Registering a Caution Note

More about Costs, Fees and Taxes When Purchasing Real Estate

"He`arat Azhara" - Caution Note

Registering a Caution Note is the first legal action after signing a purchase contract. It is generally, but not always, done in the Land Registration Office (“Tabu”). A Caution Note means a warning sign indicating to the public that the property has already been “sold” or is in the process of being sold. Therefore the main purpose of the Caution Note is to protect the buyer`s interest until the property is actually registered in his name. The lawyer who handles a real estate transaction should also take care of the title registration. For this purpose, it is obligatory to obtain all certificates approving that all statutory taxes and payments were paid. As a matter of fact, the representation before the Israeli Tax Authority can be done only by lawyers. Furthermore, the preparation, signing and authentication of transaction deeds (sale, lease and mortgage) can be done only by lawyers.

"Zikron Devarim" - Memorandum of Understanding

This is the first legal document in a real estate transaction and they are seldom offered to the buyers by real estate agents to ensure that a purchase contract will be signed in the near future. It`s extremely unadvisable to sign this document without a lawyer because this legal document is in fact a legal contract, with obligations towards the seller (even tax liability) and you will be bound to it (i.e., claiming later that you didn’t understand or for any other reason won`t free you from obligation). As an Oleh it is extremely important not to sign any paper of this kind without being represented by your lawyer.

"Mas Rechisha" - Real Estate Taxes

This is a government progressive tax imposed on the buyer to be paid within 50 days after signing a purchase contract or even signing just a Memorandum of Understanding - or any other type of binding commitment to buy the property. So be careful when you sign any kind of document concerning real estate. Before buying any property you should be sure about the total amount of taxes you will be obliged to pay by all types of laws and regulations. In general, if this is your first property and it is not a very expensive one, the taxes will be affordable or you will be exempt as this is the only tax imposed on a buyer of property. Please note that this is not the only tax imposed on the seller.

"Mas Shevach" - Real Estate Taxes

"Mas Shevach" or Appreciation Tax is a government capital gains tax imposed on the seller and it is one of the most complicated calculations. This should be done only by a lawyer who is an expert in the field. The good news is that the majority of sales are in fact exempt from this type of tax. It is important to note that there are some exemptions and the majority of sales are in fact totally exempt. The most common exemption is the one which allows selling a residential apartment once every four years, without paying any tax.

"Heitel Hashbacha" - Real Estate Taxes

"Heitel Hashbacha" or Improvement Tax is a municipal tax imposed only on the seller. It is imposed on the improvement of the property due to Urban Building Schemes ("Taba") that were approved and thus improved the property. This is a very high percentage of tax - 50% of the actual and real improvement.

Conclusion

Like everywhere else in the world, real estate is a fascinating legal issue and is more like a web of legal implications and questions surrounding every aspect of tax law, real estate law and even mathematics. For this reason one should never adventure to approach any kind of real estate law without legal representation by his own lawyer.

  Sincerely,

  Tzvi Szajnbrum, Attorney at law