Last update - 00:00 07/01/2008
You own the flat? Prove it
By Guy Lieberman
Kobi is a student at Bar-Ilan University. He meant to rent the 1.5-room apartment he found in Givat Shmuel, but actually seeing the place and meeting its owner suddenly inspired him. During the weeks to come, Kobi brought professionals to see it, to give him an idea as to costs if he bought and renovated the flat. When he saw the numbers, he decided it would be a good deal and started the acquisition process. But he balked at the last minute after discovering that the apartment had never been registered at the tabo, or Land Registry. Meaning, the owners had no official title to the property ? even though they'd owned it for more than 30 years.
Israelis love to own their homes, but registering them is another matter entirely. The tabo has come to symbolize the epitome of bureaucracy. Real estate sector sources surmise that hundreds of thousands of flats remain unregistered. Yes, it's a mere technicality, but a hugely important one when they want to sell. It isn't rare for a potential buyer to walk away from a deal after learning that no official title to the flat exists.
For good reason, too. The tabo extract shows not only exactly who owns the property, but describes the character of the asset too. The tabo's importance lies in the comprehensive and reliable nature of the information it contains, which is crucial when the buyer isn't thoroughly familiar with the apartment, its building, the neighborhood and the region. The tabo describes the asset's history and also its precise location and size. Moreover, it lists debt to the banks or others.
Even if you think the seller is rock-solid reliable, absence of a tabo should signal a need for acute caution and thorough investigation of the property. Your lawyer (and loved ones) may well urge you to forget the flat and find another. If you insist on going ahead with the deal, a discount may be in order: People buying unregistered flats have been known to demand a 20-30% discount.
The flat that Kobi liked was located in an old area of Kiryat Shmuel, a neighborhood that arose with the establishment of Israel. A lot of public housing was erected at the time without any proper registration. As Kobi investigated the matter, he met several neighbors in the area, some the original occupants from 50 years ago and some were not there by choice. They confided that they had despaired of selling their home because of the tabo issue.
Attorney Ilana Braaf-Snir says that, unhappily, she's encountered all too many cases like that. "Because I work with several local governments, I encounter the issue from the direction of people asking the municipality for help in transferring an asset to their name in the tabo, years after construction was completed," she says.
Ilan Charcon, chairman of the property department at the Israel Bar Association, describes other situations in which tabo registration is missing. The first situation is when the property is registered with the Israel Lands Administration (ILA), but not with the Land Registry. That gets handled through the ILA, he says.
Another common situation involves housing companies, says Charcon. "In the past, the Housing Ministry would grant 'housing company' status to big development companies, even though the term itself, 'housing company,' doesn't actually mean anything. What would happen is that those contractors became a sort of substitute for the tabo office," he explains: The company's in-house legal team would handle all the issues of land, inheritances, forfeiture and what not. Over the years, these companies generally did register the assets properly, but not always.
Charcon insists that the contractors not be blamed: sometimes the failure to register the property with the tabo office wasn't the developer's fault. It could result from delays caused by the major planning bodies, or by government companies such as Israel Railways. In such cases, the contractors were effectively unable to register the assets.
That said, Charcon, who represents the ILA, says that about 20 lawsuits were filed against contractors, including some major building companies, for their failure to properly register apartments in the tabo.
If an apartment is not registered at the Land Registry, but is registered at the ILA or at a reputable contractor's company, then Charcon for one sees no reason to retreat from a transaction to buy it. "What counts is registration at the ILA," he says. "Registration with the contractor and ILA is significant enough to prove a legal affiliation with the property." No question, though: Proper registration reduces the uncertainty factor and makes a deal safer.
The tabo and the reality
Buying a flat is a highly complicated process, says Braaf-Snir, and while one can haggle over price, registration is not negotiable. "The moment there is any discrepancy between what the tabo says and reality, that's when the real trouble arises," she warns. "Non-registration can hide things like development fees and betterment costs that had never been paid, which can become the problem of the new owner. Also, there could be liens attached to the property. Again, the problem will become that of the new owner."
Recently the court ordered a contracting company that refused to properly register flats it built in Rehovot in 1998, to compensate the buyers, paying each of 10 owners NIS 50,000. The contractor had argued that he meant to build another flat on the ground floor, and registering the joint building would have caused him to forfeit his rights to the land.
"The company's desire to build and sell another apartment in the building is no justification for delaying registration of the shared building and the rights on the name of the claimants," the judge wrote, adding that irrespective of the claimants' position, the builder hadn't even obtained permission from the planning authorities to erect the extra flat. Judge Amiram Binyamini remained unconvinced that the company had any right to build any other flat on the ground floor. Not only did he order the company to pay compensation, he gave it 60 days to register the building.
Ora Herzog, widow of former president Chaim Herzog, has a similar problem, as do her 35 neighbors in the building on Medinat Hayehudim Street in Herzliya Pituah. They recently sued Oranim Construction Project (1992) Ltd., which had built the 44-apartment building in 1998. But it never registered the building at the tabo.
Herzog and her neighbors are being represented by attorney Igal Kalderon, who says the company is more than six years behind in carrying out the registration, per its undertaking in its contract with the apartment buyers. The company had even charged the buyers 2% extra to cover the registration costs. Kalderon says that some of the tenants would love to sell their apartments and move on, but are stuck because of the tabo issue. He points out that the flats are very expensive ones, which make potential buyers all the more wary: Who'd pay top dollar for an apartment that isn't listed in its owner's name, in a building that isn't registered as a shared asset? he asks. Several of the claimants say they had buyers lined up, but who reneged because of the tabo issue, Kalderon says.
In Ashdod, there's a building whose occupants have paid twice in the last 16 years to have the beast registered at the tabo, to no avail. Get a tabo extract from the Land Registry and presto, they aren't listed as owners. This is a project that the Baranovich brothers built in 1991. The Baranoviches went bankrupt, leaving some knotty problems for the more than 400 families in the neighborhood they'd built. Most of their buyers were Russian immigrants, who had paid huge sums to have their property registered under law. But it wasn't.
In 2004, after the court declared the Baranovich corporation to be insolvent, the court appointed attorney Avi Shatz to sort out the ownership rights. Each tenant was asked to pay him NIS 1,170. Shatz, who encountered not a little bitterness among the occupants, says that it took a year and a half until he managed to open the actual process of registration. But what took all that time was not what one might think. "One of the conditions for my doing the job was to gain support from at least 50% of the tenants, in order to jump-start the process, which had been stuck for years," Shatz says. And that's what took all that time: getting enough signatures."
He believes the process can be completed within six months, and admits that doesn't sound too good, but it's as fast as Israeli bureaucracy can move.
Braaf-Snir suggests ways in which buyers can protect themselves from tabo trouble. First of all, when buying an asset, make sure the contract clearly stipulates a deadline for the seller to have it registered at the tabo. She suggests that the contract make the payment to the seller for tabo registration contingent on such registration ? don't pay it in advance. Another option is for the contract to stipulate fines if the contractor delays in registering the asset.
In any case, warns Braaf-Snir, don't just ignore the problem. It won't go away. If the contractor starts dragging its corporate feet about tabo, call your lawyer, without delay.