05.04.2004 |
Buying a property in Israel - from the Jerusalem Post
Buying a property in a foreign country is a very common affair, especially in Israel where Jews from the Diaspora purchase property as an investment or as a prospective home. But when one buys, property in a foreign ...
Buying a property in a foreign country is a very common affair, especially in Israel where Jews from the Diaspora purchase property as an investment or as a prospective home. But when one buys, property in a foreign country, one should be more wary about the purchase than when buying property on home ground.
There are legal differences; there are questions of location, the soundness of the property etc.
The legalities of buying property are all-important and, in most cases, the real estate legal framework differs from one country to another; consequently, misunderstandings may arise with regard to the legal position of the property.
Eli Eshel, partner at Yoram L. Cohen, Ashlagi, Eshel, who specializes in Israeli real estate, says that different types of legal ownership can confuse the uninitiated, so it is important to seek legal advice before finalizing a transaction.
To try to explain this, one must understand that different systems have different rules, and what applies in one country doesn’t necessarily apply in another.
This is particularly true in Israel, where there are two land registration systems that work parallel but separate from each other. The first one is "Tabu", or the land registration office, which registers land and property owned outright. All legal questions come under the existing land or property laws.
The second system is Munhall, or the Israel Land Authority. It deals land that is owned by the state through the Israel Land Authority and is only leased out. Most land in Israel, in fact 92%, is government owned. The government, mainly as a means to control the real estate market, uses the Land Authority.
An owner of property held by the Land Authority is essentially a tenant with a lease agreement of usually 49 years, with an option to renew. The payment arrangements vary. In some cases, rent is paid up front for the entire duration of the lease, or it can be paid on an annual basis. When buying property on leased land, it is important to find out when the lease will run out, as well as the payment method on the original contract.
When purchasing property, one must also take the Israeli tax system into account, as it has an impact on the price as well as the long-term value of the property.
Property is liable to a sales tax, which can be up to 2.5%, land profit tax, which is a tax on the rise in the real value from the time it was purchased to the time it is sold; and a purchase tax of up to 5%. Property bought as an investment and is then rented out is liable to both income tax and VAT.
Legal procedures are important because someone can buy a house and suddenly realize that, from a legal standpoint, it still belongs to the seller. While the legal aspect is the most important from a registration perspective, there are other factor that must be considered as well.
There are legal differences; there are questions of location, the soundness of the property etc.
The legalities of buying property are all-important and, in most cases, the real estate legal framework differs from one country to another; consequently, misunderstandings may arise with regard to the legal position of the property.
Eli Eshel, partner at Yoram L. Cohen, Ashlagi, Eshel, who specializes in Israeli real estate, says that different types of legal ownership can confuse the uninitiated, so it is important to seek legal advice before finalizing a transaction.
To try to explain this, one must understand that different systems have different rules, and what applies in one country doesn’t necessarily apply in another.
This is particularly true in Israel, where there are two land registration systems that work parallel but separate from each other. The first one is "Tabu", or the land registration office, which registers land and property owned outright. All legal questions come under the existing land or property laws.
The second system is Munhall, or the Israel Land Authority. It deals land that is owned by the state through the Israel Land Authority and is only leased out. Most land in Israel, in fact 92%, is government owned. The government, mainly as a means to control the real estate market, uses the Land Authority.
An owner of property held by the Land Authority is essentially a tenant with a lease agreement of usually 49 years, with an option to renew. The payment arrangements vary. In some cases, rent is paid up front for the entire duration of the lease, or it can be paid on an annual basis. When buying property on leased land, it is important to find out when the lease will run out, as well as the payment method on the original contract.
When purchasing property, one must also take the Israeli tax system into account, as it has an impact on the price as well as the long-term value of the property.
Property is liable to a sales tax, which can be up to 2.5%, land profit tax, which is a tax on the rise in the real value from the time it was purchased to the time it is sold; and a purchase tax of up to 5%. Property bought as an investment and is then rented out is liable to both income tax and VAT.
Legal procedures are important because someone can buy a house and suddenly realize that, from a legal standpoint, it still belongs to the seller. While the legal aspect is the most important from a registration perspective, there are other factor that must be considered as well.