Purchasing an Apartment in Combination — A Complete Guide for Buyers

What is a Real Estate Combination? Definition and Basic Risks

A real estate combination is a sale transaction of an apartment or other property that has not yet been registered in the Taboo (government land registry) under the seller's name. Instead, the buyer purchases the right to the apartment from the current seller, but the Taboo is still registered under the name of the previous owner or under the bank/mortgage name. This is a transaction that frequently occurs in the Israeli real estate market, particularly in Tama 38 projects (urban renewal) or when the seller is still in the process of completing obligations to a bank or other parties.

The central risk in buying a combination is that the buyer does not have full legal ownership of the apartment until the Taboo is updated in their name. During the period between signing the contract and registering the new Taboo, the buyer is exposed to many legal and financial risks: if the seller does not complete their obligations, if an indictment is filed against the property, or if claims are filed by other creditors of the seller.

Why Do People Buy in Combination?

Despite the risks, many buyers choose a combination for economic reasons: the price is usually lower than in a standard transaction (where the Taboo is already registered under the seller's name), or because the apartment is available immediately without waiting for the completion of lengthy legal proceedings. However, every buyer must understand that they are paying a lower price in exchange for accepting higher risk.

What Should a Buyer Know Before Signing?

Before any combination purchase, it is mandatory to obtain professional legal advice. Mendelboum, Gor, Witzman-Gor & Co., with over 18 years of experience in real estate and property law, and deep knowledge of the risks involved in such transactions. A thorough examination of the legal status of the property, verification of the Taboo, examination of the seller's debts, and understanding of the contract terms — all of these are essential steps that cannot be overlooked.

Legal and Financial Risks in Purchasing a Combination Property

Every combination purchase involves exposure to various risks, and some of them can be quite significant. Understanding these risks is the first step toward making an informed decision.

First Risk: Taboo Update Will Not Be Completed

The greatest risk is that the seller will not complete the Taboo update in your name. This can happen if the seller does not complete their obligations to a bank (mortgage), if there are unpaid tax debts or other debts, or if legal claims are filed against the property. In this case, you may find yourself holding only a contractual right (the right to receive the apartment) but without full legal ownership.

Second Risk: Indictments and Seller's Debts

If the seller has unpaid debts (taxes, national insurance, debts to private creditors, or other legal debts), the property may be subject to claims or legal proceedings. In some cases, the property may be subject to seizure or lien to settle these debts. As a combination buyer, you may become involved in legal proceedings that you did not anticipate.

Third Risk: Existing Mortgage on the Property

If the Taboo is still registered under the name of a previous owner who has a mortgage, the bank may delay the Taboo update in your name until the mortgage is fully settled. This could keep the apartment in legal uncertainty for months or even years.

Fourth Risk: Claims from Third-Party Rights

If the seller has a spouse or other heirs claiming rights to the property, or if there is an unresolved family dispute, the apartment may be subject to claims by third parties. This could delay Taboo registration or cause lengthy legal disputes.

Fifth Risk: Hidden Costs and Misrepresentations

In some transactions, the seller may not have disclosed important information about the apartment (property condition, open building files, municipal requirements, or neighbor disputes). As a combination buyer, you may find yourself owning an apartment with legal or construction issues that you were unaware of.

Comparison: Combination Transaction vs. Standard Transaction

To better understand the choice between purchasing a combination transaction versus a standard transaction, it is important to compare the two models:

As can be seen, a combination transaction offers a lower price, but in exchange for substantially higher risk. The buyer must be aware that they are paying less because they are assuming greater risk.

Combination Property Purchase Process — Practical Steps

First Step: Initial Inspection

When you are interested in a unit in a combination property, the first step is an initial inspection of the property and the seller's representations. Check the current land registry (Tabu), inquire about mortgage status, and require the seller to provide a written statement regarding all liabilities and third-party rights on the property. Do not rely solely on oral representations.

Second Step: Preliminary Legal Consultation

Before any commitment, consult with a law firm experienced in combination property transactions. Mendelboum, Gor, Witzman-Gor and Partners can review the Tabu, assess the risks, and propose a legal strategy for you. An initial consultation meeting at no cost enables you to understand the situation before any final decision.

Third Step: Drafting a Strong Contract

If you decide to proceed, the purchase agreement should be detailed and protective of your rights. The contract should include: (a) conditions precedent concerning the settlement of mortgages and liabilities; (b) seller's warranties regarding the updating of the Tabu within a defined timeframe; (c) provisions regarding your rights in case of delay or failure to update; (d) an escrow mechanism to ensure the seller completes its obligations.

Fourth Step: Mortgage Inspection and Credit Reports

Check the seller's credit report to understand their payment capacity. If there is a mortgage on the property, obtain a written statement from the bank regarding the debt amount and the expected settlement date. This will help you plan your timeline.

Fifth Step: Safeguarding of Funds

The contract must include a provision for depositing the buyer's funds in a separate escrow account until all of the seller's obligations are completed. This ensures that your funds are not used for other purposes of the seller.

Sixth Step: Monitoring Tabu Update

After signing, monitor the progress of the Tabu update yourself. Be alert to unexpected delays and claims. If there are issues, consult immediately with your attorney.

Buyer's Rights in Combination Properties — What You Can Do If Something Goes Wrong

If the seller fails to update the Tabu, or if legal issues not previously disclosed are discovered, the buyer has various legal rights:

Contract Cancellation

If the seller fails to update the Tabu within a reasonable period (usually defined in the contract), the buyer has the right to cancel the contract and demand the return of their funds. This right should be explicitly stated in the contract.

Demand for Settlement of Liabilities

If the seller represented that the property is free of liabilities, but unsettled liabilities are discovered, the buyer has the right to demand that the seller settle these liabilities or refund funds from the purchase price.

Claim for Breach of Contract

If the seller breaches its obligations under the contract, the buyer has the right to file a lawsuit in court for damages or to enforce the seller's obligations.

Protection of Rights Through Court

If a lawsuit is filed against the property by a third party, the buyer has the right to appear in the lawsuit and defend their rights. An attorney can assist you in this process.