BUYING A RESIDENCE: A GUIDE

01/09/2010 | Practice field: Real Estate and Condominium

Real estate in Israel, a field quite lame for several years, is starting to recover lately in various regions in the country. For instance, in the city of Eilat more and more investors choose to buy properties for residence, for business and for… investment.

If you think of buying real estate I should remind you now that you must maintain things in order, examine minutely the property you chose and get the proper professional accompaniment.

For practical advising I chose separating between buying new property from a contractor and buying property from second hand.

Buying property from a contractor

Permissions, authorizations and estate titles

· Make sure that the contractor holds a valid license and that he/she is authorized for the construction. I recommend of asking the contractor about other projects he was involved in, and to try and get an impression of his work and his financial ground.

· At the land register or at Israel Estate Administration one can assure that the land is owned by the contractor or that at least a warning note was registered on his/her behalf, and that the land is not liened and not attached.

· Make sure that the contractor holds a construction permit endowed by the local municipality in which the property is being built.

· Make sure that the contractor holds an authorization from the taxation authorities, which in accordance there's no prevention of registering the properties on behalf of the buyers.

Memorandum and sales contract

· Do not rush and sign a contract or a memorandum (which is in fact a binding contract). Even if it seems that other buyers think of purchasing the property one should read the whole contract and its clauses and terms: are they understandable? Do they reflect the agreements between the sides?

· One should pay attention to the terms endowing the contractor alter his/hers commitments some time in the future or permitting him/her determine things on his/her own.

· The sales contract must bear, among other things, specifications of the property and itemized description of the building.

· The contract should also bear the final price of the property (no bargaining), excluding expenses of development as pavements, gardens, etc. And though, for no surprises should 'pop-up', the prices of these expenses should be remarked in the contract.

· Find out about the joint assets each property is linked to, mostly the roof, the yards and the parking lots.

· Make sure that the contract bears an exact date in which the property would be delivered, and an exact sum of compensation if the contractor fails to fulfill his/her duty. The contract should also bear a date in which the cadaster extract registered on the buyer's behalf would be completed.

Payments

· According to the Sales Act (apartments) one should pay the contractor not more than 15 per cent of property value without proper guarantees, such as bank guarantee, in order to insure the sum of money already paid as advance.

· I recommend paying for the property relatively: due to its construction progress, and not at dates determined arbitrarily.

Construction defects

· Before you actually move and furnish examine minutely if the property bears any defects, and make a 'delivery list'. An engineer or an estate assessor can assist you.

· If defects are found one should report immediately to the contractor and demand their reparation.

· According to law, the purchaser holds a right of maintenance period (between one and seven years, depends on type of defects) during which the contractor is obligated to repair any defect found in the property.

· As the period of maintenance ends, the buyer holds the right of three years liability period during which the contractor is obligated to repair any defect that is proven to be under his responsibility.

Representing both sides by a solicitor

In most cases, in order to sign the contract, the purchasers are directed to a law office. It should be clear: the solicitor representing the contractor has no permission whatsoever to represent also the buyer, excluding treatment of the purchasing registration. And so, if the purchaser wishes to secure his/her rights within the sales contract should he turn to another solicitor.

Buying a secondhand property

Purchasing a secondhand property is apparently simpler, for one can visage the asset due to its condition (legally: AS-IS). But in this case too – one should not rush, and before buying, some examinations should be made.

Identification of owner and property

· First and foremost: one should inspect the owners identity before purchasing any property from a private owner. Make sure that the owner is registered within the estate administration. You can even ask for an ID.

· If you meet the owner's authorized representative make sure the accreditation is legal.

· Make sure that the property registered in the cadaster extract or in the estate administration is the property you intend to buy.

Owner's rights of property

· Make sure the property bears no lien, no attachments and no warning note etc. on behalf of a third side.

· If the property bears some or all of above the deal is not entirely off. That is if the third side approves carrying forward the property's register entry and the removal of lien.

· If a tenant dwells on property one should inspect that he or she are not statutory tenants, for evicting them would be a hard task.

Irregularities of construction and betterment tax

· One should inspect at the local municipality the construction plans relevant to the property, if irregularities exist or if construction made illegally or if any demolition order exist. Also, one should inspect if any betterment tax is imposed (or would be imposed in the future). This sort of taxation might alter significantly the deal's worth.

Inspecting the property

· One should attend and examine the property through eye more than once in order to get an impression of its condition, and mostly in order to make sure that the property bears no entitled (statutory tenants, spouse who's not titled as owner, etc.), whose approval of selling the property or carrying forward its possession is needed.

IN GENERAL

Taxation

Real estate taxation is an issue of complex and undertakes pre-planning before anything is signed. The tax rate in some cases could reach half of the property's worth. Tax planning should be in advance and for the long run. One should consider taxes that are and that might be imposed in the future. A professional assistance is recommended.

Miscellaneous inspection

In addition to all above one should examine some aspects that might influence the property's value and the quality of life of its dwellers. I recommend scrutinizing the neighbors and their relationships with each other, the tenants' committee's function and inspect if taxes are due paid. I also recommend inspecting the whole environment of living and to check if sometime in the future any nuisance will 'pop-up' or already exist, such as noise, odours, pollution, cellular radiation, electric radiation, intoxications, etc. these inspections might be cardinal. Thus, for instance, the value of a luxury apartment which cost was enormous would deteriorate if it turns out that a skyscraper is going to be built on the plot nearby and this panoramic view would be blocked.

Note: these recommendations are only in general. The cautious purchaser should inspect some other issues. It should be emphasized that the recommendations above can not substitute any of the services given by professionals as lawyers, engineers, estate assessors, etc.

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