Banks Scrutinize Shared Property Mortgages Due to Legal Complexities
Securing a mortgage on a 'מושע' property, where ownership is registered by percentage rather than a distinct plot, presents unique challenges for lenders. Banks require thorough verification of what exactly they are securing before approving a loan, as the shared nature of the land can complicate foreclosure.
The term 'מושע' originates from Ottoman land law and signifies undivided joint ownership. In practice, on a plot with multiple owners, each holds a registered share, but physical boundaries remain undefined until a partnership agreement and surveyor's plan are established. Banks view collateral as an asset to be liquidated, and disputes over boundaries or a co-owner's objection to a sale can lead to lengthy legal battles.
To mitigate these risks, some banks reduce loan-to-value ratios, increase interest rates, or mandate additional legal reviews, extending processing times. A preliminary appraisal by the bank's surveyor is crucial to assess the collateral's value and the feasibility of securing it, considering potential legal uncertainties that might lower its assessed worth compared to the purchase price.
Formalizing ownership through a registered partnership agreement, drafted by a certified surveyor and signed by all co-owners, is essential. This agreement, when registered with the Land Registry (Tabu), solidifies each owner's rights and prevents later disputes from overriding it. The process requires legal fees and can be stalled if even one partner refuses to sign, necessitating verification of their willingness beforehand.
While standard mortgage limits (up to 75% for a primary residence) generally apply, banks may offer lower financing percentages for 'מושע' properties. This can necessitate a larger down payment, potentially increasing the required equity by hundreds of thousands of shekels on expensive properties. The complexity increases with the number of co-owners, as each signature is required on the partnership agreement, making transactions with many stakeholders impractical within typical timelines.
Banks also investigate existing encumbrances like warning notices, liens, or prior mortgages on the property, which can delay or halt new loan applications. Buyers who have already paid a deposit may find themselves caught in delays caused by the seller's own co-owners or existing financial issues, underscoring the importance of a backward-planned timeline from registration and appraisal to the final signing.
