Title extract – (Nesach Tabu) and NO Title Insurance in Israel

The land in Israel is divided into Block and Parcel numbers (with apartments receiving sub parcel numbers). This identification number is entered into the computer system and you receive a printout of the owners, liens, mortgages and warning notices.

These are public records and anyone can either go to their local land registry (most cities have one) and get a printout, or obtain one online (if you read Hebrew), but it is essential that your attorney review it to ensure that title is clean or that any problems with title can be resolved before you make full payment for the property.

A typical title extract may show ownership in a married couple with a mortgage to a bank. The mortgage is paid off in the course of performance of the sale agreement, so a mortgage isn’t normally a problem in completing the transaction. Sometimes a title extract may show a spouse as owner, who died, but the surviving spouse never bothered to transfer ownership into his/her name. This is the kind of title issue that an attorney can resolve (by immediately starting an Israeli probate process), but that must be addressed in the sale agreement.

Sometimes the land is owned by the “Israel Land Authority” (Minhal Mekerkei Yisrael) and the “owner” actually has long term leasing rights (such as a renewable 99 year lease). This is quite typical in Israel, but again an attorney needs to review the long term leasing deed and the conditions of that deed.

There are no title insurance companies, as there are in the US, who provide insurance for any problems with title. Title has to be checked in advance of signing the contract and most sale agreements state that the buyer has checked title and has no further claims in that regard.

 

Say NO to a Zichiron Dvarim – Memorandum of Understanding (MOU)

Just say no! Real estate agents may try to persuade you to sign a memorandum of understanding with the seller, when you see an apartment that you love. They’ll tell you that the apartment won’t be on the market if you wait or that the real estate market is so hot the seller will get a higher offer.

Never sign an MOU, in Hebrew referred to a Zichron Dvarim. This is a full fledged contract, obligating you to complete the transaction, but it is too short and never fully addresses the whole transaction, leaving gaping holes which create way too much room for conflict with the seller.

It is never advisable to sign an MOU, prior to checking title, which is the most basic due diligence you must do prior to the purchase. Even if it means the possibility of losing an apartment you love, that is preferable to entangling yourself in a legal bind, which is very difficult to extricate yourself from.

Experienced Israeli lawyers and most Israeli buyers and sellers are well aware of the pitfalls of an MOU. Don’t let any real estate agent play on your lack of familiarity and convince you otherwise.

Read the previous blog to further strengthen all the reasons why you should have a lawyer lined up, before you start looking at apartments. This way, you call your lawyer to tell her about the MOU and she will immediately dissuade you from it and start working on a full sale agreement!