Yair and Dvora purchased a new private home from a contractor about 25 years ago. For years they enjoyed the quality of life given them by the home they purchased.
A few months ago they decided that since their children have grown up and left home, it was time to make a change, to sell the house and buy instead something that better meets their needs.
They put up the house for sale and quickly found a buyer who was interested in purchasing the house and even agreed to pay them the asking price.
When the buyer forwarded the details of the house for the examination of his attorney, it turned out that even though the contractor has undertaken in the purchase agreement before Yair and Dvora to register the house in the Land Registration Office (Tabo), he did not do so. Meanwhile the contractor liquidated his business and there is no one to turn to.
The lawyer hired by the potential buyer advised him not to buy Yair and Dvora’s house and to look for another house.
In this article I will address the problems stemming from non-registration of property (house or apartment) in the Tabo over time and how to cope with them.
It will be noted that this is not necessarily relevant to every house or apartment not registered in the Land Registration Office but rather to assets in respect of which there is no one to handle their registration (not the Israel Lands Administration, not a housing company and not a contractor or other developer company).
Problems in identifying the property – one of the major problems stemming from non-registration of a house or apartment in the Land Registration Office are the issue of identification of the property. This problem arises even more when a number of properties are built on the same plot or lot (a number of apartments or a number of houses). In such a case, if there is no registration of a condominium it is difficult to identify which property (house or apartment) belongs to which owners. This problem may make it difficult both in the event that the owner wishes to sell the property and in the event that the owner would like to take a loan secured by a mortgage.
A problem in the ability to sell the property – as an asset (house or apartment) that is not registered in the Land Registration Office “suffers” from a legal defect, the potential buyer interested in its acquisition may take his lawyer’s advice, be alarmed by the defect, and refrain from buying the property. Thus, a house or apartment that are not properly registered in the Land Registration Office, are more difficult to sell as there are fewer people who would be interested in purchasing them.
Difficulty in obtaining loans backed by a mortgage – one of the common uses people do of a property they purchase is charging of the property (house or apartment) to secure the repayment of a loan. Sometimes the loan is taken to finance the purchase of the property (house or apartment) and sometimes the loan is taken at a later stage, when the owner of the property (house or apartment) needs the money. When the property (house or apartment) is not registered in the Land Registration Office, the bank may pile on difficulties and not allow the receipt of a loan secured by a mortgage against the property. This may be problematic, both to the owner wishing to take out another loan and when that same owner would like to sell the property (house or apartment).
The difficulty increases as time passes. As in Yair and Dvora’s case, the passage of time significantly aggravates the situation.
The circumstances differ from case to case: limited liability companies that have ceased to operate due to bankruptcy, dissolution, or otherwise; people who were alive when purchasing a property (house or apartment) and have since died and their heirs are hard to locate; the law firm that handled the matter no longer exists and so on.
The result is the same – the more time passes the harder it becomes to find the relevant documents, the relevant individuals or entities, to rectify the situation and to register the property (house or apartment) in the Tabo.
It will be further noted that as time passes the greater the chances that some of the tenants holding the adjacent apartment or house will make changes to their properties, constituting prohibited building violations, making registration in the Tabo even more difficult.
A real drop in the value of the property – every property (house or apartment) has a price. Even a house or apartment “suffering” from all the problems described above have a price. There is no doubt that their price will be lower than the price of a similar property where the title rights are registered “properly” in the Land Registration Office in the name of their owner.
Why the price reduction? Because this is a serious legal “defect” in the property, impairing its marketability (the ability to sell or transfer it to another), which affects the ability to charge it and use it as collateral for loans etc.
The proposed solution, relevant to anyone who bought a house or apartment from a contractor or entrepreneur – is to closely monitor the contractor/ developer or lawyer handling the matter and to check every few months the progress of the registration.
Once the fact that the process is “stuck”, for whatever reason, is identified (the matter is not handled properly, the contractor went bankrupt, etc.), it is recommended to contact a lawyer specializing in the field for advice on how to proceed and deal with the issue.
If one turns to a lawyer on time, it is almost always possible to find a solution and carry out the registration of rights in the Land Registration Office.
In any event, the fees of your attorney handling the matter are negligible compared to the adverse effect to the property value which may amount to tens of thousands of dollars or even more.
Adv. Tali Kessler is a partner in the “Rechnitz, Kessler & Co. Law Office” operating in the field of commercial law, contracting and real estate. www.rk-law.co.il
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