After a Sunday packed with phone calls, replying to emails and a few meetings, I was finally about to leave the office at the end of the day when the phone rang. On the other end was David, who asked whether he had reached the right office, since he is a devoted reader of our stories on Facebook and had never thought it would happen to him too, but he had bought an apartment abroad and needed our help. We set a meeting for the following afternoon.
David, a man in his 40s, self-employed, had saved a bit of money over the years, and about a year and a half earlier, during the protests against the “regime coup” (the government's judicial overhaul), he decided that the safe way to protect himself, his family and the small capital he had saved was to buy an apartment abroad. The apartment would both generate ongoing returns and serve as a kind of refuge for David and his family in a time of need.
David checked, researched and traveled a few times. Finally, through a Facebook advertisement, he reached a marketer/investor escort who offered him several apartments in a capital city in an Eastern European country known to be friendly to Israelis. They traveled together, visited the apartments, and David chose one of the apartments offered to him.
“The escort was really decent,” he told me. “He suggested I take a lawyer to accompany me through the process. I told him I don't understand the local language and prefer not to communicate with the lawyer in English, so he gave me a few phone numbers of Israeli lawyers and recommended that I talk to them. At the same time he told me that the fee of the lawyer he works with is 300 euros.”
“An excellent price,” I said.
“Yes, and none of the lawyers I spoke with from the list he gave me even came close to that price. The cheapest offer I received was 1,500 euros,” David continued.
“And did you ask or compare what you would get from each of the lawyers?” I asked.
“I'm a business owner, I understand what a lawyer is supposed to do, I've bought apartments in Israel before too. What's so complicated? Why pay so much money to a lawyer?” he replied.
How many times I have heard that sentence...
David ultimately chose the local lawyer recommended to him by the investor escort, signed a preliminary agreement to buy the apartment, and transferred a 10% deposit to the seller. He also signed a power of attorney to the local lawyer so that two months later he would sign the preliminary agreement on his behalf, so that David would not need to return to the country for that purpose.
Two months passed and the agreement was not signed, and the local lawyer was dodging David's calls, and the investor escort, you ask? He gave David various and sundry explanations and excuses, until David decided to buy a flight ticket and show up at the lawyer's office.
It turned out that the local lawyer had had David and the seller sign a preliminary agreement without a notation on the agreement being registered in the local land registry. The money was transferred by David to the seller and not to any trust account, and so David was left without security for his money.
In retrospect, David discovered that the seller was in the midst of divorce proceedings and there was a dispute between him and his wife/ex-wife, there was no agreement between them and the apartment could not be sold. David, through the local lawyer, filed a lawsuit against the seller, and now that David holds a judgment entitling him to payment, it turns out that the seller has no assets (not even a car is registered in his name) and has no funds, so even the costs of obtaining the judgment went down the drain.
What could David have done differently?
The problem of David, as of many Israeli buyers, is that they are willing to buy an apartment abroad for tens of thousands of euros (and sometimes even hundreds of thousands of euros), but when it comes to legal expenses they look through “the hole in the penny” and prefer to rely on a lawyer in the country where they are buying, if at all.
In every country there are good lawyers and less good ones. The problem is the differences in mentality, language, culture and ways of working between us and them (try getting an answer to a question on the same day from a Greek lawyer... good luck).
When you carry out a transaction abroad you need a lawyer who speaks your language, who knows how to ask the right questions, demand the relevant documents and carry out the relevant checks (legal due diligence, engineering checks on the property and more). A lawyer well versed in the law of the relevant country and well versed in the real estate field. A lawyer who knows how to secure the money you pay the seller, who will make sure that in the end you receive the property you paid for, registered in your name in the local land registry.
It is important to remember that an Israeli lawyer who accompanies Israeli investors abroad knows the unique challenges facing Israeli investors and can provide suitable solutions. In addition, many lawyers (and we too) work in cooperation with local lawyers in various countries, so they can provide you with the local know-how required in addition to the advantages of an Israeli lawyer.
While a local lawyer may offer a lower price, it is important to remember that a real estate transaction is a complex transaction, especially abroad. Investing in quality legal guidance from an Israeli lawyer can save you heartache, a great deal of money, and even prevent significant losses.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית