Most citizens of the State of Israel are used to thinking that the Green Line is a subject of political debate between the left and the right, and perhaps a place where acquisition is dangerous from a security perspective. Nothing more than that. After all, what could possibly be the difference between the city of Beitar and Mevo Beitar, and between Ganei Tikva and Shaarei Tikva? Maybe the price, right?!
Sometimes it seems that this is meaningless, but a careful examination of the rights we are purchasing can save a lot of headache that may arise as a result of entering into a transaction that would have been better avoided.
And it was. Our office previously represented clients who purchased property across the Green Line. This property was not registered with the Land Registry or the Israel Land Authority. In fact, it was not registered anywhere. It was land that was apparently purchased by a developer company from a Jordanian man many years ago. The company built a beautiful villa project on the site and later went into liquidation.
Today, the entire registration is conducted in the office of a lawyer who was appointed by the court as the liquidator of that company. Furthermore, there is no register in which the rights to the property are recorded. Before our clients entered into the transaction, we asked them to verify with the mortgage bank that they would indeed be eligible for a mortgage on the purchased property and they replied to us: "Yes, yes, they said there would be no problem." Time passed, the contract was signed, and the final payment date [which is usually paid from the mortgage money] arrived.
As is customary, the bank financing the apartment requires the sellers of the apartment to sign a mortgage registration commitment form, which simply means: until the mortgage is registered in favor of the buyers, the sellers are the ones committing to the bank. In this way, they commit to preserving the bank's rights and returning the money they received, even if the transaction does not go through. However, what does the bank do in a place where there is no regulated registration, neither in the Land Registry, nor in the Israel Land Authority, nor anywhere else except the office of the lawyer who was appointed as the liquidator of the company that built the property? In such cases, the banks may ask the sellers to sign a commitment to pledge their rights. Thus, the seller suddenly becomes a "borrower" and, against his will, he may become a third party between the bank and the buyer, sometimes for years [for example, a situation may arise in which the bank will demand from the seller the repayment of the loan that the buyer did not repay, years after the seller finally thought that the sale transaction was behind him].
The sellers in the above story refused [and rightly so] the bank's request to sign such documents. After discussions between all parties, a solution was found that suited the specific case, but it can be said with certainty that if these were not wealthy buyers with very respectable salaries, the bank would not necessarily have agreed to give in.
The above cases are repeated as a matter of routine. So what should we do?
Financing without a mortgage
The answer to the question is: (as always) it depends on who the customer is. The seller must ensure that the sales agreement contains an explicit stipulation regarding the sellers' refusal to mortgage their rights in the property. While the buyer is required to verify (among other things) with the bank the possibility of obtaining a mortgage on the specific property, while cooperating with the seller in all matters related to the way in which the parties will implement the transaction.
In very specific cases, the buyer should examine whether he can finance the transaction without a mortgage. If the answer to this is no, he should prepare for appropriate negotiations with the seller. At the end of the day, each case will be examined on its own merits, but as you can see, there is a huge difference between closing the deal before signing a sales agreement (or, God forbid, a memorandum of understanding), and trying to resolve the mess the week before the final payment is due.
In any transaction, especially in transactions of this kind, the parties would do well to contact a lawyer who specializes in the field and protect their rights and assets.
Attorney Meir Molad From the office Wolfson Weinstein & Co.', specializes in the field of real estate law.
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