Real Estate Due Diligence: Navigating Legal and Planning Pitfalls
Legal experts emphasized the critical importance of thorough due diligence in real estate transactions during the Globes and Bank Leumi Israel Real Estate Conference. Attorneys Sagi Hamer and Efrat Sharon from FBC & Co. explained that due diligence acts as an "X-ray" of a property or company, ensuring buyers are not making uninformed decisions. Hamer likened lawyers in this field to "translators," converting a client's vision into legal and practical realities. Unlike litigation, which looks backward, transaction law focuses on anticipating future scenarios and assigning responsibility.
Hamer stressed that while not all risks can be foreseen or eliminated, lawyers must identify potential issues, present them to the client, and propose solutions, such as insurance coverage. He highlighted that understanding the property's registration status, lease agreements, building rights, zoning plans, and potential liabilities like hazardous materials or archaeological claims are essential. He shared an anecdote about an unforeseen incident during excavation where fiber optic cables were nearly severed, posing a significant risk that was not marked on any plans.
Sharon focused on the planning and construction aspects, asserting their primacy over location. Her role involves examining all planning elements to ensure developers make informed decisions before signing preliminary agreements. Key checks include verifying property ownership (private or public), lease agreements, planning caveats, and discrepancies between building permits and actual construction. In shared buildings, distinguishing between common and private areas is crucial. Sharon also advised attention to building regulations, expropriations, permit conditions, master plans, affordable housing initiatives, and potential high costs associated with projects like the Metro (Tama 70).
Both experts concluded that effective due diligence goes beyond merely identifying problems; it involves translating legal and planning risks into practical solutions. Proactively identifying potential red flags enables buyers and developers to make sound decisions and avoid costly surprises. The conference was sponsored by Bank Leumi, Ashtrom Group, and others.
