vacate or to pay was sent, and what the value of the use is. These facts may affect the accounting, but they do not necessarily negate the right to dissolution of the joint ownership.

Dissolution of Joint Ownership Among Heirs

A property received by inheritance sometimes remains in joint ownership for years. Some heirs wish to sell, others wish to lease, and one of them may be living in the property. It is possible to reach an estate-distribution agreement, an internal purchase or a sale. Where the estate has not yet been distributed, or where an estate administrator has been appointed, the process must also be adapted to inheritance law and to the state of registration of the rights.

Dissolution of Joint Ownership Between Spouses

Where the property is jointly owned by spouses, the issue of dissolution may be integrated into overall property proceedings. The court also examines the children's rights, living arrangements, the balancing of resources, and special provisions relating to the family residence. The claim should therefore not be detached from the overall family picture.

From an Agreed Solution to Representation in Court

Dissolution of joint ownership requires a combination of real estate law, procedure, taxation and, at times, family and inheritance law. Early handling makes it possible to explore an agreed alternative; and if there is no choice, to conduct the proceedings in a way that protects the value of the asset and the client's rights.