"Why do I need a real estate lawyer?"
Updated: Dec 18, 2018
After months of searching, you have finally decided which home to purchase. You have agreed on the price and a general payment timeline, and now, it’s time to get the lawyers involved. But, why do you even need a lawyer and what exactly will they do?
One of the many functions of a real estate lawyer is verify the status of the property. In legal jargon this is called "due diligence".
The due diligence will be different for the buyers’ and sellers’ attorney. Let’s start with the due diligence carried out by the buyers’ attorney.
Legal Status It’s essential that your attorney ensures that the property is fully owned by the sellers. For example, if the apartment was inherited together with other siblings, all the siblings must obviously agree to the sale. Additionally, the apartment must be exclusively owned as an independent unit and not as part of a larger property and not held in trust by a third party. If you are buying a property, it’s crucial that you get “clean title”. Clean title implies that there are no mortgages, liens, notes of caution, court orders, protected tenancy, and other “baggage”. If any of the above are registered in the Land Registry, you won’t be able to finalize the deal by registering the property in their names, unless the purchase is structured properly. A good lawyer will negotiate and structure the agreement in a way that will protect the buyers’ interests and minimize the risks.
Zoning Status Even though it’s the appraiser’s job to determine the legality of any building, it’s the attorney’s responsibility to evaluate the basic zoning status. Your attorney must verify that the property is zoned to match its intended use. A residential property cannot be used for commercial purposes and vice versa. A building permit must have been issued for the entirety of the property including balconies and any extensions. If it’s relevant, a variance for nonconforming use must have been issued. Occasionally your attorney will suggest hiring an appraiser to provide more detailed information.
In a recent case, an attorney was representing the buyers of a property which was built in Haifa during the British Mandate period. The attorney saw in the land registry that the property was registered as an “Apartment” but failed to check the zoning file where the property was registered as a “Garage”. Due to his oversight, his clients lost a lot of money, sued him for negligence and won.
Taxes Your attorney will also check the purchase tax liability and whether you are entitled to any benefits or exemptions (a lot more on purchase tax in later articles).
To summarize: Once the due diligence has been completed, you will have a better understanding of the nature of the property that they are planning to buy. With this information, you can determine whether the purchase is a safe investment for your money.
Adv. Michael Levine