What to Expect from an Israeli Property

Contract

Buying property in Israel involves a detailed and legally binding process. The contract, known as a Heskem Mecher (Sales Agreement), is the foundation of your transaction and must be reviewed carefully before signing. Unlike some other countries, property purchases in Israel are governed by complex real estate laws that require professional oversight — typically a lawyer representing each side. Understanding what to expect from the contract will help you avoid costly mistakes and ensure that your rights are fully protected.

1.  Legal Representation

In Israel, it is **essential **for each party (buyer and seller) to have independent legal representation. Lawyers handle contract drafting, due diligence, registration, and the transfer of funds through trust accounts. Israeli real estate contracts are not standardized — your lawyer will usually draft or amend the agreement to reflect your specific situation. Never sign a draft provided solely by the seller or developer without having it reviewed by your own lawyer.

2.  Title and Ownership Verification

Before signing, your lawyer will check the property’s ownership status through the **Land Registry (Tabu) **or the relevant registry body (e.g., the Israel Land Authority or housing company). The goal is to verify:

ï           That the seller is the **registered legal owner **of the property.

ï           That the property is free of liens, mortgages, or encumbrances.

ï           That there are no unpaid municipal taxes, developer obligations, or building violations.

In some cases — especially with new construction or projects built on leased state land — ownership is not yet registered in the Tabu, and the developer’s rights are verified through contractual documentation instead.

3.  Contract Structure

The **Heskem Mecher **typically includes:

ï           **Identification of the parties **(buyer, seller, ID or passport numbers, addresses).

ï           **Property description **— address, size, parcel and lot numbers, floor, storage rooms, parking spaces, and any shared property rights.

ï           **Purchase price **and **payment schedule **— detailing exact amounts, due dates, and conditions for each installment.

ï           **Possession date **— the date you will receive physical possession of the property.

ï           **Transfer of ownership **— when legal title will be registered in your name.

ï           **Conditions precedent **— for example, mortgage approval or regulatory approval if applicable.

ï           **Representations and warranties **— statements confirming that the seller has full legal rights and that there are no disputes or hidden defects.

ï           **Default and remedies **— penalties if either party breaches the agreement.

ï           **Miscellaneous clauses **— covering legal jurisdiction, notices, and costs.

4.  Payment Schedule and Bank Guarantees

Israeli contracts specify a detailed payment schedule, often tied to specific milestones such as signing, registration, or delivery. Payments are typically made to the seller’s lawyer’s **trust account **and only released once legal conditions are met.

For new construction, the developer must provide a **Bank Guarantee (Aravon Bankai) **under Israel’s Sale Law to protect the buyer’s money until ownership or possession is transferred. Without this guarantee, payments should not be made.

5.  Taxes and Fees

Both parties are responsible for different taxes and fees:

ï           **Purchase Tax (Mas Rechisha): **Paid by the buyer. The rate depends on the property value and your status (oleh, resident, investor, etc.).

ï           **Capital Gains Tax (Mas Shevach): **Paid by the seller, unless exempt.

ï           **Legal fees: **Usually around 0.5%–1.5% of the purchase price, plus VAT.

ï           **Agent’s commission: **If a real estate agent was involved, both sides may owe a commission (often 1%–2% plus VAT).

ï           **Registration fees: **For transferring ownership at the Tabu or relevant registry.

6.  Mortgage and Financing Clauses

If you are using a mortgage, the contract must allow for **registration of a lien in favor of the bank **and typically include a clause giving the buyer time to secure final mortgage approval. Your bank will issue a **Letter of Undertaking **guaranteeing payment to the seller once certain legal conditions are met. Coordination between your lawyer and the bank’s legal department is crucial for a smooth process.

7.  Possession and Condition of the Property

The contract will define the possession date **— when you receive the keys — and describe the condition in which the property must be delivered. For resale properties, the seller must deliver the home **vacant and in reasonable working condition, with all utilities settled.

For new builds, the contract will detail *specifications (mifrat technologi) **outlining materials, finishes, and standards. The developer is legally obligated to repair construction defects for a certain period known as the **warranty and liability period **(tkufat achrayut and *tkufat bidud).

8.  Breach and Penalties

Israeli contracts are strict about default and delay.

If a buyer fails to make payments on time, the seller may charge late interest or cancel the contract. If the seller delays delivery or breaches their obligations, the buyer may be entitled to compensation or cancellation, depending on the circumstances.

Compensation clauses should be reviewed carefully to ensure they are fair and enforceable.

9.  Transfer of Ownership and Registration

After all payments and taxes are completed, your lawyer will handle the **registration of ownership **in your name at the Land Registry (Tabu) or the appropriate body. You will receive a **new deed (Nesach Tabu) **showing you as the legal owner. This process can take several weeks to several months, depending on the type of property and documentation required.

10.  Common Mistakes to Avoid

ï           Signing a contract before your lawyer reviews it.

ï           Paying the seller directly instead of through a lawyer’s trust account.

ï           Failing to verify property registration or unpaid debts.

ï           Ignoring the need for a valid bank guarantee on new projects.

ï           Assuming verbal promises (like including furniture or appliances) are binding — they must be written into the contract.

Conclusion

An Israeli property contract is a detailed legal document designed to protect both parties, but it can be complex and highly technical. Always work with an experienced real estate lawyer who specializes in Israeli property law. They will guide you through every stage — from due diligence and negotiation to signing, payment, and registration — ensuring that the transaction is secure and compliant.

Understanding the structure and expectations of an Israeli property contract will give you confidence and peace of mind as you navigate one of the most significant purchases of your life.

Updated on: 01/02/2026