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  • Writer's pictureAdv. Michael Levine

Buying “on paper” vs buying “second hand”

Updated: Dec 18, 2018

The two most common ways of buying a residential property in Israel are (1) buying a new property “on paper” from a developer or (2) buying an already built, “second hand” property from the previous owner.

It is important to be aware of the potential risks involved in each method. An experienced lawyer will minimize these risks as much as possible.

“On Paper”

1. Fine print: Contracts with developers are very long and complex and often have terms which are not legal and are in the developer’s favor. For example, developers often require additional payments, illegally, and back down once a lawyer insists that this clause is removed.

2. Security: There are different forms of security which developers can offer buyers; such as a bank guaranty, insurance policy or a Cautionary Note. Each form of security will change the structure of the transaction and can impact the payment schedule. A good lawyer will ensure that the developer is offering an adequate security based on the given situation.

3. Uncertainty: Developers often do not finish construction according to schedule and it can be very hard to collect compensation for this. A lawyer can determine whether the buyer is entitled to compensation and pressure the developer to adhere to the laws.

4. Repairs: There are virtually always defects which the developer is obligated to fix. Unfortunately, the law does not obligate the developer to repair immediately. It is important that the lawyer insists on certain procedures when the finished property is handed over to the buyer which will pressure the developer to make these repairs earlier rather than later.

“Second Hand”

1. Security: A contract with a private owner, as opposed to a developer, is not regulated so the security for all payments must be negotiated in order to protect your interests.

2. Legal baggage: A second hand property may have liens or mortgages which must be removed before the buyers can register the property in their name. Failure to do so may allow a third party to take possession of the property instead of the buyer and will prevent the buyer from getting a bank loan.

3. Taxes: A private buyer, as opposed to a developer, does not have a general exemption from capital gains tax and the tax liability can impact the buyers’ ability to register the property in their name. A lawyer will make sure that the taxes are paid within the framework of the deal so that the buyer’s interests will be protected.

The above list is only of some of the risks which must be examined and mitigated by an experienced real estate lawyer.

Adv. Michael Levine


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