In short
What must an apartment purchase agreement include?
An exact description of the property and rights, the price with a protected payment schedule, the delivery date, the caution note and transfer of rights, and the allocation of taxes. Under the Land Law, an undertaking to make a real estate transaction requires a written document.
The Writing Requirement: When an Obligation Arises
Section 8 of the Land Law, 5729-1969, provides that an undertaking to make a real estate transaction requires a written document. The courts treat this as a substantive requirement, not merely an evidentiary one: an oral agreement or an unsigned draft generally does not obligate anyone to sell or buy. Only in exceptional cases, where a firm intention to be bound and sufficient definiteness have been proven, is the requirement relaxed.
A short memorandum of understanding (zichron dvarim) is also a written document. When it includes the essential terms of the transaction, such as the property, the parties, the price and the dates of payment and delivery, it may be binding even if the parties intended to sign a detailed contract later. That is why you should not sign a broker's form or a memorandum of understanding before checking what it says.
There are duties even without a signed contract. A party that withdraws from advanced negotiations in bad faith may be liable for the expenses and damage it caused, although a court will generally not enforce a transaction that was never concluded.
What Goes Into an Apartment Sale Agreement
A good sale agreement answers in advance the questions that would otherwise lead to a dispute: an accurate description of the property and of attached rights such as parking and storage, the price and payment schedule, the delivery date and the condition of the property at delivery, who pays which taxes and charges, and what happens when one of the parties is late. An AS IS clause does not always protect a seller who concealed a defect, as we explain in the article Defects in a Resale Apartment.
Payments are structured so that the buyer's money is protected at every stage: part on signing, part after a warning note is registered in the buyer's favor, and the balance against delivery of possession and the documents needed for registration. When a mortgage is registered on the property, the agreement sets how the money reaches the seller's bank and how the mortgage is removed. When the buyer takes a mortgage, the agreement allows the buyer's bank to register its lien.
A warning note (he'arat azhara) under Section 126 of the Land Law protects the buyer against a sale of the same property to someone else and against attachments registered after it. Section 9 of the Law sets what happens when an owner has undertaken conflicting transactions with two people, so the note is registered close to signing. When the property is not registered in the land registry, the undertaking is recorded with the Israel Land Authority (Rashut Mekarkei Yisrael) or with the housing company.
Selling and buying an apartment require a report to the Israel Tax Authority within the deadline set in the Real Estate Taxation Law, and payment of purchase tax and sometimes capital gains tax.
Leases, Combination Deals and New Apartments
A residential lease is subject to the Tenancy and Borrowing Law, 5731-1971, and to the chapter on apartment leases added to it in 2017. Among other things, that chapter limits the security a landlord may demand and sets the landlord's repair obligations. In a commercial lease, the contract sets the option periods, indexation, the permitted use of the property and who is responsible for the business license.
In a combination deal (iskat kombinatzia), a landowner transfers part of the rights in the land to a developer, and the consideration is apartments or space in the building to be constructed. Here the security arrangements are the heart of the agreement: guarantees, timelines, what happens when the developer is late or runs into difficulty, and who bears the taxes.
Buying from a developer is a field of its own. The Sale (Apartments) Law, 5733-1973, requires the developer to attach specifications to the contract, and the Sale (Apartments) (Assurance of Investments of Persons Acquiring Apartments) Law, 5735-1974, requires it to secure the buyer's money, for example with a bank guarantee. More on the page Buyers vs. Developers.
When the Contract Is Breached: Enforcement, Cancellation and Damages
The Contracts (Remedies for Breach of Contract) Law, 5731-1970, entitles a party harmed by a breach to sue for enforcement of the contract or to cancel it, and to damages in addition to or instead of either remedy. In real estate transactions enforcement is a common remedy: a buyer whose seller backed out can ask the court to order the seller to complete the transaction.
Cancellation depends on the type of breach. In a fundamental breach, the contract can be cancelled immediately. In a breach that is not fundamental, the breaching party is first given an extension to perform, and only if it fails to do so can the contract be cancelled. Notice of cancellation must be given within a reasonable time, so you do not wait months after the breach.
Most agreements include agreed compensation, for example a percentage of the price. Section 15 of the Law allows the court to reduce it when it bears no reasonable relation to the damage that could have been foreseen when the contract was made, so it should be drafted carefully at the signing stage.
What the service includes
- Drafting sale and purchase agreements for an apartment, house or plot
- Reviewing contracts and memoranda of understanding before signing
- Checking rights: land registry extract, Israel Land Authority, permits and liens
- Registering a warning note and transferring the rights
- Residential and commercial leases and combination agreements
- Claims for enforcement, cancellation and damages when a contract is breached
When to contact us
- Before signing a memorandum of understanding or a sale agreement
- Before buying from a developer or entering a combination deal
- The other side is late in paying or delivering
- The seller or the buyer backs out of the deal
What to bring to the meeting
- A land registry extract or confirmation of rights from the Israel Land Authority or the housing company
- The draft contract or the memorandum of understanding
- Building permits and documents from the building file
- Correspondence with the other side and with the broker
Real Estate Contracts throughout Israel
The firm represents clients from all over Israel: Jerusalem and the Shfela, Be'er Sheva, Ashdod and Ashkelon, Haifa and the North, the Sharon and Gush Dan. Meetings take place at our two Modiin branches, at the WE Towers branch in Tel Aviv or by video call, and documents can be sent in advance on WhatsApp. We represent clients in the courts, the Labor Courts and before planning committees throughout Israel. How we work with clients across Israel.
Frequently asked questions
Is a memorandum of understanding binding?
It may be. Section 8 of the Land Law requires a written document, and a signed memorandum of understanding that includes the essential terms of the transaction can meet that requirement even if the parties intended to sign a full contract later. That is why it is reviewed before signing, not after.
We agreed orally on the sale of an apartment and the seller backed out. Can he be compelled?
Generally not. An undertaking to make a real estate transaction requires a written document, and without one a court will generally not enforce the transaction. If the seller negotiated in bad faith, it may be possible to claim compensation for expenses and damage.
What is a warning note and why is it registered right away?
A warning note is registered under Section 126 of the Land Law in favor of a person with whom the owner has undertaken to make a transaction. It protects the buyer against a sale of the same property to someone else and against attachments registered after it, so it is registered close to signing and before most of the money is paid.
The seller is late in delivering the apartment. Can I cancel the contract?
It depends on whether the delay is a fundamental breach. In a fundamental breach you can cancel immediately; in a breach that is not fundamental you first give an extension. You can also claim the agreed compensation in the contract or damages. When buying from a developer, special rules on compensation for late delivery also apply.
