In January 1996, the Israeli Knesset (legislature) passed a new law requiring, for the first time, the licensing of real estate brokers. Under this law, all persons wishing to engage in real estate brokerage in Israel are required to pass a licensing examination administered by a government-authorized licensing board. The law includes a “grandfather” clause exempting persons who provided real estate brokerage services prior to the enactment of the law from these examinations. It was reported that over half the agents/brokers are not licensed. All brokers/agents at Capital are licensed.
The law requires brokers to obtain a signed document from their clients setting forth the amount of the agreed brokerage commission. For this reason brokers now require, as an accepted procedure, all clients to sign such a document at their first meeting.
When viewing a number of properties it is advisable to note down the address of each property viewed and the owners name and the agent with whom the property is viewed. If the same property is viewed with two or more real estate agents it is possible that two or more fees would be due!
Commission in Israel is payable by each of the parties to the transaction (i.e. both the buyer and seller ) for this reason a broker is not providing the services of an agent (such as an estate agent in the U.K.) with a duty to obtain the best deal for one side to the transaction. The broker must provide technical and legal information with regard to the property (as is reasonably possible) but must remain balanced between the two parties to the transaction. The commission is due as long as the agent was an instrumental part of the transaction.
The customary brokerage commission payable is as follows:
1. On the purchase or sale of property, 2% of the price of the property.
2. On leasing property for a period of one year or more (long term), one month’s rent.
3. On leasing property for less than one year (short term) 10% of the total rent paid during the term of the lease.
Value Added Tax is added to any commission due (17%).