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What are the hidden costs when you buy an apartment in Israel?

Are there taxes when you buy a home?

What are the taxes payable by sellers and why should you as the buyer care?

Should you build rather than buy?

Should I use a real estate agent?

Does the real estate agent have to tell you the truth about the apartment?

Do you have to pay the real estate agent if the deal falls through?

Why is there a discrepancy between the number of square meters you were told constituted the apartment and the number of square meters for your wall-to-wall carpet? Or, where did 20% of your apartment disappear?

I don’t speak Hebrew. Can I insist that the contract be in a language I understand?

How do you guarantee your purchase money?

The definition of ‘price’, or, what does the term USDollar actually mean?

I am looking to buy a property in Israel where is there more choice – new construction or secondhand ?

What is the Tabu?

What if the property is not actually registered in the land registry?

What is a ‘Caution’ and how does it help you?

Who is Israel Lands Authority?

What are Agreement Fees and who should pay them?

How to avoid paying Agreement Fees when you sell the property at a future date.

What is capitalization?

How do I find the money to fund my home purchase?

Should I borrow in foreign currency or in shekels?

I am a new immigrant, how do I go about getting help from the Government?

How do I find out the up to date information of what state funded finance is available?

What are area loans?

How do I get a better deal from the lenders?

Will the government help me?

What if the builder goes bust? Can you protect yourself?

Does the law protect you against faulty workmanship?

How long do I have before the builder’s legal obligations expire?

Your builder find that the land on which he is building is a Maccabean archeological site. The exciting finds are covered in newspapers worldwide. Is finding these cultural treasures good or bad for you?

You get possession of your new apartment but the builder is lackadaisically developing the area around the building. You sink in mud in winter and choke in the dust in the summer. What to do?

A few years after you have made yourself comfortable in your apartment you receive a letter from the builder that he plans to add four more storeys to the building. He apologizes for the expected noise, disruption and inconvenience over the upcoming 24 months. Can he do this?

What should I consider when looking for an apartment?

Buying from a plan: how to know what you get when paper becomes concrete

What is the technical specifications schedule (mifrat techni).?

What is the other important appendix to the contract?

Can anyone represent himself to be an estate agent

What are your obligations towards the real estate agent?

What if the agent is not licenced? Do you have pay him?

How do you check if the agent is licenced?

Can you try to get a better deal from your real estate agent?

What are the alternatives to real estate agents and are they effective?

You desperately want this apartment. You have no time to obtain a full contract. Should you sign a ‘Zichron Devarim’ or memorandum of understanding just so you do not lose the opportunity?

do the caveats regarding memorandums of understanding apply when you are buying a new apartment

What is the difference between a fundamental breach of contract and an ordinary breach of contract?

What is an Agreed Compensation?

What is a grace period?

If you are late in your payments do you pay interest?

Should you use a professional surveyor to inspect the apartment before receiving possession?

What is the legal meaning of ‘transfer of possession’?

Do you have come personally to Israel to receive possession?

The apartment’s share in the common property.

What are ‘bloc’ and ‘plot’ numbers? How do they help you identify the property you’re buying?

 

Should I borrow in foreign currency or in shekels?
It often makes sense for foreigners to borrow in foreign currency rather than in shekels. If your assets and earnings are in dollars, it will make sense for you to enter into dollar obligations so that you are not surprised by currency swings during the period of the loan. Also, the rate of interest in dollars has been favorable over the years, and a better deal than for borrowing in shekels. Banks in Israel are willing to lend in foreign currency and accept repayment in foreign currency. Some of these loans are actually in Shekels but are linked to a foreign currency such as the dollar. The downside of such an arrangement is the extra cost of converting between the two currencies, which can reach up to 1 percent of the amount converted.

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What are the hidden costs when you buy an apartment in Israel?
In figuring how much money you need to have available, it is not enough to focus on the purchase price of the apartment. Buying property in Israel, as the world over, attracts other expenses, and it is worth summarizing them. Below is an overview of additional costs — some more obvious than others.
Purchase price
Acquisition tax ~ 5% of purchase price [or .5% for olim]
Lawyers fees ~ 1%-2% of purchase price
Real estate agents fees ~ 2% of purchase price
Cost of changing foreign currency to shekels ~ ¾%
All told, you may expect to pay an additional 10% over and above the cost of the apartment. This is without taking into consideration commissioning building surveys and government fees for accessing information and registering your title.

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Are there taxes when you buy a home?
The tax most relevant to buyers of apartments - whether they are purchasing newly built or second-hand apartments - is the Acquisition Tax, which is payable 50 days after you enter into a binding written commitment to buy the apartment. This tax is a progressive tax, which means that the tax increases as the price of the apartment you buy increases. This gives the tax a social element, levying higher taxes on those who can afford it, as you can see in the table below.

Acquisition Tax

Purchase Price (New Israel shekels) Tax (%)
Step 1: the first 557,420 0
Step 2: from 557,421 to 691,240 3.5
Step 3: anything above 691,240 5

Note, the above is applicable if the apartment is your sole residence.
Tax rates change all the time, and are adjusted every three months in keeping with the cost-of-living index.

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What are the taxes payable by sellers and why should you as the buyer care?
There are taxes on sellers as well. It is important to know what taxes are applicable to sellers, because if they do not meet their obligations to the tax authorities, the purchaser will be unable to register in his name the apartment he has just bought. There have been cases where purchasers who have been badly advised, and have entered into situations where their interests were not properly secured, found themselves having to pay the seller’s taxes in order to be able to register their property.
The most important tax on sellers of existing (rather than newly built) properties is Appreciation Tax (Mas Shevah), a form of capital gains tax. It levies a tax on the capital gain between the time you bought an apartment and the time you sold it. It is only applicable if the seller has more than one apartment and has sold a property within the last four years. If that is the case, the basic rate of tax as of January 1, 2007, is 20%.
However, the Mas Shevah is a complicated tax, and varies depending on various determinants, including the year of purchase (for example, there are different rates of tax applicable for apartments bought between 1948 and 1960). If you need to find out what your seller’s taxes are, consult an attorney. This tax is also applicable if a seller has only one apartment but has sold a property within the last 18 months.

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Should you build rather than buy?
The first question you have to ask yourself is, do you have the time to allocate to the project? Second, if you are not actually living in Israel, do you have someone here who can represent your interests in your absence? Building a new home or apartment can be a very difficult project to undertake from afar. Having said that, it must also be stated that there are some very capable project managers in Israel whose clients fly in from time to time to check on the progress of the work.
There are three main advantages to building your own home. First, you can save the 20% profit a builder makes on his work. Second, you can build a home that really suits you. And though there are very few vacant lots of land available for private building in the cities, there are many flat roofs which you can acquire and build on top of, subject to getting planning permission of course, and ensuring that you will not face any opposition from other residents of the building.
There are also some tax advantages to building your own home. Buying the land is a VAT-exempt purchase, and buying a builder's services is not subject to Acquisition Tax. These savings, though, should not be the sole reason for deciding to build rather than buy, as they are too small to serve as a decisive factor.

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Should I use a real estate agent?
Real-estate agents have different specialties, whether in types of property, geographic region, or the clientele they serve. Certainly an American or British buyer would do well to use a real estate agent who speaks fluent English, who can help bridge the cultural gap between newcomers and veteran Israelis. A professiona estate agent can also be a great source of information and can be helpful in securing the best possible price and terms.

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Does the real estate agent have to tell you the truth about the apartment?
The real estate agent is obliged by law to act in good faith, and provide his client with all the pertinent information regarding the property he is showing. He or she also has an obligation to take reasonable steps to proactively obtain pertinent information relating to the property. Should he have a personal interest in the property, he must, by law, divulge this to the prospective purchaser. In an ideal world, the above obligation would be respected by all real-estate agents. In reality, real-estate agents are not created equal. Thus it is highly recommended that you do not rely on their representation, particularly in light of their inherent interest in seeing that the deal goes through. That is not to say that real-estate agents are dishonest, but rather that information regarding the soundness of the property, or its legal status should be left to the professionals, such as surveyors and lawyers.

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Do you have to pay the real estate agent if the deal falls through?
The law states that if a real estate agent was the effective cause in bringing about a binding contract between seller and buyer, he is entitled to his fee, notwithstanding the cancellation of the contract later between the parties. However if your contract was drawn up properly the “damages” section of the Breach of Contract clause of the contract will cover this damage to you, if the other party is the cause of the cancellation of the contract.

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Why is there a discrepancy between the number of square meters you were told constituted the apartment and the number of square meters for your wall-to-wall carpet? Or, where did 20% of your apartment disappear?
With new apartments , most agreements specify the apartment’s size and state that a difference in the measurements of up to 2 percent is not a breach of contract. (This may not seem like a great amount, but in an apartment of 150 square meters, the difference is three square meters. In an exclusive neighborhood where a meter can run $8,000 a square meter, this comes to $24,000.)
It is also important to note whether the builder quotes you a net meterage or a gross meterage. If it is gross, you may find that when you come to put down your wall-to-wall carpet in the 120 square-meter apartment you bought, you will be surprised that you only need to buy 100 square meters. Where have the other 20 meters gone, and is this legal?
Well, yes, it is legal. Gross meterage includes parts of the common property, parts of the staircase, part of the elevator shaft, and part of the space under the walls. So it is very useful to ascertain what net meterage you will receive, and to have it reflected in the agreement. This is not always possible, but a guideline to work with is that gross meterage is usually about 15% greater than net meterage
The answer may not be as obvious as you may think. A careful search in the tabu should be undertaken, and the details found there should be compared with the reality of the apartment. Sometimes you will find land registry documents that state that the apartment is smaller than it is in real life. Particularly in the older areas of cities, the chaotic system of registration — spanning the Ottomans, the British Mandate, and the nascent State of Israel — can be a nightmare. Historically, people subsumed common property into their apartments and built-on illegal additions. For years the local authorities had no method to find out what was the real square meter sum of these apartments.
In the 1990s, the municipality of Jerusalem sent around a team of inspectors to measure apartments. This investigation resulted in tens of thousands of metres that had never been assessed by the city being added to the city’s rate base. So the tabu registrations do not necessarily reflect what you are getting. What you should do is measure the apartment yourself. In Israeli apartments this is very simple to do because the square floor tiles make a grid which you can simply count and add up. Thus you can get a clear idea of what is the sum of the square meters that you are buying.

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I don’t speak Hebrew. Can I insist that the contract be in a language I understand?
Israel, like many countries has more than one official language ( see also India Canada Switzerland Belgium and Finland among others). The two languages are Hebrew and Arabic although English is widely used on stamps and currency. However there is no law disallowing the use of languages other than these in any legal document. So you can ask for the house purchase contract to be in English or French or any other language that you and the seller agree upon. Because Israel is home to people who have ingathered from eighty different countries contracts that have been presented to the courts during litigation have ranged from Afrikaans to Yiddish. Also some building companies who are aiming at a foreign clientele have offered contracts in English. But all this depends on the goodwill of all the parties including the lawyers and without everybody’s agreement the default language for contracts is Hebrew.

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How do you guarantee your purchase money?
Make your payments contingent on the seller fulfilling his obligations In second-hand apartments, the norm is to pay 15-30% down against a Caution in your favour in the land registry. Further payments are made contingent on the seller having paid his taxes, removed his mortgage from the property and subsequently, turning over possession of the apartment to you accompanied by registration of the property in your name.
A further form of guarantee is to have the seller assign an irrevocable power of attorney to yourself and your lawyer. This enables you or your representative to complete the registration in your name should the seller be unable (or unwilling) to complete the procedure. This is a very powerful document which, in theory, allows the buyer to unilaterally register the apartment in his name. Therefore it is usually kept by the seller’s lawyers, in trust, until the purchaser has paid a fairly high portion of the selling price. At that time, it is transferred to the purchaser’s lawyer, where it is held in trust until such time as the purchaser has completed the payments.

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The definition of ‘price’, or, what does the term USDollar actually mean?
People who do not live in Israel are often surprised to find that the phrase “U.S. dollar” has several meanings here. Normally, the price of second-hand apartments is listed in U.S. dollars. However, most contracts indicate that the payment has to be made in New Israeli Shekels according to the “Representative Rate” (haShaar haYazig”) of the dollar.
When you send dollars from your country of origin, they arrive in Israel as foreign currency. (This transfer carries a fee of several tens of dollars)When you sell the dollars to the bank to buy shekels, you will find that you are buying shekels at the lower rate of the dollar. The spread between the lower rate and the Representative Rate can reach 1% (ore more if you are changing cash), depending on the bank. On a $500,000 transaction, this can come to $5000 or more.
The Representative Rate of the dollar is set every banking day by the Bank of Israel. Many contracts stipulate that if you make payment by 11 o’clock your payment is calculated according to the known Representative Rate, which is the Representative Rate set by the Bank of Israel the previous day. Any payment after that time is calculated according to the Representative Rate which will be announced later that day. To avoid uncertainties, it is advisable to ensure you pay before the set time so that you know which Rate is applicable to your payment. Although Israel has not suffered from constant devaluations as it did two decades ago, it is not worth taking the risk to pay after 11 o’clock and find that the Minister of Finance has decided to devalue the shekel by 10%.
If you can persuade the seller to take dollars in foreign currency, you will be making a savings. If the seller himself is foreign, offer to pay him the money abroad, or pay him in Israel but with foreign currency. Note that most Israeli sellers will not agree to this as they need the shekels to buy their next residence.

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I am looking to buy a property in Israel where is there more choice – new construction or secondhand ?
Though Israel is a small country, an astonishing amount of housing construction takes place here. In an area 21,000 square kilometers large, there are years when 100,000 to 120,000 apartments change hands. Most of these apartments are second-hand sales, but about a third is in newly constructed building. Every year Israeli building companies invest approximately 36 billion shekels in construction, two-thirds of which is in the residential market. In fact, the construction industry constitutes over 12% of the gross national product, and employs several hundred thousand workers. To give you a perspective on how big an industry it is in Israel, one need merely look at the number of professionals and semi-professionals are directly involved: There are between 5,000 and 8,000 real-estate agents, approximately 8,000 architects, and about 9,000 registered contractors working in the country.

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What is the Tabu?
This the old Turkish term for the Israel Land Registery where your rights in the property you have bought will be recorded.

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What if the property is not actually registered in the land registry?
A major problem within the Israeli market is that much of Israeli land - and thus the buildings that are built on this land – is not registered in a property land registry. The situation has improved over the years, but the lack of consistent registration, and the fact that over 90% of Israeli land is owned by the State - which often leases it out for periods of 49 years only - can greatly complicate registration. Moreover, it exposes the buyer to all manner of risk unless the registration is handled professionally.

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What is a ‘Caution’ and how does it help you?
This is a note on the land registry [or the Minhal] advising any prospective purchaser that there is a sale contract for this apartment, and that the sale is in process. When the purchaser finally pays the entire cost of the apartment and the apartment is registered in his name, the Caution disappears.

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Who is Israel Lands Authority?
Historically, a good part of the land in Israel was bought by Jewish organizations such as the Jewish National Fund (Keren Kayemet L’Israel). Upon Israel’s founding, these groups turned over their land rights to the state, which set up the Minhal to administer them. So we find that the property rights in many Israeli homes are based on leases from the Minhal. These are usually short leases (49 years) but experience has shown that the Minhal always renews them. This cumbersome structure, which impacts so many Israelis, was changed in recent years so that if the lease is capitalized there is no Agreement or Lease Fees.

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What are Agreement Fees and who should pay them?
The basic rule is that in order to get the lessor – the Minhal – to agree to the transfer of the lease from the seller to the buyer, one has to pay Agreement Fees. These are usually worked out at a third of the increase of the value of the land on which the residence rests. This is a complicated calculation, and if you need to know what it is, consult an attorney or ask for a pre-ruling from the Minhal. In any case, this is always paid by the seller and never by the buyer. Furthermore, one should be aware that during the years that you are leasing the property from the Minhal, you will also have to pay Lease Fees.
In order to register a second-hand leased apartment where the lessor is the Israeli government, the seller will have to prove that he has paid Agreement Fees to the Israel Lands Authority – the ILA (in Hebrew, Minhal Mikarkei Israel), or as everyone calls it in Israel: the Minhal,

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How to avoid paying Agreement Fees when you sell the property at a future date.
Pay the Minhal a lump sum called capitalization and when you come to sell the property you will not have to pay Agreement Fees.

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What is capitalization?
What is the difference between Minhal land and land registered in Tabu?
Transferring title in the tabu is far easier than transferring title in the Minhal. With the Minhal, the drawn out procedure can delay the completion of the transaction for weeks, if not months. Another point to remember is that the land held by the Minhal is leased to the apartment owners and they do not have a freehold in the apartment. While it is true that the Minhal renews these leases, the fact remains that a tabu apartment, which has free hold, is usually worth more on the market than an unregistered apartment. A tabu property often sells at two percent over the price of an equivalent Minhal apartment.

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How do I find the money to fund my home purchase?
If you can show the income, and are willing to take on a heavy debt, you can borrow up to 95% of the cost of your apartment. This is done by taking a loan from a mortgage bank for about 70% of the cost of the apartment price, and combining it with a “top up” loan from the same bank for a further amount. You pay an insurance premium to cover the bank against a default on the extra amount. Premiums are calculated based on the loan-to-value ratio, but generally run about $25 for every $100,000 on the loan. Obviously, the main benefit of the credit insurance is that it allows you to not use up all your equity in securing the mortgage.

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I am a new immigrant, how do I go about getting help from the Government?
The Ministry of Immigrant Absorption suggests you take following steps to obtain on a state-funded mortgage:
1. Receive eligibility certification at the mortgage bank.
2. Check the sum of the mortgage to which you are entitled at the mortgage bank.
3. Sign purchase contract
4. Open a file at the mortgage bank. You will receive a detailed explanation on what you have to do, and the documents you are required to submit.
It goes without saying that before you sign a binding contract and find yourself committed to purchasing an apartment, you must check how much assistance you are entitled from the government, and what additional loans the bank can give you

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How do I find out the up to date information of what state funded finance is available?
Useful information for immigrants, including mortgages, can be found in the Ministry of Immigrant Absorption’s website

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What are area loans?
The government promotes various locations in Israel in its attempt to spread the population over as large an area as possible. You can take advantage of this by choosing to live in one of the offered areas and receiving a grant to help you buy your apartment. For example, in 2003 the government provided every person buying a new apartment in Jerusalem an “area loan” of 50,000 shekels. Sometimes living in an area just outside a major population center enables you to obtain substantial benefits. For example, moving to Maaleh Adumim just outside Jerusalem doubles your area loan.

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How do I get a better deal from the lenders?
All banks in Israel are supervised by a government office called The Inspector of Banks, so in theory they should all be offering the same kind of mortgages, more or less. The truth, though, is that it is worth shopping around to get the best possible deal with the lowest possible interest rate. Shaving even a small slice of a percent off the mortgage interest rate can make a substantial difference over a period of years. For a young couple, it can make the difference between being able to buy a home or not.
You can bargain with the banks, and often your lawyer, who probably has more clout, can help you do it. All you have to do is visit several branches of different banks, obtain loan offers at a rate of interest, and then let your attorney play off one bank against the other. The banks are keen to do these deals, and have different rates for different people. If they are convinced that you will go elsewhere, you will be surprised at how much they are prepared to cut in interest.
You may think that lowering the interest rate from 6% to 5.9% isn’t substantial. But if you are buying an apartment for $300,000 and are borrowing $150,000,over 25 years reducing the interest rates by even 1/10 of a percent compounded over the loan period can achieve about $5000 worth of savings .
And it is not only the interest rate that adds to your bill - there are also the costs of opening a mortgage application, and other sundry bank charges. Nevertheless, the banks can be persuaded - particularly if they work with your lawyer on many other mortgage applications - to drop parts of these charges.

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Will the government help me?
The Government of Israel encourages olim (new immigrants), and expresses that policy by making inexpensive mortgages available. The level of government mortgage assistance is based on a point system which factors in the number of children the immigrant family has, as well as the number of years they have been living in Israel. Assistance rates for singles only consider the immigrant’s years in Israel, plus providing a supplement for Israeli military service based on duration of service. Families with a disabled spouse are considered separately. Immigrants are eligible for government mortgage assistance for up to seven years from the date of immigration.

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What if the builder goes bust? Can you protect yourself?
Most builders borrow from a bank in order to finance their building activity. In order to obtain this loan they usually put up as collateral the land on which they are building. It is important to ensure that your apartment does not become part of that collateral. The way to do it is to obtain a letter from the bank which states that your apartment is excluded from the collateral, and thus belongs to you, notwithstanding the financial situation of the contractor.
The Sale of Goods (Apartments) Act also contains clauses dictating that the contractor must guarantee money paid towards the price of the apartment in the following manner:
He must provide a bank guarantee that all monies paid to him will be returned to the buyer if he is unable to transfer title, possession, or any other right agreed to in the contract.
Alternatively, the builder gives an insurance policy to the buyer essentially covering the same risks. Remember to check that the builder has paid the premiums on this policy ahead of time.
There are many provisos and glosses on the above, but that is the basic idea of the law. You can secure one of these forms of protection for any amount that you pay, over 15% of the price of the apartment. For the builder to accept payment without giving you proper guarantees is a criminal offense, and the cost of these guarantees are his responsibility.

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Does the law protect you against faulty workmanship?
The law sets out a post-purchase time period during which the builder is obligated to repair any defects that appear in the apartment. The mandatory periods vary for different aspects of the apartment. See the table below.
Possible Defects Post-purchase years builder obligated to repair defect All piping, including heating and gutters 2 Dampness in roof, walls, or air-raid shelter 3 Mechanical equipment (engines, boilers, etc) 3 Peeling paint in stairwells 3 Sinking of flooring on ground floor 3 Sinking of pavings in parking areas, sidewalks, pathways 3 Cracks in walls or ceilings 5 Substantive peeling of outer stonework 7 Any other incompatibility with the law and the mifrat, which is not a fundamental one 1

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How long do I have before the builder’s legal obligations expire?
It is important to note that a purchaser of a new apartment must act in a set period if he wants to lay claim that his apartment differs from the agreed upon or statutory terms. If he is claiming an item that was discoverable when he received possession of the apartment, he must do so within a period of one year. If his claim refers to an item that would not have been reasonable for him to discover when he received the apartment, he must inform the seller within a reasonable period from the time of finding out about the problem.

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Your builder find that the land on which he is building is a Maccabean archeological site. The exciting finds are covered in newspapers worldwide. Is finding these cultural treasures good or bad for you?
These may be cultural treasures, but for the builder and the buyer these are disasters. The completion of the building can be delayed indefinitely until the site is properly secured. If the authorities decide the site is not important enough to prevent building, but significant enough that the artifacts in the area are to be dug up and transferred to a museum, “rescue digs” are staged. These also cause delays, are considered force majeure, and allow the contractor to delay transferring the apartment to you.

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You get possession of your new apartment but the builder is lackadaisically developing the area around the building. You sink in mud in winter and choke in the dust in the summer. What to do?
Completion and transfer of possession can occur notwithstanding that the builder may still be working in the adjoining building or vicinity, or doing landscaping or nearby access roads for months after you take possession.
It is important to define when development in areas around your building will end, and how you will be affected while it is going on. It is common for clauses that allow the contractor to bring pipes, electricity, cables, and other connections to the utilities through your apartment. This is acceptable while the building is being constructed, but it should be clearly stated that this cannot be done after you take possession.

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A few years after you have made yourself comfortable in your apartment you receive a letter from the builder that he plans to add four more storeys to the building. He apologizes for the expected noise, disruption and inconvenience over the upcoming 24 months. Can he do this?
There is often a lurking clause that gives the builder the right to add to the property in the future. You want to watch out for such clauses, because they might result in someone building on top of your penthouse floor five years down the line, even though you thought the building was long finished. Moreover, such clauses often specify that you cannot try to block such building in any way — for example, by disputing the builder’s zoning request or riling up other residents. If you do, you will find yourself paying a heavy fine to the builder.

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What should I consider when looking for an apartment?
First of all, you should make a list of your basic requirements: Are you a young family requiring kindergartens and schools? Is your family going to grow? Are you an older couple planning to buy an apartment near your children? Do you feel the need to live in an urban environment with shops, culture and other facilities close by, or do you wish to live in the quiet of the countryside?
Is climate a consideration when I make my decision as to where I will buy.
Climate is definitely a factor. Tiny Israel has five different climates! You can live in a desert environment, say in Arad in the Negev (where a lot of people suffering from asthma prefer to live), or you can live in the Galilee, surrounded by greenery and unspoiled countryside, with the Sea of Galilee and all the facilities around it within easy reach.
Which part of the country offers the best services and facilites.
The main reason why people like to live in large urban concentration is access to employment , business opportunities and services . The major metropolitan area in Israel known as Gush Dan, which includes Tel Aviv, Bat Yam, Holon, Bnei Brak, and Ramat Gan, in which two million people live. This area has as much to offer as any metropolitan area in the world — major stores, shopping centers, universities, cafes, opera houses, concert halls, synagogues and parks, all within immediate reach. Gush Dan is famous for the closeness of this urban area to the Mediterranean, and for its high humidity in summer. Cooler and more sober is the hill city of the capital, Jerusalem, where the weather, some find, is more hospitable. Nevertheless, although it is now the largest city in Israel, it is also the poorest, because there is no real business base within its surrounding areas. It is very different from Gush Dan, where the major businesses of the country are headquartered, and where the per capita income is nearly 50% more than in Jerusalem.
Where I come from many people rent apartments, What is the norm in Israel
Israelis love to own their own homes. Over 72% of Israelis own their homes, one of the highest homeowner rates in the world. In comparison, the home ownership rate in the United States is 68%, in Britain 69%, and in France it is 54%.

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Buying from a plan: how to know what you get when paper becomes concrete.
It is common for purchasers to enter into a contract with a professional building company to buy an apartment which has not yet been built. In Israel this is called liknot al haneyar, which literally means “buying on paper.” There are distinct advantages in doing this, but also potential pit-falls. In order that your purchase materializes from the paper stage into reality in the manner that you expect you have to look out for the items described below in this chapter.
Naturally, the most difficult thing when buying something that does not yet exist is to imagine what it will look like when building is complete. In most contracts, the contractors protect themselves by specifically excluding any representations made by advertisements, statements by sellers, and promotional material such as the glossy brochure that persuaded you that this, indeed, is your dream home. Still, your lawyer should be able to protect you by insuring that most of your requirements and desires are translated into contractual form.

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What is the technical specifications schedule (mifrat techni).?
It’s boring but it is important? The contract has two important appendices to it. One is the technical specifications schedule (mifrat techni). This tells you what kind of ceramics you will get in your bathroom, what type of marble your counters will have, and the height of the rooms. Go through this with great care, preferably asking your attorney to recommend an architect or designer who will be able to help you visualize what you are getting. People often ignore the mifrat techni, and they do so at their own risk because it is one of the important keys to understanding what you are buying.
Often, you will wish to change the specifications of particular items in the mifrat techni. You may prefer to have more expensive cabinetry or different floor surfaces. There should be a table within the contract which shows the value of each item, so that you can credit what the builder has contracted to give you towards your preferred purchase.
Another important point: builders make most of their money on unexpected changes that you will request as the building proceeds. It is well worth thinking about all these in advance, so that you can bargain with the contractor to include those changes in the price beforehand. For the contractor the cost is usually minimal, and in order to persuade you to buy, he is often willing to include that in the price. If you ask for the same changes an hour after you have signed the contract, you will find that they can be much more costly.

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What is the other important appendix to the contract?
The other significant appendices are the plans themselves. You will need assistance in understanding the true meaning of placing windows in this or that corner of the apartment – what your view will be, how much sun you will get, and whether you will be seeing a view of the Judean hills or the brick wall of the building next door. Some builders have computerized imagery of the apartment, but it is worth discussing the plan with an architect.

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Can anyone represent himself to be an estate agent
There are approximately 8,000 registered real estate agents in Israel, and it is illegal for someone to act as a real estate agent without being licensed by the Registrar of Real Estate Agents. Before the Real Estate Agents Act was enacted in 1996, anyone could serve as a middle-man on property transactions. In fact, neighbors, friends, and other locals – ranging from the owner of the local corner store to friendly taxi drivers – steered people to property deals and charged a fee for their help.

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What are your obligations towards the real estate agent?
The main obligation, of course, is to pay the agreed-upon fee and act fairly towards the real estate agent, and inform him if a deal is about to be sealed on a property that he has shown you.

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What if the agent is not licenced? Do you have pay him?
No. the only people who are allowed legally to charge a fee for introducing you to an apartment that you late buy are registered real-estate agents who have obtained your signature on a form securing their services.

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How do you check if the agent is licenced?
You can check if a realtor is licensed by looking up the following website

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Can you try to get a better deal from your real estate agent?
It is quite common for a real estate agent to lower his commission fee if he feels that this will contribute to the sealing of the deal. Real-estate agents are accustomed to buyers bargaining with them, so do not hesitate.

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What are the alternatives to real estate agents and are they effective?
In my opinion, there is no real replacement for a real estate agent who is prepared to traipse around and show you as many apartments as you want to see. Some real-estate agents are great experts in their neighbourhood and are thus able to help you focus your search, saving you time and money. They can also save you a great deal in helping you negotiate the price with the seller.
All that said, there are ways to connect with sellers without going through real-estate agents. The first is obviously the classifieds, particularly in the local papers. Another way is to take a walk around the neighborhood. People wishing to sell their apartment sometimes put up signs on their balcony. Another popular idea is to go to the local makolet (grocery store). The grocery owner knows everyone, and can be a great resource. And of course the Internet is another source of information regarding apartments for sale.

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You desperately want this apartment. You have no time to obtain a full contract. Should you sign a ‘Zichron Devarim’ or memorandum of understanding just so you do not lose the opportunity?
You usually do not sign a letter of intent memorandum of understanding when you are buying a second-hand apartment. However, you are sometimes presented with a short one- or two-page letter which purports to sum up the terms of the contract. This is called a zichron devarim - a memorandum of understanding. Sometimes this document is pressed on you by the real estate agent, who is obviously keen to see a deal done. Notwithstanding what anyone else tells you, never sign a memorandum of understanding. It is absolutely binding, but the lack of clarity inherent in a short document can cause great problems. There is a good reason why Israeli house purchase contracts run to five and ten pages. There are all kinds of angles that you would not know that have to be covered, but your attorney will, and they are not covered in a memorandum of this sort. Innumerable lawsuits stem from arguments over the exact interpretation of terms in signed memorandums of understanding. It is worth waiting patiently until a proper contract can be drawn up.
If you have signed the zichron devarim, you should be aware that the document triggers off the tax liabilities that attach to purchasing an apartment. So, for example, within 50 days of the date of signing of the memorandum, you will be required to pay Acquisition Tax.

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Do the caveats regarding memorandums of understanding apply when you are buying a new apartment
Unlike purchasing second-hand apartments, when you are buying a new apartment you often sign a letter of intent when you put down a deposit. This is normally not a binding document, and you do not lose your deposit if you change your mind. Some companies, however, make you sign a letter of intent which does not bind them but does bind you. If you change your mind or do not like the contract presented to your lawyer, you could lose your deposit. For this reason, you should not sign any such document before showing it to your lawyer.

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What is the difference between a fundamental breach of contract and an ordinary breach of contract?
An agreement usually defines which parts of the contract are “fundamental” and which are not. For example, the price of the apartment is a fundamental condition of the contract. So is, usually, the date of possession. Breaching these conditions brings about a fundamental breach of contract, which allows the injured party to immediately cancel the contract without warning the other side at all. An ordinary breach of contract becomes fundamental only after notice of the breach has been given to the offending party and that party takes no action to remedy the situation.
It should be noted that some sellers insert a general clause declaring all conditions contained in the contract to be fundamental. Such a general clause is invalid. Fundamental conditions have to be clearly and explicitly listed.
It is important as a buyer to be aware which conditions have been defined as fundamental. Take care that you do not find yourself in breach of these conditions.

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What is an Agreed Compensation?
Israeli law allows sellers to predetermine breach of contract compensation in the contract. Agreed Compensation is usually set at 15% of the value of the property that you are buying, though some people agree to a greater or lesser percentage. You must be careful how this clause is written. It should be specified that Agreed Compensation does not detract from your collecting on other damages you may incur. Furthermore, you should leave yourself the option of canceling the contract and receiving the Agreed Compensation or alternatively, fulfilling the contract but still collecting the Agreed Compensation, as described above.
The courts rule by these contractual terms most of the time, so the Agreed Compensation clause and the level of compensation should be carefully determined by the parties. This is particularly true if there is a real risk that you may be the one to be in breach of contract - for example, if you are selling another apartment to finance the new one. You may find that a hitch arises in the sale of your old apartment, which leads you to be late on payment on your new apartment. If you agreed to an inordinately large Agreed Compensation, you could be in trouble.

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What is a grace period?
It is expected that all contractual obligations are fulfilled on time. If they are not, the injured party may send a warning. If the breach is not then remedied, it becomes a “fundamental breach of contract” as described above. This usually allows the injured party to cancel the contract and even claim the Agreed Compensation (see below.) However, it is also wise for a contract to have a safety valve known as the “grace period.” This allows either party to be late in fulfilling their obligations – either payment or turning over possession, for example – usually for a period of up to seven days. If you think you are going to be late in payment or if you are transferring money from abroad to make a payment, a smart thing to do is to request seven working days as a grace period. Israeli banks observe Jewish holidays and traditional bank holidays, as well, so your payment may be considered late even if it is held up by all the days the banks are not working. This is not the case if you stipulate working days as grace, because the days the banks are not open are not counted.

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If you are late in your payments do you pay interest?
If you delay payment longer than the grace period allows, you will have to pay interest on the sum outstanding to your seller. (That is, if he decides not to cancel the contract or sue you for fundamental breach of contract). If your currency environment is a dollar environment, it is important to write that the interest payable will be the normal interest payable on dollar overdrafts. If the clause states that the interest is on the shekel, you will find that you are paying a much higher interest rate.
It should be noted that for purchasers who are Orthodox Jews, there may be difficulty in paying interest at all, as this is precluded by Halacha [Jewish Law]. In order to avoid this issue, it is usual in contracts between religious Jews to insert a heter iska, which is a halachic legal tool which allows you to pay interest.

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Should you use a professional surveyor to inspect the apartment before receiving possession?
Yes this is highly recommended.

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What is the legal meaning of ‘transfer of possession’?
Obtaining possession means that you legally take physical control of the property. This is usually done by the seller handing you the keys to the apartment. If you are not in Israel yourself, you can appoint someone to receive possession for you. When the keys are handed over, it is important to check the apartment and make sure that you are receiving it in the condition that was specified in the contract.
Furthermore, there are procedures for changing names with the utility companies. Again, you do not need to be in the country for this.
As you have held back a large part of the payment until gaining physical possession, you should be sure that you have the money to pay when the time comes. You should note that in some contracts, the sellers define the date of transfer of possession as being “no later” than X date. The implication of such phrasing is that the seller can turn to you any time before that date and inform you that he is transferring possession. You will then have to come up with the money you are obligated to pay against the transfer of possession. It is better to fix a specific date to ensure that you will know exactly when you must have the appropriate funds available.

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Do you have come personally to Israel to receive possession?
No. You can have someone else represent you and take possession on your behalf.

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The apartment’s share in the common property.
The title deed extracted from the tabu, or viewed on the Internet, will tell you what percentage of the common property is yours. If you want to really understand in depth what you are buying, it is possible to order the entire building file, called the Co-operative House File (Tik Bayit Meshutaf File), from the tabu. Inside you will find the exact building plans and colored sections of any additional property that may have been purchased with the apartment, e.g. parking areas, parts of a garden, storage spaces, and so on. It may surprise you to find that one of the neighbors has established a presence on a space allocated to you. It is worth finding out before you buy.

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What are ‘bloc’ and ‘plot’ numbers? How do they help you identify the property you’re buying?
Most buildings, quite apart from their ordinary street address, have an identifying grid coordinate, so that if you went to the maps in the Land Registry you would be able to put your finger, literally, on the building in question. To identify the exact coordinate, the country is (more or less) divided into blocs and subdivided into plots. A building is given a plot and bloc number and the apartment is given a sub-plot number. All these numbers must appear in the preamble to a purchase contract

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