Real Estate Attorney
Buying an Apartment from a Developer in Israel: Key Legal Considerations
Why Legal Representation Is Essential in New Construction Purchases
Purchasing a new apartment is always a complex process that requires careful planning, but this is especially true when buying directly from a developer or contractor. Unlike second-hand apartment purchases, new construction transactions involve unique legal risks — including the significant power and knowledge imbalance between the developer and the buyer. Below are the key issues every buyer should understand before signing a purchase agreement for a new apartment.
By Igal Mor, Adv. & Notary
Accuracy in Legal Advice. Excellence in legal support.
Purchase Price and Hidden Costs
It is essential to verify that the price stated in the purchase agreement is the final, all-inclusive price, including VAT. The agreement should also account for all additional costs the buyer may be required to pay, such as installation of a solar water heater, connection to water and electricity infrastructure, sewage hookups, development fees, attorney’s fees on the developer’s behalf, parking, storage space, and any other ancillary charges. A thorough review ensures there are no hidden costs that could significantly increase the total purchase price.
Technical Specifications
Unlike purchasing a second-hand apartment, buying from a developer is essentially a purchase “on paper” — the property may not yet exist. The purchase agreement must therefore include detailed technical specifications covering all relevant aspects: electrical systems, air conditioning, flooring, doors, and windows. The goal is to ensure the finished apartment meets the buyer’s expectations and that all of the developer’s promises are legally binding. This is also the optimal time to negotiate any customizations or upgrades before the contract is signed.
Bank Guarantees for Buyer Protection
Israeli law prohibits buyers from depositing funds directly into a developer’s bank account. Instead, the Sale (Apartments) (Assurance of Investments of Apartment Buyers) Law requires that buyer payments be secured through one of several mechanisms — most commonly a bank guarantee. Under this arrangement, the buyer’s payments are deposited into a dedicated account, and the bank issues a guarantee protecting the buyer’s investment. If the developer fails to deliver the apartment, the buyer can claim their money back through the guarantee. It is crucial to verify that the guarantee covers the full amount paid and that all terms comply with the law.
Apartment Delivery Date and Delay Compensation
The purchase agreement must specify a clear delivery date for the apartment. Delays are common in new construction, and the law grants developers a grace period of up to 60 days beyond the agreed date without penalty. For any delay beyond that period, the buyer is entitled to compensation — either as specified in the agreement or as mandated by law, whichever is higher. It is important to negotiate fair delay compensation terms that incentivize the developer to meet the schedule while adequately protecting the buyer in case of significant delays.
Why You Need a Real Estate Attorney for New Construction Purchases
Are you considering purchasing a new apartment from a developer? The real estate attorneys at Adv. Mor & Co. specialize in representing buyers in new construction transactions. We will review every clause of the purchase agreement, negotiate better terms on your behalf, and ensure your investment is fully protected under Israeli law. Contact us today for a consultation.
This section provides an overview of some of the important points in a purchase agreement for an apartment from a contractor, but there are many more that cannot be covered in this short section. As explained above, for the buyer to protect his rights throughout the transaction, he needs the legal assistance of an experienced real estate lawyer. The lawyer will perform all necessary preliminary investigations regarding the contractor and the project, negotiate the terms of the contract, draft the purchase agreement, and ensure that the contractor’s obligations are clearly outlined in it. As part of the legal process, the lawyer will also take care of the taxation aspects of the transaction and will register the rights at the conclusion of the transaction.
Our real estate planning & construction department specializes in legal accompaniment of real estate transactions, private and commercial. We will conduct the legal preliminary checks and advise you on what to inspect about the property to determine if it is appropriate for you. When you decide this is the property you wish to purchase, we will negotiate the transaction terms on your behalf. We will draft the contract, and register the property in your name.