ISRAEL Law and Practice Contributed by: Hagit Bavly and Adi Daniel Zamir, Arnon, Tadmor-Levy
2.5 Typical Representations and Warranties
istered with regard to land that is not registered as a separate parcel or as a separate unit in a “co-operative house” in the land registry. A “co-operative house” is the common way of registering ownership with respect to a building or a project that has two or more units, residen - tial or other, and is different from the US condo - minium. In past years, Israeli law has accepted the option of 3D registration, though the process for this is complex. 2.4 Real Estate Due Diligence A due diligence review is conducted prior to a real estate transaction, with the scope varying according to the type, complexity and value of the property, and to other parameters. The review may include the following: • checking the registration and any restrictions that may exist with regard to the registered rights, such as mortgage, lien or expropria - tion; • planning restrictions – what may be built on the property, and whether a valid permit was issued for the existing building; • physical inspection – ie, of the land, of con - struction on the land, of infrastructure, etc; • third-party rights such as tenants, or obliga - tions towards planners or contractors; and • outstanding taxes and levies on the property, including those that will be imposed on the seller and that will be required in order to register the transaction. Depending on the value and complexity of the property, various professionals may be retained for the due diligence process (lawyers, account - ants, insurance consultants, tax experts, engi - neers, assessors, etc).
The seller of real estate must act in good faith and make representations as to what they know about the property, its registration status, defects, and any restrictions and obligations imposed on it. This does not limit the buyer’s duty to perform a due diligence review. The seller must provide representations about matters that cannot be examined, such as agreements with regard to the property. A seller who fails to fulfil this disclosure obliga - tion can be sued for damages suffered by the buyer, and in some cases may be at risk of the contract’s cancellation. There are also specific obligations for a devel - oper who builds and sells real estate property. Such a developer is subject to enhanced duties, both with regard to the representation and with regard to details and provisions that must be included in the sale agreement and its appen - dices, such as: • a duty to complete the registration of the property in the land registry within a specific period of time; and • a duty to guarantee the buyer’s payments until construction has been completed. There is no survival period for the seller’s rep - resentations, though naturally there is a term of obsolescence. Representation and warranty insurance is not customary in Israel. A cap on the seller’s liability for a breach of its representations and warranties is not standard, and rarely exists.
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