LETTER OF AGREEMENT AND SELLING CONTRACT ON PURCHASING A NEW HOME IN ISRAEL
- Do not hurry to sign a Letter of Agreement that you might regret signing in the future.
- Know that usually a signed Letter of Agreement is treated like a contract legally. Its cancellation by you can cause trouble, such as having to compensate the contractor.
- Remember! Signing a Letter of Agreement binds you contract-wise and minimizes your options for negotiations regarding the terms of the contract.
- It is advised to consult a lawyer before doing anything with legal consequences.
Which documents are attached to the Selling Contract?
According to the Sales Law (Apartments), 1973 the contractor must attach the following documents to the contract:
- A technical specification of the apartment, worded as specified in Apartments Sale Order (Specification Form), 1974 apartment plans.
- Plans of the apartment floor, a typical floor, the entrance floor and the roof floor.
- Plans of the plot as required in the plans submitted to the local authority.
- Before signing the contract take the time to read through the agreement you are about to sign. Gather opinions from professionals – lawyers, architects, and engineers – regarding everything written in the contract.
- Demand an online form from the seller containing all technical specifications. Keep that form for any problem that may arise in the future.
- Make sure that any “promise”, “agreement” or “understanding” between you and the contractor will appear in the contract written and clearly.
Pay special attention to these points:
The price as written in the selling contract must be final and include all sums related to the apartment price. Therefore, when negotiating with the seller and before signing the contract, it is advised to pay attention to some of the topics mentioned in the contract. Thus you will prevent “surprises” and will not be required to pay any extra on top of the apartment price.
- Requests for changes in the apartment: Make sure that the contract will have a clause allowing you to ask the seller to make changes or additions in the apartment. Note that every request for changing or additions to the apartment will be in writing, and be appended to the contract. If possible, make sure that the request will include prices, completion times and length of delays of the sale, following these changes (if any). Ask the seller if you will have to pay for installing furniture that you will supply. Check if you will get credit for the furniture you have decided to waive, and if so, how much.
- Parking and storage: Check if the apartment price as written in the contract includes the price of a parking spot and/or a storage space. Check if you were sold an adjacent or roofed parking spot. Check if the apartment is paired with a storage spot. Check the parking spot and/or the storage that you were promised and make sure it will be noted in the contract.
- Solar heating: According to the planning and building regulations, every seller that is installing a water heating system in the building must make sure it’s a complete solar system. Make sure that the seller guaranteed a complete system and not just preparations for one.
- Connections to electricity, water, gas and telephone: Check if the expenses related to connecting the building and its apartments to electricity, water, gas and telephone systems are included in the apartment price noted in the contract.
- Gardening and cable network: Check if the seller promised in the specifications to provide gardening and connections to complete cables or just preparations for them. Check the garden plans, roads, watering, plant life, etc.
- VAT: Check if the VAT payment is included in the apartment’s price or you’ll have to pay extra.
- Shared property: Check what parts were taken out of shared property and paired to apartments in the building. Check how shared property is handled – entrance, storage spaces, parking spaces, roof access and the roof – and whether or not the seller keeps to themselves rights on these areas.
- For your information: The seller (in case they do not own an apartment in the building) or any other foreign entity must not hold parts of the shared property when registering the house as a shared house.
- Delay in delivery: Make sure that the selling contract has one set date for delivery of the apartment. Pay attention for any clauses allowing the seller to delay delivery by a few months, for reasons not related to the contractor. If so, check if the contract defines a compensation for the buyer. Amount of compensation is defined in Apartment Selling Law (amendment 5)
- Registration in the land registry office: Demand that the seller will define the date on which the process of writing the apartment under your name in the land registry office will be complete. Ensure that no shady clauses will appear in the contract regarding this subject, such as registering in the land registry office within a year of registering the house as a shared house, or within a year from when the parcellation will be finished. Check if the registration will cost any extra on top of the apartment price as noted in the contract. It is advised to check if the selling company is present in Reshut Mekarkey Israel’s list of denied registrants.
Lawyer Accompaniment during Apartment Purchase in Israel
- It is advised to rent the services of a lawyer that is specialized in real estate to check all details about the apartment and to negotiate with the seller. It is advised to sign the selling contract while the lawyer hired by you is present.
- Remember to make the seller sign the extra copy of the selling contract.
- Please note: The seller has his own lawyer that will only advise you regarding apartment registration. The seller will collect payment from you for paying the lawyer. That lawyer will not represent you in negotiations with the contractor.
- Remember! The general contract laws assume that a person understands and knows what he is signing and that the contract binds him. It is very hard and sometimes impossible to cancel a contract or a clause in a contract claiming to not have understood it.