The Sale Law (Assurance of Investments of Purchasers of Apartments) requires the seller to secure the purchaser's money with a recognised form of security, such as a bank guarantee or an insurance policy, beyond the permitted rate of the first payment. The security is provided against each payment.
Buying an apartment from a developer
A lawyer for buying an apartment from a developer checks the project and the security for the money you will pay, and amends the contract the developer drafted, before you sign. Here, in brief, is what the representation includes. The full details, including late delivery and compensation, are on dira-law.co.il.
The project's lawyer does not represent you
In a developer's project, the project's lawyer represents the developer alone, even where the purchaser bears part of that lawyer's fees. Your own independent representation focuses on three things: that the money you have paid is secured, that the delivery date and the compensation for delay are clear, and that what is delivered matches what was promised.
Further reading: a full account of the representation in buying from a developer, including the list of checks, the stages of the process and frequently asked questions, is available on the dedicated website dira-law.co.il.
What the representation includes
- Who the developer is, the status of the rights in the land, whether there is a building permit, and whether the project has bank financing and supervision.
- What security you will receive for the money you paid under the Sale (Apartments) (Assurance of Investments of Persons Acquiring Apartments) Law: a bank guarantee, an insurance policy or another security recognised by law.
- Whether each payment in the payment schedule is covered by a security at the time it is paid.
- Which part of the price is linked to the construction input index, and whether that linkage can be limited.
- The delivery date, the postponement terms the developer reserves for itself, and the compensation due to you for late delivery.
- What the technical specification says, which credits you are entitled to, and how to request changes and additions.
- The inspection and warranty periods, and the procedure for dealing with defects discovered after delivery.
- Balancing the compensation and cancellation clauses, which in the developer's draft mainly protect the developer.
- Drafting an amendments appendix to the contract, and negotiating it with the developer's representatives and the project's lawyers.
Two rules that save a great deal of money
Do not pay before there is security
Every shekel paid beyond the permitted first payment must be backed by security under the Sale Law, and must be paid only into the project's designated bank account (the accompaniment account). Paying into any other account, even at the developer's request, puts the money at risk.
Indexation is a clause worth tens of thousands of shekels
Indexation to the Construction Inputs Index looks technical, but over a long project it adds a significant amount to the price. The law limits the extent of indexation, and it is worth making sure that the contract complies with this and that indexation stops on the contractual delivery date.
Scope of the work
The representation focuses on the stage at which it makes a difference: reading the contract and the specification before the first payment, preparing a rider of comments and conducting the negotiations with the developer, checking the security received against each payment, and preparing for delivery, including recording defects in the delivery protocol and demanding their repair within the prescribed periods.
Building a project often takes years, and during that period the lawyer has no standing or role vis-a-vis the developer. The scope of the work is therefore defined in advance in the fee agreement, making clear what it includes and what is handled separately and as needed, for example a claim for construction defects or for late delivery.
Contact us before the first payment
If you have received a contract from a developer, send it to us before you pay or sign. We will go through it and explain what needs to be amended.
Questions and answers
When must the developer provide a guarantee?
Can the developer's contract be changed at all?
Developers tend to say that the contract is a standard form that cannot be changed. In practice, a focused and well-reasoned rider of comments leads to amendments, mainly in the clauses on delivery, compensation, indexation and securities.
What am I entitled to if the developer is late in delivering the apartment?
The Sale (Apartments) Law provides for compensation for late delivery, subject to the grace period and to the circumstances the Law recognises. It is important to keep a record of the actual delivery date and of the correspondence with the developer.
Why am I asked to contribute to the fees of the developer's lawyer?
This is a customary demand in projects, and the law limits its amount. The payment does not give you representation: the project's lawyer continues to represent the developer.
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