The National Health Law guarantees equal basic medical care to all residents of Israel regardless of their age and medical condition.  There are four Health Funds (Kupot Cholim) that provide an equivalent range of medical services.  Each Israeli chooses to register with the fund of his/her choice.  Supplementary insurance plans are offered for an additional fee paid directly to the Health Fund for medical services or discounts not included in the basic health services package.

A monthly health insurance payment is paid directly to Bituach Leumi, the National Insurance Institute, and covers the basic medical services.

New Immigrants (olim chadashim):  The oleh may register for one of the health funds at the airport free of charge or at a post office at a later date for a small registration fee.  If the oleh opts to register at the post office instead of the airport, he/she must request a medical insurance voucher at the airport from the immigration officials who welcome him. He/she then brings the voucher and  immigrant booklet, the teudat oleh, to the post office and tells the clerk which fund he/she wishes to join.  Those changing status in Israel need to go to the local Absorption Ministry office to obtain a teudat oleh and the medical insurance voucher.

Olim receive free health insurance for 12 months if they are not working or if their income is very low. This also applies to ezrachim olim and k’tinim chozrim. If you are employed, the health tax will automatically be deducted through your place of employment. Once the 12 months are up, one must make arrangements to pay the health tax to Bituach Leumi if one is not working.

Couples & Children: Each spouse may register with a different Fund.  Children under 18 are registered with the Health Fund of the mother, barring special circumstances.

Salaried Workers:  The health tax is deducted automatically from an employee’s salary.

Self-Employed: The self-employed must coordinate payments with Bituach Leumi.

Students & Yeshiva Students: All students must coordinate payments through Bituach Leumi.

Retirees: Retirees receiving Bituach Leumi allowances have their health tax deducted from the allowance.  Seniors who do NOT receive a Bituach Leumi allowance must arrange payment for their health tax at the Gviya (Payment) Department at their local Bituach Leumi office.  Arrangements can be made with Bituach Leumi to set up a standing order (hora’at keva) at your bank, to simplify the payment procedure.

Returning Residents: Please see the AACI Information Sheet on Returning Residents.

Transferring to Another Health Fund:  Anyone registered with a Health Fund may transfer to another Fund up to 2 times in a twelve month period.  Transfer requests may be submitted at any time, but take effect only 1½ to 3½ months later on specific dates 6 times a year.  Until the date for all transfers of a particular period take effect, the member remains the responsibility of his/her  current Fund.  Transfers must be done at the Post Office for a small fee or online on the Bituach Leumi payments site (in Hebrew).

The information presented in this article was accurate at the time of publication.  Changes in procedures and in the law may occur.  AACI does not take responsibility for changes and recommends you confirm the above information with an AACI counselor.

Updated July 2020

BASIC INFORMATION REGARDING PURCHASE OF APARTMENT IN ISRAEL

Congratulations!  You have made the decision to purchase a home in Israel.  Here is some basic information to have in hand, to know what questions to ask.  However, this does not take the place of a lawyer who is knowledgeable in this area.  When considering a specific apartment, and your own financing needs, it is important to consult with a lawyer regarding the specific property and your own specific needs.  Good Luck!

Title

Until now, there has been no title insurance as there is in the States.  The option of title insurance is still very new and untried.  In any case, it is of the utmost importance to have the sellers’ rights to the apartment clarified.

Land in Israel is divided into privately owned property and land owned by the State, the Churches, and the Jewish National Fund.

Private Land

Privately owned property is registered in the District Lands Registry Offices (Lishkat Rishum Mekarke’in) around the country and is commonly known as “Tabu”.  This is the simplest form of ownership to clarify.  The record also indicates whether there are any liens, mortgages, easements, rights of use and/or passage, appropriations by public authorities, etc. on the property.  It is also possible to do initial checks in the Lands Registry Files on-line through a number of sites (for a lesser fee than at the Tabu office). However, only the Extract of Title (Nesach Tabu) with the original stamp of the Lands Registry Office is considered “official”.

Public Land

Property which is owned by the State or the Jewish National Fund (JNF).  These properties are administered through the Israel Lands Authority (Minhal Mekarkei Yisrael).  The property is leased to apartment owners, generally for periods of 49 years, renewable at the end of each term.  There is an annual rental fee for the lease period, however, in new construction this is capitalized and paid for at the beginning of the period.  Approximately 95% of the property in Israel is controlled by the Minhal.

Leaseholds may be registered in the Tabu, or may not.  Often, the registration is in the hands of a housing company, usually the company which built the project.

In this case, the housing company (Hevra mishakenet) acts as a “mini-Tabu” regarding recording ownership, mortgages, liens, etc.  The newer the project, the more likely that the rights are registered with the housing company.

In the past few years, however, the Minhal has begun to “crack down” and demand that the housing companies complete registrations into Tabu, or risk sanctions from them.  As a result, more of these properties are being registered into Tabu.  In addition, changes in legislation have allowed transfer of ownership title to owners of apartments in buildings, but not private homes.  There are limitations on this ownership when it comes to selling to foreigners.

When buying “on paper” from contractors, it is important to check that their contracts with the Minhal are in order.

Church Land

These properties are usually registered in the Tabu offices.  The Israel Lands Authority (Minhal Mekarkei Yisrael) and/or the JNF often lease these lands and have apartments constructed on them.  The purchasers of the apartments hold a sub-lease from them.  The leases are expected to be renewed every 49 years, as in the case of regular leaseholds from the Minhal or the JNF. 

However, there are properties where the leasehold is directly from the Church, without an official intermediary.  These leaseholds are considered to be less attractive, because no one knows what will be the case with regards to renewals, where there is no official body, such as the Minhal, to negotiate the renewals.

Taxes

When purchasing an apartment, everyone pays Land Acquisition Tax (mas rechisha). This is a graduated tax, based on the cost of the apartment, as well as the personal status of the person buying it. These rates are influenced by a number of factors: whether this is the buyer’s only apartment, if the buyer is not an Israeli resident, etc.

Tax rates are adjusted twice yearly, so these rates are valid at this time.  You can check at the Tax Authority website

https://www.gov.il/en/departments/israel_tax_authority/govil-landing-page

In addition to changes to the Land Acquisition rates, January 1, 2014 brought major changes in the availability of exemptions from Capital Gains Tax. Foreign residents no longer have immediate exemptions from capital gains taxes, nor Israelis on investment apartments. 

Because of the changes to the tax structure, it is even more important to make certain that you are properly represented and receive legal advice.

Real Estate Agents

A special law was passed in 1997 overseeing and regulating the work of Real Estate Agents.  At present, an agent must pass a licensing exam in order to work in the field and expect to be paid. In addition, there must be a signed agreement between the client and the agent spelling out which properties were shown, what the expected fee will be and when it will be paid. The law also specifies that the agent is entitled to his/her fee only if they were instrumental in finalizing the deal. This last requirement is the reason that many agents are insistent that the negotiations be conducted in their offices, or that they are present for any negotiations and the signing of the contract.

The customary commission in Israel is 2% + VAT of the purchase price from both the seller and the buyer, not an insignificant sum if the agent represents both sides. That does not mean that you cannot negotiate a different arrangement with the agent as to amount of the commission and the manner in which it is to be paid.

Mortgages and Government Grants

The Israeli Government gives subsidized mortgages to certain select groups in society in order to encourage home ownership. The amount of the loan and its terms are determined by a “point system.” New Immigrants automatically get extra points to ensure that they meet minimum levels for getting the loans. Army and/or National Service also increase the number of points a person receives, as does coming from a large family. The mortgage banks can tell you what your “point” status is and on what terms you can get a government loan.

While in the past, the Government Loans (“zakaut”) were considered to have the best terms, this is no longer the case. Often, especially for people who are considered “good” clients, banks will give terms that are better than those of the zakaut loan. 

Banks also make loans from their own funds. These can be in NIS or foreign currency, or linked to the dollar/euro/sterling. The best loans are those that are considered “principle only” mortgages, as the interest payments decrease over time and the principle can be repaid without penalty. “Principle only” loans are typically linked to the LIBOR and/or prime rates, with an additional fixed interest. If you decide to take a standard NIS mortgage, it is better to negotiate a fixed interest rate, rather than a variable one.  When considering mortgages with a variable rate, remember that the lower the interest at the beginning of the loan, the more it can rise over the course of the loan. It is best to try and limit the number of times the rate can be adjusted over the course of the loan.

Also, bear in mind that the mortgage banks are all looking to increase market share of the mortgage market. They assume that if you take their mortgage from them, you will bring other business to the bank, which increases the fees and interest they will collect from you. In fact, most mortgage banks currently insist that you open an account with them through which you repay the mortgage. The bottom line: make the rounds of the banks and see who offers what and what the best terms are. Then, make the rounds again, indicating what that best offer is and see if one of the other banks will match and/or give even better terms. You can sometimes save almost 1% on interest by negotiating.  BUT remember that you do have to decide at some point which bank to go with. Also, do not forget to ask your lawyer which banks are easier to work with. It does not matter how good the offer is, if the particular bank is known for being difficult to work with: this may cause your mortgage payment to be delayed.

There are also professional groups that have negotiated better terms for their members, such as teachers, public service workers, etc. Find out from your place of work if such arrangements are available.

Many mortgage banks will require you to open an account with them through which the loan will be repaid.

Additionally, several of the insurance companies now make loans secured by mortgages. 

As regards seniors who own their own homes and need financing:  several of the banks are now making “reverse” mortgages, which allow utilization of the equity in the apartment, and the repayment is usually made when the apartment is sold.

In the past few years, a market for mortgage brokers has developed.  Many of these brokers worked at the various mortgage banks and now represent buyers looking for a good deal on the mortgage.  The broker gets paid a fee by the buyer.  Ask for recommendations.

As part of efforts to reduce the cost of housing by reducing investment incentives, the Bank of Israel has issued new directives regarding mortgages for new purchases.  In the case of Israelis purchasing their first homes, the mortgage cannot exceed 60% of the value of the property.  In the case of purchases by foreigners and additional apartments by Israelis, apartments which are considered “investment apartments,” mortgages cannot exceed 50% of the value of the property.  Banks will insist on an appraisal of the property to determine value and will not rely on the contract price, unless buying on “paper”.

Here are some of the types of mortgages and types of interest which are available in Israel.  (Explanations courtesy of Yediot Aharonot – Mammon 30/10/12):

Prime interest: this refers to the Israeli prime rate, not American. The Israeli Prime is set at 1.5% above the interest set by the Bank of Israel. This type of interest provides the base for loans or deposits with variable rates. When the Bank of Israel rate changes, so does the Prime.

Variable rate mortgage based on Prime:  Mortgage where the rate of interest is set according to the Prime rate. This type of mortgage is usually not linked to the Cost of Living Index (madad), and it is best taken when the prime is low. Usually, there are no special fees for early repayment or in recycling the mortgage.

Variable rate mortgage linked to the cost of living index (madad):  In this case, the outstanding principle is linked to the madad, and the interest rate changes at specific points in the life of the mortgages, as predetermined at time mortgage is taken (e.g., every 3 years, 5 years, etc.). The interest is set as a spread from an external known index to which it is pegged, like the Bank of Israel rate. This type of mortgage may be beneficial when the interest rates are expected to drop.

Fixed interest, unlinked mortgage:  Here the interest rate is fixed for the term of the loan when the client takes the mortgage and does not change over the life of the mortgage. There is no influence of the madad or increase in the Bank of Israel rate. However, the interest rate is usually significantly higher than the other types of mortgages.

Over the past year, the Bank of Israel has further regulated the percentage of the value of a property which may be financed by a mortgage. In any event, the maximum, which is for first time purchasers, is 75%. Consult with your lawyer and mortgage banker.

Price and payment

At this point in time, it is rare for the prices of apartments to be quoted in dollars. Instead, prices are posted in shekels. Bear in mind that you don’t fall into the trap of calculating back into dollars, since the final price will fluctuate in any foreign currency, based on the rates of exchange.

When buying “first-hand” from a contractor, the contract price set will be in shekels (by law).  The cost of the apartment will also include VAT.  The contract will also indicate whether the payments are to be linked to the Consumer Price Index (“madad”) or the Index of Building Materials.  All outstanding monies are linked. Therefore, before each payment is made, it is important to contact the contractor to make certain that you pay the full amount, including the linkage. Unpaid linkage fees become part of the principle, and late fee surcharges are common.

The second-hand market is priced in NIS and does not have VAT attached, unless the seller is a corporation.

Guarantees and Securities

When purchasing a second hand property, it is customary to register a lien on the apartment once the down payment has been made.  The lien might be registered in Tabu (depending on the type of registration), with the housing company and/or Minhal, and at the Registrar of Liens (Rasham HaMashkonot).  The final payment to the sellers will then only be made upon transfer of title and possession of the property.

In the case of purchases of new construction, the law provides specific securities which the contractor must provide the buyers. Because these provisions only go into effect when the buyer has paid 15% of the purchase price, most contractors – and certainly the buyers – insist that the first payment be no less than 15% of the purchase price. 

The most common form of security from contractors is a bank guarantee.  The guarantee is issued following every payment, provided that the buyer makes all his payments into a specified account for that building project. The funds in the account are mortgaged to a specific bank which is financing the project for the contractor. The bank then releases the funds to contractor according to a specified schedule based on progress of the construction.  The “profit” only gets released to the contractor when the project is completed with a Certificate of Occupancy and the buyers get keys to their apartments. It is critical that you only make payments into the account specified, even if the contractor offers discounts for cash or asks that the money be deposited into another account. Funds not deposited into the project account will not be granted a bank guarantee.

Since the collapse of the Heftzibah Construction Company, the public has become more aware of the importance of insisting that payments be made according to the contract and receiving the guarantees. The Ministry of Housing and Construction has formalized new regulations and the Knesset passed specific legislation aimed at protecting the public in their relationships with the contractors. It is critical to make certain that the contractor of the specific project you are interested in is following all the regulations and issuing all the relevant guarantees. That is why having your own representation is of the utmost importance. Usually, purchasers are given a booklet of vouchers with which to make payments. These specify the account number of the project, from which the bank guarantees are received.

Miscellaneous

Additional expenses for the purchase include legal fees, fees from the mortgage bank for opening a file, an engineer to inspect property before contract, title registration, etc. A good rule of thumb is to expect additional unanticipated costs of 10-15% of the purchase price. That is why you should never stretch yourself to the limit for the purchase price alone, given all the other payments which must be made.

AACI wishes to thank Deana Fein, Adv. for providing this information.

02-6792587; 052-2633746  dfeinadv@internet-zahav.net

Updated August 2021

BASIC INFORMATION REGARDING RENTAL OF APARTMENT IN ISRAEL

Congratulations!  You are renting a home in Israel.  Here is some basic information to have in hand, to know what questions to ask.  However, this does not take the place of a lawyer who is knowledgeable in this area.  Good Luck!

Title

There have been incidents where people have purported to be owners of apartments or their representatives and tried to rent them out.  When the real owners discovered this, the innocent tenant was left without money or apartment.

Ask the person showing the apartment to show you proof of ownership.  If it is an agent, ask them for proof that they represent the actual owner.  If the person signing the lease itself is not the owner, ask to see a power of attorney.

Taxes

There are no taxes on short term rentals, only on those for which the lease extends beyond 9 years.  In that case, the Tax Authority will see it as a sale and tax both parties accordingly.

Real Estate Agents

In the case of rentals, the agent’s fees can be a month’s rent + VAT.  You can try negotiating.

There was a recent change to the law regarding rentals.  The new law purported to try and protect tenant rights.  One of the changes is that the landlord be responsible for the agent fees to the agent s/he hired.  However, this is not clear when actually dealing with the agent and tenants still often pay the agent as well. 

The Rental Agreement

1. Should be in writing and contain details of the property, the parties to the lease, the monthly rent, term of the lease, method of payment, etc.
2. Discuss and include terms for an “option” to renew at the end of the term of the lease.
3. Israeli leases generally open with a statement that the tenant does not have the status of a protected tenant under the terms of the “Protected Tenancy Law”.  That status is granted to people who paid “key money” to the owners or have been renting the same apartment from before 1967.  New tenants are protected under a different law.
4. Make sure it is clear which repairs are covered by the owner and which by the tenant.
5. Find out if the owner has structural and third party insurance on the property.
6. Make a list of flaws or any other repairs that need to be made before moving into the apartment so that it is clear that you are not responsible for them.
7. Check with municipality if need a special term in the lease in order to get a parking sticker.

Utilities and fixed payments

Leases will generally require that the tenant change the name on the utilities into their own names in order to lessen the liability of the owner in the case of non-payment of the bills.

1. Arnona:  By law, the person who resides in an apatment is the one responsible for arnona, which is actually a user’s fee.  For new olim, students, people with low income, and others designated in the law, registering the arnona in your name will allow you to benefit from any discounts to which you may be entitled.  Also, for families, it will determine registration for neighborhood educational institutions.

1. Va’ad bayit: Most tenants are expected to pay the monthly upkeep charges to the house committee.  However, it is customary to differentiate between the general upkeep charges (cleaning, heating, etc.) to capital expenses which are the responsibility of the owner (painting the hallway, resurfacing the roof, replacing elevator, etc.).  Check that the va’ad differentiates these expenses.

1. Gas/electric/water:  Make sure to take meter readings when you move in and check that all prior bills have been paid, either by the previous tenant or the owner.  You want to prevent a situation where the utility is turned off for non-payment of bills and the owner does not care, and you have to pay for someone else’s bills.

Guarantees and Securities

Owners will require some sort of guarantee to cover rent, unpaid bills, damage to the apartment in the event the tenant breaches the rental agreement.

In many cases, they will ask for 2 guarantors who will sign the lease.  This is often uncomfortable for olim for whom this is not something they are used to providing.

In addition to, or instead of, guarantors, owners will ask for blank checks made out for arnona and utilities to cover any bills that the tenant has not paid; some sort of promissory note, bank guarantee or cash.  The lease should stipulate when these will be returned to the tenant if all is in order.

Miscellaneous

1. It is always recommended that you get legal representation.
2. Make sure to get confirmation of each rent payment.
3. Keep copies of all paid bills for your records.  The owner will want copies or the originals at the end of the tenancy.
4. When you move out, make sure to get a letter from va’ad that you are paid up in full.
5. When you move out, make sure to get letter from owner that your tenancy ended as of a certain day so that you can transfer utilities and arnona out of your name and back to the owner’s.  People have discovered years later that their name remained on utilities or arnona and had a hard time proving that they were not responsible for those bills.
6. Care for the property as if it were your own.  Owners will relate differently to a tenant who respects the property and cares for it, than one who is indifferent or worse.

AACI wishes to thank Deana Fein, Adv. for providing this information.

02-6792587; 052-2633746  dfeinadv@internet-zahav.net

Updated August 2021

The information presented in this article was accurate at the time of publication.  Changes in procedures and in the law may occur.  AACI does not take responsibility for changes and recommends you confirm the above information with an AACI counselor.

May 2024