Buying a New Apartment from a Developer in Israel
Buying from a developer means there is no property to inspect and no owner to talk to. There is a contract, a specification and a payment schedule, and a built-in gap in knowledge between the developer and the buyer. This guide sets out where the law protects the buyer, and what is left open to negotiation.
The price and what it includes
The consideration stated in the contract should be a final price inclusive of VAT, set out alongside an express list of what it does not include. The payments that tend to surface late are connection to electricity, water and gas, installation of a solar system, levies and fees payable by the buyer, and registration fees.
A separate subject is buyer variations. Contracts commonly set a date up to which certain changes can be requested at no extra charge, such as moving electrical or plumbing points. After that date every change is priced separately, and sometimes also depends on the developer agreeing. It is worth establishing that date before signing rather than after.
The developer lawyer fee is capped by law. Under the Sale (Apartments) (Limitation on Legal Expenses) Regulations, which apply to contracts signed from 1 January 2015, the amount that may be charged to the buyer is the lower of 0.5 per cent of the price or a fixed index-linked sum. The payment is for registration of the rights alone, and it does not make the developer lawyer the buyer lawyer.
The specification
Unlike a second-hand apartment, here there is nothing to look at. The specification is the document that determines exactly what is being bought: the floor area and how it is calculated, the ceiling height, the flooring and cladding, the number of electrical points, the position of air conditioning, what is included in the kitchen and bathrooms, and what comes with the apartment such as a storeroom, parking space or balcony.
The Sale (Apartments) Law, 5733-1973, requires the seller to give the buyer a specification in the form prescribed in the Schedule to the Law. Anything not written in the specification is not part of the deal, whether it was said in the sales office or shown in a marketing rendering. The specification deserves to be read clause by clause, and the attached plan checked against what was presented.
Securing the money
This is the core of the protection given to buyers. The Sale (Apartments) (Assurance of Investments of Purchasers) Law, 5735-1974, provides that the seller may receive up to 7 per cent of the price without providing a security. Beyond that he must provide one of the securities listed in the Law:
- A bank guarantee for the return of the sums paid.
- An insurance policy under which the buyer is the beneficiary.
- Transfer of ownership into the buyer name, free of encumbrances.
- A first ranking mortgage in the buyer favour.
- A caveat free of encumbrances.
Most projects today have bank financing. Payments are then made through a voucher book directly into the project account rather than to the developer own account, and each payment operates as an instruction to issue the buyer a bank guarantee within 14 business days.
And one more clause worth including in the agreement itself: a provision that if the land is attached in legal proceedings against the contractor, the sums the buyer has paid are returned to the buyer.
The release letter. Where a project is bank financed, the financing bank usually has a mortgage or a note registered over the land. The release letter is the document by which the bank takes your apartment out of that general charge. It should not be waived, and it should be confirmed as received close to delivery.
Delivery date and late delivery
The contract must state a delivery date. Delay is common, which is why the law provides statutory compensation that does not depend on proving loss.
For contracts signed from 7 July 2022, following Amendment 9 to the Sale (Apartments) Law, the grace period was shortened from 60 days to 30 days. Where the delay exceeds 30 days the buyer is entitled to compensation based on the rent of a comparable apartment, at rising rates:
| Length of delay | Monthly compensation |
|---|---|
| Up to 30 days | No compensation |
| From the second month to the fourth | Rent of a comparable apartment |
| From the fifth month to the tenth | 1.25 times that rent |
| From the eleventh month onwards | 1.5 times that rent |
The seller is exempt where the delay was caused by an act or omission of the buyer, or by circumstances beyond his control whose consequences could not be prevented. A clause purporting to reduce the compensation below the statutory level is ineffective, because these provisions cannot be contracted out of to the buyer detriment.
Defects and warranty periods
Two separate periods run after delivery. During the defects period the burden is on the developer to show that the fault is not his responsibility. During the warranty period, a further three years beginning at the end of the defects period for that component, the burden shifts to the buyer.
| Component | Defects period |
|---|---|
| Any other non-conformity | One year |
| Windows, joinery, aluminium frames, interior flooring and cladding | Two years |
| Machinery and boilers, landscaping, thermal insulation | Three years |
| Water, drainage and sewage pipework, and envelope waterproofing | Four years |
| Peeling of exterior cladding | Seven years |
The practical conclusion: have the survey done before delivery, not after, and record every defect in the handover protocol. A defect that was not recorded is harder to claim for later, and the timing of notice of non-conformity also affects the buyer rights.
What the lawyer checks
In a developer transaction the contract was drafted by the developer lawyer, so a check from the other side is not a formality. The points examined are:
- Who owns the land and what the developer standing is in relation to it, including combination transactions where the developer is not the owner.
- The permit: whether a building permit has been issued, and what it covers compared with what is being sold.
- The security: which security is given, when, and what happens on an attachment or legal proceedings against the developer.
- The payment schedule: whether payments are linked to the construction inputs index, and from which base index.
- The compensation clauses in both directions, including agreed damages on cancellation and how they sit alongside the statutory compensation.
- Registration of the rights: when the apartment is registered in the buyer name and who is responsible for that.
The imbalance in this transaction is structural. It cannot be removed, but it can be narrowed by having the contract read and priced before signature, while there is still room to negotiate.
Before you sign, talk to us. Our office drafts the agreement for you, conducts the negotiation and represents you through to completion of registration. Our real estate department has accompanied transactions for over 15 years, alongside an architect, a surveyor and a property valuer. Call 02-5953322, send a WhatsApp message to 050-4411343 or leave your details in the form below, and we will get back to you as soon as possible.
What people ask most often
The developer is late with delivery. From when is compensation due?
We paid more than 7 per cent and received no guarantee. Is that in order?
What is the difference between the statutory guarantee and a release letter?
The rendering in the sales office differs from the specification. Which governs?
When should the pre-delivery survey be done?
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Before you sign with a developer
We accompany purchases from a developer from the checks through to delivery and registration, and represent you opposite the developer and the accompanying bank. Tell us about the project and the stage you are at, and we will accompany you through to the key.