Buying off-plan: 10 Stages after Signing the Contract on your New Home in Israel
Posted on 11. Jan, 2010 by buyitinisrael in Buying On Paper, Legal Matters
By Elana H. Billig, Advocate
Congratulations on buying your new home in Israel. You signed the contract and made the first payment, but there’s still much work to be done. The following is written with a goal to help organize the next phase of the Israel property purchase and make the various processes run smoothly.
- Bank Guarantees or other form of security. Each time you make a payment to the project’s account, you should be alert to ensure that you receive in a timely fashion the corresponding bank guarantee or other security in return. If you do not, you should follow up with the Kablan. Note that the current laws in Israel aim to protect the purchaser, particularly following the Heftsiba debacle, and payments in new projects are made using a pre-printed payment book that resembles a checkbook whereby the payment is made by submitting payment slips to the bank managing the projects accounts. Payments should not be made to any other account, or they will be at risk.
- Power of Attorney. You will need to provide the Kablan with an irrevocable power of attorney to handle registration of the property as well as other matters. This power of attorney will need to be notarized, and should be taken care of shortly after the contract is signed.
- Payments. You must meticulously follow your payment schedule to avoid interest and other heavy penalties. Even if your attorney secures a grace period for a short lateness by the purchaser, it is important to note that this grace period will apply to payments to the Kablan, but will not toll any increases due on the inflationary index (‘madad’). If your payments are in accordance with milestones, you must follow the construction progress to ensure timely payments. You should be aware that certain parts of the construction occur rapidly and you may be making a series of payments in a short period of time.
- Mortgage. If you are taking a mortgage to finance your new home in Israel, shortly after you sign the contract, you should begin the mortgage paperwork process even if you will not be taking the actual mortgage funds yet as the process is lengthy and needs signatures from the Kablan, notarization, a recordation in the pledge office and some other bureaucratic steps.
- Changes. If you bought your new apartment in Israel at a phase where structural changes are feasible, you must meet with the designated appointee of the Kablan to make these changes. You will likely need to consult with an expert to plan the wall, electrical and plumbing changes and the like. If there are costs for these changes, it is important to pay for them when ordered to avoid interest and inflationary index rises.
- Selection. During the construction process, you will have myriads of items to select and this is a good opportunity to increase your Hebrew vocabulary. It is critical to make any selections which are required on the schedule that the Kablan provides to you otherwise the Kablan will have a right to delay your keys with no penalty, or will simply select for you. Even if you live in Israel this can be an overwhelming task, as the suppliers for the doors will likely be in a different city than the supplier for the tiles who will be in a different city than the supplier for the windows and so forth. If you live overseas, it is critical that you retain an experienced project manager to assist you. Please keep in mind that while the Kablan is supposed to follow the plans, the work is generally much better and more to the plans when a concerned owner or project manager frequently makes an appearance during the construction.
- Tofes 4. Once the building and your unit look nearly ready, you can begin asking when the certificate of occupancy (“Tofes 4″) will be received. This is not exclusively in the hands of the Kablan as the Electricity Company and the Municipality as well as others also need to inspect the unit and project. When you expect that Tofes 4 will be issued soon, it is imperative to have your funds available to make your final payment. It is important to note that many Kablanim will try to provide you with your keys prior to obtaining Tofes 4, and you absolutely should not take the unit before Tofes 4 is received. You will not be able to be permanently hooked up to electricity and other services. You should also realize that even if Tofes 4 has been granted, the apartment may be far from ready to move in. Thus, it is important that one of the things your lawyer negotiates is that when the Kablan provides you with the keys, in addition to Tofes 4, that your unit and the building and your parking and storage room must all have reasonable access.
- Inspection. Prior to making your final payment, it is time to inspect your unit and any common areas. While there is generally no obligation for you to bring an expert (and if the contract obligates this, an alert attorney will remove this requirement), it is a right that you have, and is recommended. The average person cannot tell if the windows were sealed with adequate sealant or if the slope on the terrace is sufficient for water to drain, etc. Thus it is recommended that an engineer be retained to conduct the inspection. Given that the apartments are usually replete with construction remnants when the inspection is performed, you may not be able to notice details like broken tiles at this time. It is critical to record on the Protocol every defect and deficiency that can be noted at the time of the inspection. Things that can only be discovered later must be made known to the Kablan in writing. If the apartment is habitable (other than the construction grime and some minor building defects), it is time to make final payment and get the keys. At this stage, the bank guarantees or other security are to be given in trust to the Kablan’s lawyer or your own lawyer, but not to the Kablan’s hands as these are intended to guarantee registration, which will take place sometime in the future.
©iStockphoto.com/ Hongqi Zhang
- Possession. You will receive the keys to your new home upon payment of the final installment. (Some Kablanim request the final payment a certain number of days prior to receiving the keys, whilst others will hand over the keys immediately upon confirmation of payment into the project’s account.) It is important to ensure receipt of keys to all locks in your new environment, including the mail key, front and back entrance doors to your building, storage room, access to your parking lot and the like. It is highly recommended that you change the locks to your unit and storage room. Now that you are in possession of your home, you are free to bring in outside contractors and services providers to handle the finishing touches to your home, as well as order the movers. You may also wish to retain a “Polish” company which is a cleaning company specializing in cleaning homes from construction debris. It is important to check references and find out exactly what is included in this service, as many companies charge extra to clean interiors of cabinets, windows and so forth. This stage is also the time to handle connection to utilities. While some Kablanim charge you in advance for connection and meters for the supply of electricity, gas and water, you may need to do this on your own or at the least, ensure that these accounts are in your name. This is also the time to set up accounts with additional utilities and suppliers that you are interested in, such as telephone, cable, alarm, etc.
- Warranties. Once you have your keys, you should remember that the Kablan is obligated to repair building defects. Other than urgent repairs, ordinary repairs are made at the end of the first year that you are in your home and this repair period is called “Shanat Bedek“. Generally, the Kablan will make these repairs on the other units in the project around the same time. It is important that you let the Kablan know of all deficiencies and defects in writing. It is also important to note that you should not rush to bring in your own service provider to make repairs as this will void that aspect of the warranty. The sales law sets forth a time frame for repairs that the Kablan must make if a defect is discovered. (The issue of warranties from the Kablan is a lengthy and complex subject which I shall try to address in greater detail in a future article.)
Mazal tov and enjoy your new home in Israel.
The contents of this article are designed to provide the reader with general information and not to serve as legal advice or other professional advice for a particular transaction. Readers are advised to obtain advice from qualified professionals prior to entering into any transaction.
Elana H. Billig, Adv. is an Associate at Gideon Koren & Co., Law Offices and Notary. Should you have any questions or comments regarding this article, feel free to contact Adv. Billig by email at elana@gkl.co.il.
© Copyright 2010
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