Checks Before Buying an Apartment

Buying a resale apartment can look simple: you find an apartment, agree on a price and sign a sale agreement. In practice, most of the risks are not visible on a visit and physical inspection of the apartment. They are found in the registries, in the documents and even in clauses that may be problematic in the wording of the contract. To reduce surprises, it is worth carrying out legal checks before signing and, certainly, before transferring any money. This article explains what is better to check.

The information is general. Every transaction has its own unique characteristics and is different, so have the specific details checked with a lawyer who represents you in the transaction.

Who represents you in the transaction

In a sale, the buyer and the seller have different interests. A lawyer acting for the seller, or a brokerage office that contributes to shaping the commercial terms of the transaction, does not represent you and will not necessarily reflect your interests in the transaction. The clear recommendation is therefore to proceed to a sale transaction with an independent lawyer on your behalf, who acts for you alone and represents your interests in the best possible way. A lawyer on your behalf gets involved before you sign any document, including a "framework agreement" or a "memorandum of understanding" (which it is in any case preferable to avoid) or even a "brokerage services order". For the broader field, see real estate.

1. The land registry extract

The first step is to obtain an extract from the land registry office or the housing company, current as of the time of the negotiations, reflecting the rights in the property. In the extract, check, among other things:

• Who holds the registered rights, whether the seller really holds the right, and whether there are other owners whose signature is needed.
• The type of right: ownership, a lease, or another right, and the remaining lease term if it is a lease.
• Liens: a registered mortgage in favor of a bank, which must be cleared in the course of the transaction. The manner of doing so is a matter to take into account when drafting the terms of the sale agreement.
• Notes and caveats: a note in favor of an earlier buyer, an attachment, or any existing note that could harm the transaction. A caveat is a registration intended to protect a buyer's right, so it matters to whom it is registered.
• Registration as a condominium: whether the apartment is registered as a separate unit, and what the registry status of the building is.

If the apartment is not registered in the land registry, for example when it is held through a housing company or through rights from the Israel Land Authority, further checks and suitable approvals are required.

2. Planning status and building permits

Not everything you see in the apartment was built lawfully. It is worth checking:

• Whether there is a building permit for the apartment, for changes made relative to the permit and for building additions, for example an enclosed balcony, a roof room, a storage room or parking.
• Whether there are demolition orders or pending planning proceedings.
• Whether what is actually being sold matches what is registered and what the building permit allows.

Building deviations can affect the ability to sell in the future, future expenses and sometimes the process of approving a mortgage.

3. The seller's debts and obligations

Before transferring the money, make sure there are no debts that remain on the apartment or fall on you:

• Certificates from the local authority showing no debts for property tax and levies.
• A certificate from the building committee or the management company showing no debts.
• Electricity, water and gas accounts, and the procedure for transferring them to the buyer's name.
• The tax position: the seller's betterment tax and the buyer's purchase tax. It is worth understanding in advance who is responsible for what, and checking eligibility for any relief under the law in force at the time of the transaction, with an accountant or a lawyer.

4. The apartment itself and its physical condition

A legal check is not a substitute for an engineering check. Before signing, consider a visit by a building inspector or engineer, and include clear provisions in the contract on the condition of the apartment and any defects found. Where a seller knew of a defect and did not disclose it, there may be consequences, and this is examined case by case.

5. The contract

In the sale contract, pay particular attention to:

• The exact description of the property: block, parcel, sub-parcel, area, parking, storage and common areas.
• The payment schedule: what is paid, when and to whom. A first payment before the checks are done is a risk.
• Evacuation and delivery date, and what happens if the seller is late.
• Mortgage clearance: a clear mechanism ensuring that the lien is cleared at the start of the payment and that its release is registered.
• Agreed damages and breach: the conditions, and the consequences for each side if the transaction is not completed.
• A list of the movable items and fixtures in the apartment, such as air conditioners, cabinets and fixtures.

6. An existing tenant in the apartment, leases and possession

If the apartment is rented or held by someone else, it is important to anchor the arrangements regarding this before signing, so that they are reflected in the sale agreement. Check the lease, its term and the tenant's rights, and anchor in the sale contract whether the apartment is delivered vacant or with the tenant. It is also worth checking whether a spouse or another person has rights in the apartment, and whether the seller is a non-resident, an heir or a representative of another owner, in which case additional documents are usually needed to confirm the authority to sign.

7. Registering the transaction and protecting the money

After signing, it is worth arranging the registration of a caveat in favor of the buyer, to protect against conflicting transactions and attachments by the seller's creditors. Later, the rights are transferred to the buyer's name and the liens are cleared. When the buyer has a mortgage, the stages of the transaction should also be coordinated with the bank, because it sometimes sets conditions for releasing the money.

A short checklist

1. A current registry extract was checked, including liens and notes.
2. The ownership matches the signing parties, and all owners sign.
3. Building permits exist and match the property.
4. Certificates showing no debts were received from the local authority and the building committee.
5. Clearing the seller's mortgage is arranged in the contract.
6. The tax aspects for both sides were reviewed.
7. An evacuation and delivery date was set, with a consequence for delay.
8. Registration of a caveat immediately after signing is planned.

In summary

Checks before buying a resale apartment are meant to confirm that you are buying a property the seller is entitled to sell, free of debts and planning surprises, under a contract that also protects you. If you are about to buy, you can contact us and have the apartment and the contract checked before you sign. If you are buying a new apartment from a developer, you are welcome to read Buying an Apartment from a Developer.

The information in this article is general, is not legal advice, and does not replace a review of your specific case.