Yes, property foreclosures exist in Israel, but the process and terminology are different from what is common in countries like the United States. In Israel, a foreclosure is typically referred to as Kinus Nechasim (כינוס נכסים), which translates to “receivership” or “liquidation of assets.”
The process is initiated when a borrower defaults on their mortgage, and the lender (usually a bank) takes legal action to seize and sell the property to recover the outstanding debt. Here’s a breakdown of what the foreclosure (Kinus Nechasim) process looks like in Israel.
The Trigger: Defaulting on the Mortgage
The process begins when a homeowner fails to make their mortgage payments over a period of several months. The bank will first send warning letters and attempt to contact the borrower to arrange a payment plan. If these efforts fail and the debt continues to grow, the bank will turn to legal action.
The Legal Process
- Opening a File with the Hotza’a LaPoal: The bank’s legal team will open a file with the Hotza’a LaPoal (the Israeli Execution Office), which is the judicial body responsible for enforcing financial judgments, including mortgage defaults.
- Appointment of a Receiver (Konez Nechasim): The bank petitions the Hotza’a LaPoal to appoint a receiver, who is usually a lawyer or an accounting firm. This receiver is an officer of the court whose job is to manage the sale of the property in a fair and transparent manner to maximize the proceeds for the lender.
- Notice to the Borrower: The homeowner is officially notified that the property is now in receivership. They are given a specific period (usually 20-30 days) to repay the entire outstanding debt. If they fail to do so, the receiver is authorized to proceed with selling the property.
- Eviction: If the homeowner refuses to vacate the property, the receiver can obtain an eviction order from the court to have them removed.
The Sale Process
Properties under Kinus Nechasim are not sold like typical homes. The process is designed to be public and competitive to ensure the highest possible price is obtained.
- Property Appraisal: The receiver hires a licensed appraiser (shamai) to determine the market value of the property.
- Public Tender/Bidding: The receiver advertises the property for sale and invites potential buyers to submit bids in a tender process. The advertisement will specify a deadline for submissions. Interested buyers must inspect the property and submit their offer, usually with a deposit (typically 5-10% of the offer price) to show they are serious.
- Winning Bid Selection: The receiver reviews all submitted bids. They are legally obligated to sell to the highest bidder, provided the offer is reasonable and close to the appraised market value. The receiver presents the winning bid to the Hotza’a LaPoal for final approval.
- Completion of Sale: Once the court approves the sale, the winning bidder completes the payment, and the property title is transferred. The proceeds from the sale are used to pay off the outstanding mortgage debt, legal fees, and the receiver’s costs. Any remaining funds are returned to the original homeowner.
Buying a property through Kinus Nechasim can sometimes be an opportunity to purchase at a below-market price, but it is a complex legal process that requires careful due diligence and guidance from a lawyer experienced in this specific type of transaction.
