Purchasing Corporate Property in Israel

Purchasing or leasing a property is an essential starting point for growing business entities, but it is not the most simple of processes. This article is here to explain how purchasing corporate property works in Israel, helping you navigate the system and procure Israeli property for your business. Our law office is here to provide support for those looking to take this significant step in advancing their organization.

Successfully executing a real estate investment requires industry knowledge from an experienced legal team with technical capabilities.  There are various online databases with a wealth of information available to the public, allowing one to view every real estate transaction over the past several decades. There are many services one may consider to be of help in the process such as soliciting an appraiser, and in some cases, ensuring the property is evaluated by an engineer or an appraiser. (Be aware that the customary commission rate charged by real estate agents in Israel is usually around 4%, about half (2%) paid by the buyer and about half by the seller.)

LEASING CORPORATE PROPERTY

In Israel, State Property cannot be purchased, rather only leased. Therefore, title to property is not registered in the name of the “purchaser”. The “purchaser”, who must be an Israeli citizen, a legal entity with majority Israeli ownership, or a foreign citizen who is eligible to become Israeli by the terms of the Law of Return, is instead granted the right to enter into a long-term lease with the Israel Lands Administration (ILA).

Private ownerships are common in urban areas, but almost 90% of Israeli land area today is owned by the state, the development authority, or the JNF (Jewish National Fund). Private persons still enjoy rights to their property even with eminent domain’s application, as the Israeli government must compensate for the fair value of the land. The land is often leased to private persons for a period of 99 years. Leases today are “capitalized”, meaning the developer/contractor pays the rent for the entire lease term in advance and the lessee is exempted from any annual payments. In practice, once the lease agreement is signed, the lessee has no further business with the Administration until the expiration of the lease, unless he wishes to make additions or modifications to the existing structures or to its usage. In such an event, the Administration’s approval, as the owner of the land, is required, and it may demand an additional rent in respect to the new usage.

Unlike in the US, where it is customary that the contractor provides the purchaser of a new condominium apartment with a title insurance policy, in Israel guarantees are required. The Sale (Apartments) (Assurance of Investments of Persons Acquiring Apartments) Law – 1973, states 5 types of guarantees, at least one of which a contractor is required by law to provide the purchaser of an apartment, prior to receiving a sum exceeding 7% of the purchase price:

1. Bank Guarantee – money-back guarantee in the event that the contractor cannot transfer the property under the purchaser’s name.
2. Insurance Policy – the contractor obtains insurance for repayment of amounts received from purchasers and names purchasers as payees in the policy.
3. Lien – the contract registers a lien on the apartment (or on a relative portion of the land) as a first ranking pledge in favor of the purchaser. (Although this sort of guarantee is rarely provided by contractors.)
4. Caution Note – registered at the local land registry and grants the purchaser preference over any later conflicting transactions or creditors of the contractor.
5. Transfer of Title to the Property in the Purchaser’s Name at the Land Registry – contractors will rarely agree to the transfer title before receiving payment in full from the purchaser.
   

    

MORTGAGES

On the topic of mortgages, one seeking a loan must go to a mortgage bank to find out the conditions of pre-approval. Oftentimes, a lender will examine aspects of your financial picture, informing you of a maximum loan amount within 8-15 days. If you plan to fund an apartment purchase with a mortgage, the mortgage lender must have a representative branch in Israel. With many banks in Israel, the pre-approval stage can be done online. There are many types of mortgages on the market, and the pre-approval stage is generally when you will indicate which kind you prefer, and under what terms (this information can usually be changed later). Therefore, it is usually acceptable to complete this step immediately.

A foreign buyer may receive up to 50% in financing from a bank but borrowing money from a foreign bank against an asset in Israel is virtually impossible.

CONTACT US

If you are seeking assistance purchasing property for your company in Israel, please contact us. Our team is highly qualified and happy to help you throughout this process. 

 :  :

03-3724722

055-9781688

office@lawoffice.org.il