Limiting Service Fees Charged by a Managing Company – Comprehensive Legal Guide 2025

Introduction

A Widespread Phenomenon in Israel’s Real-Estate Market

Apartment buyers in Israel, particularly purchasers of new Apartments from a contractor, entrepreneurs, (“on paper”) or members of purchasing groups often find themselves facing excessive fee demands by the managing company (Hevra Meshakenet). These demands commonly arise when a buyer or seller seeks to transfer rights, register or remove a mortgage, obtain a rights certificate, or perform other registration actions. In many cases, managing companies charge inflated fees despite the maximum legal tariff set by law.

To protect the public, two key Price Control Orders from 1999 were issued with the intent of limiting the fees that managing companies may charge.

Chapter 1: What Is a Managing Company and What Is Its Legal Role?

A managing company (Hevra Meshakenet) is usually the developer, contractor, or their legal representative. Until the building is formally registered as a condominium in the Tabu, the company maintains the internal registry. This includes registering undertakings to register a mortgage, cautionary notes, liens, internal transfers of rights, and issuance of certificates.

Because the company controls the registry, it holds significant authority, creating an imbalance that required legislative intervention.

Chapter 2: Legal Status of the Managing Company – A Private Entity with a Public nature and Authority

The landmark case Friedman Hachshori (1721/00) held that a managing company:

· Is prohibited from charging fees exceeding the maximum tariff set by the Price Control Orders.

· Functions as a quasi-public body subject to principles of reasonableness

transparency, and equality.

· Must comply with the Orders even if the original sale agreement pre-dates 1999.

This decision remains a foundational precedent protecting purchasers and sellers.

Chapter 3: The 1999 Price Control Orders – The Legal Framework

Two Orders establish the legal basis for regulating fees:

1. The Application Order – applying the Price Control Law to managing companies.

2. The Maximum Tariff Order – stating that the fee may not exceed the Land Registry tariff for the same action.

Any “office expenses,” “administrative fees,” percentage-based fees, or legal-handling additions are unlawful.

Chapter 4: Key Case Law

· Friedman Hachshori: The Orders apply even to older agreements; excessive fees are void.

· The Al-Haram Case: A company in liquidation cannot charge fees; only the appointed liquidator may perform actions.

· Diyur La’Oleh: Courts recognized the public nature of managing companies and

consistently canceled excessive fee demands.

Chapter 5: What Is Allowed and What Is Prohibited?

Permitted:

· Fees identical to the official Tabu tariff

· Fees for an actual action performed

· Statutory fees

Prohibited:

· Percentage of property value

· Internal tariffs

· Legal service fees that are not a part of the regulated action

· Administrative charges

Chapter 6: What To Do When Facing Excessive Fees?

Options include:

· Sending a written formal demand referencing the Orders

· Filing a complaint with the Ministry of Construction and Housing

· Filing a small claims lawsuit

· Hiring a real-estate attorney

Chapter 7: Attorney Responsibilities in Second-Hand Transactions

An attorney must:

· Verify lawful tariffs

· safeguarding the clients from illegal payments

· Negotiate with the managing company

· Ensure legal justification for every demand

Chapter 8: Professional Commentary

Attorney Adam Znati notes:

· Many demands are unlawful

· Most purchasers and sellers are unaware and pay unnecessarily

· The law supports the public

· A single well-drafted letter is often enough to cancel the demand

Chapter 9: Practical Recommendations

· Consult an attorney

· Verify registration status

· Request written tariffs

· Compare with the Ministry of Justice fees

· Do not pay without justification

· Keep documentation

Conclusion

Managing companies perform quasi-public functions and must comply with the Price Control Orders. Excessive fees are unlawful and in many cases are refundable.

For legal assistance:

Attorney Adam Znati – Real Estate and Property Law

Phone: 074-7271750

Email: Office@znati-law.co.il 

Website: www.znati-law.co.il