Often, after the parties agree on a price, someone suggests: “Let’s sign a memorandum of understanding, and the lawyers will do the contract later.” It sounds like a non-binding interim step. In practice, a memorandum (zichron dvarim) can be a full contract.
When is a memorandum a contract?
Courts check two things: whether the parties intended to be bound, and whether the document includes the essential terms of the deal, such as the parties, the property, the price and payment and handover dates. If so, the memorandum may be a binding contract, even if it says a “detailed contract” will be signed.
The risks
- For the buyer: committing before checking the land registry extract, permits and financing.
- For the seller: committing to a handover date or terms not fully thought through.
- For both: a short document does not address taxes, furniture, defects, agreed compensation or what happens if something goes wrong.
What if you already signed?
Do not assume it is meaningless. Show it to a lawyer immediately to assess whether it is binding and what the parties’ conduct from now on means.
What to do instead
If you want to “close” quickly, ask a lawyer to check the property within days and prepare a proper contract. If you still sign an interim document, state explicitly that it is not binding and that the deal is conditional on a full contract, and avoid paying significant money at this stage.
Where do you go from here?
Every deal and every property is different, and a small detail in a contract or registration can be worth a lot of money. At Paz Israel & Co. Law Office we support buyers, sellers, landlords and property owners, from the first check to registration at the Land Registry. For more information see our real estate lawyer page, or contact us to schedule a meeting in Tel Aviv, Jerusalem or Modi’in.
This article provides general information, is correct as of the time of writing, and does not constitute legal or tax advice or a substitute for reviewing your specific circumstances.