ISRAEL Law and Practice Contributed by: Hagit Bavly and Adi Daniel Zamir, Arnon, Tadmor-Levy
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
ers. The registration of a mortgage at the Land Registry in favour of a foreign lender on land owned by the ILA (as mentioned in 2.11 Legal Restrictions on Foreign Investors ) is subject to the terms and conditions set out by the ILA. There are no legal restrictions regarding loans from foreign lenders or on repayments being made to a foreign lender, except for obligations under tax laws and restrictions under the Anti- Money Laundering Law. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Registration of pledges is subject to the pay - ment of a small fee to the Land Registry. The fee is fixed and is not a function of the value of the property (and is negligible). The cost of notaris - ing a document is also fixed and negligible. Lenders charge for the preparation of their docu - ments, and for the costs of the consultants they use for the transaction. These amounts could be significant. Financing agreements commonly stipulate that the cost of foreclosing on the collateral in the case of default will be borne and paid by the borrower. Such costs may be significant. Upon foreclosure, property is liquidated by sell - ing it and collecting the debt from the proceeds. On the sale of a property in such a case, the borrower shall have to pay land appreciation tax pursuant to the provisions of the Land Tax Law, as described previously. 3.5 Legal Requirements Before an Entity Can Give Valid Security When resolving to pledge the entity’s property, directors must weigh up the best interests of the company and its shareholders, and must verify
In most cases, transactions in commercial real estate are financed by Israeli banks or Israeli insurance companies. Parties that cannot obtain such financing approach private financers; the terms of such loans from private financers will usually be less convenient for the borrower. Large projects can raise money by issuing debentures or shares. 3.2 Typical Security Created by Commercial Investors The collateral available to the financing entity is first and foremost the property itself. Sometimes, the borrower is required to provide additional securities. In the last few years, there have been hardly any non-recourse loans; in other words, the lender has recourse against the borrower. The property itself is pledged by registering a mortgage at the Land Registry (if the borrower is not registered at the Land Registry), and until registration is completed the collateral can be in the form of an obligation from the ILA or any other third party registered as the owner at the Land Registry, for registering a mortgage togeth - er with registration of the borrower’s rights in the land. All income accruing from the property is also pledged as collateral and insurance receivables. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are no restrictions on granting security over privately owned real estate to foreign lend -
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