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Protection for the
Purchaser of a Residence in Israel
Itamar Cohen B.A., LL.B.
(ISRAEL)
Member of The Israeli Bar Association
Certified Foreign Legal Consultant by the Law Society of Upper Canada
There are two laws in Israel that are relevant to this subject.
The aim of the provisions of these laws is to protect people who purchase a
residence from a building contractor and to safeguard their investment.
The law applies in principle to the sale of a residence by a contractor or by
whoever purchases a residence from a contractor in order to sell it.
A
sale also includes a lease for a period of 25 years and more.
The Obligations placed on the Vendor
A. Delivery of a Specification
The vendor of the residence is obligated to attach a specification to the
contract of sale and to give the purchaser a copy of this specification. A
vendor who does not deliver a specification to the purchaser shall be deemed as
undertaking to transfer the residence to the purchaser according to the accepted
practice in the circumstances of the case.
B. Delivery of Details Concerning
Linkage and Common Property
Whoever sells a residence in a condominium or in a building that is to be
registered as a condominium, and if the constitution of the building differs
from the standard constitution, must include details in regard to the following
matters in the specification or attach them to the contract of sale:
1. The exclusion of part of
the common property.
2. The area of the part of
the common property that is attached to the residence.
3. The rate of contribution to the expenses of the condominium
and the obligatory services in connection with the condominium.
The manner of taking decisions in regard to the management of the condominium.
A vendor, who does not give details concerning these matters, is deemed as
undertaking that the provisions of the standard constitution shall apply to the
condominium in any such matter.
C. Stipulation of the
Provisions of the Law.
No stipulation may be made in regard to the
provisions of the Law, unless it is to the benefit of the purchaser.
Safeguarding
the Purchaser’s Money
The vendor may not receive
a down payment on the price of the residence from the purchaser that is in
excess of 15% unless he has provided one of the following five guarantees:
A.
A Bank Guarantee
The purpose of bank
guarantees is to ensure the return of money that the purchaser has paid the
vendor as a down payment on the price of the residence in the event that the
vendor is unable to transfer title or any other right to the residence to the
purchaser, because of a lien placed on the residence or on the land on which it
is built, or because of a receivership order, or liquidation order or
appointment of a receiver that is given against the vendor or the owner of the
land.
B.
Insurance to Guarantee the Money
The aim of the insurance is also to ensure the return of the money that the
purchaser has paid the vendor as a down payment on the residence in the event
that the vendor is unable to transfer title to the residence or any other right
because of a lien, a liquidation order or appointment of a receiver.
C.
Mortgage
The vendor may take out a first mortgage on the residence or on a proportional
part of the land on which it is built to the benefit of the purchaser in order
to guarantee the return of all the money that the purchaser has paid on account
of the price of the residence.
* Comment: The disadvantage of the above three guarantees is that they do
not guarantee receipt of the property.
D.
A Caveat
The vendor may register a caveat on the residence or on any proportional part of
the land on which it is built, on condition that there is no charge, lien or
other right of any third party that has priority over any such caveat registered
on them.
E.
Transfer of Title
The vendor may transfer title or any other right to the residence, or to any
proportional part of the land on which it is built, to the name of the purchaser
if the residence or the land is free of any charge, lien or third party right.
This guarantee is too powerful and is therefore
not usable. Contractors usually refuse to give this guarantee.
Exchange of the Guarantee
A vendor who has guaranteed the purchaser’s money with a bank guarantee or
insurance, may exchange one guarantee for another form of guarantee, on
completion of the construction of the residence and when occupation has been
transferred to the purchaser, unless otherwise determined in the contract of
sale.
A Residence on Land belonging to the State of Israel
When the land on which the residence sold is situated owned by the State, the
Development Authority or the Jewish National Fund, the vendor is obligated to
insure the purchaser’s money for the period until all the following terms have
been fulfilled:
a. The construction of the building has been completed.
b. Possession of the residence has been transferred to the purchaser.
c. A contract has been signed between the purchaser and the Israel Land
Administration in which the Administration undertakes to register the purchaser
as the lessee of the residence for a period in excess of 25 years, the residence
being free of any charge, lien or right of a third party.
Restriction on Payments
A
purchaser of a residence, if the monies paid to the vendor were not secured by a
bank guarantee or by insurance, will not be obligated to make payments on
account of the price of the residence at rates that exceed those determined in
the regulations, despite that stated in the contract of sale.
That is, if the payments are not guaranteed as stated, the rate of payments will
be according to the schedule and in accordance with the stage of construction.
Payment of Expenses by the Vendor
All payments of commissions and expenses involved in securing the purchaser’s
monies will be the responsibility of the vendor.
Expenses on Payment of Amounts that were not Properly Guaranteed
One of the results emanating from an offense against the prohibition to receive
payments for the purchase of a residence that was not guaranteed as required in
law is that any person who receives money but who was ineligible to receive it
according to the stage of construction as specified in the regulations is bound
to compensate the person making the payment for any damage he suffers. This
damage is the linkage differentials and interest for the entire time that the
payment remained in the possession of the unlawful recipient.
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BS"D
It's
no secret that Israel has been going through a particularly rough patch in
recent years. Not only is the security situation difficult, but the constant
violence or threat of violence has dealt the Israeli economy a crippling
blow.
