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  • Asaf Arazi, ADV

Buying a new apartment from a contractor

In a deal of purchasing an apartment from a contractor (new project) there is a special importance to hire a professional lawyer in order to make a due diligence for the project, to warn the buyer of possible malfunctions and to negotiate with the entrepreneurial company on amendments and changes to the contract that ensure the interests of the buyer.



The purchase of a new apartment from an entrepreneurial company has different characteristics than a purchase transaction of a second-hand apartment. On the one hand, there are many advantages that are reflected in the rules of the sales law that apply to the transaction, and on the other hand, the main disadvantage is the risk of purchasing of an apartment that still does not yet exist in reality, which is going to be built in the future. When purchasing an apartment from a contractor, there are several things that are very important to pay attention to:

Who is the developer and who is the contractor- The reputation and the financial stability of the entrepreneurial company and the contracting company building the project should be checked; what are the reviews of customers who have purchased apartments in the past? Did the developer meet the deadlines? What was the standard of construction? Were there deficiencies and how serious were they? It is also important to perform a financial check of the entrepreneur.

The legal status of the land- Who is the owner? Is this a combination deal? Is the ownership in land registry or the Israel Land Authority (totally different procedure and kind of ownership) or another housing authority? What is the status of the seller in terms of ownership? - All of these will have critical meanings for the transaction and security in the purchase of the apartment.

Is there bank guarantee for the project?- The issue of bank guarantee is crucial, because without bank support it is not possible to get a bank guarantee for the construction of the apaetment. The bank guarantee given according to the Israeli Sales Law (Apartments) is the most important aspect that can insure the construction on the apartment by the seller (or getting back the money).

Construction permit - Inspection of the apartment in the permit and in the city building plan relevant to the project.

Technical specifications and drawings - Obtaining full drawings of the apartment, the floor, and the common areas as well as full technical specifications - and verifying compliance with the contractor's promises.

Checking the payments schedule; - It is important to make sure that the payment schedule complies with the sales law, as well as the buyer's financing plan (equity + mortgage)

Moreover, the role of the lawyer is to make sure that the sales agreement ensures everything that was promised to buyer and that there are no clauses that could endanger the buyer.

Regarding taxation, the lawyer needs to check the buyer's rights and what is the amount of purchase tax he must pay - and report accordingly to the tax authorities. In addition, he must ensure that taxation that the contractor must pay (including improvement levies) will not fall on the buyer.

Another issue is the future registration of the condominium. A lawyer on behalf of the buyer will make sure that the developer undertakes to register the apartment under the buyer's name in the Israeli Land Registry. Usually, an appendix will be attached to the purchase agreement with principles that will be anchored in the condominium regulations in the future, when the building will be registered as a condominium. At this stage, the buyer's lawyer should make sure that his rights in the future shared house (such as his part in the house commission fees, the use of shared facilities, connected properties, etc.) will not be violated.

To conclude, relying on the developer's lawyer is a mistake, since a professional lawyer on behalf of the buyer will check many details in the purchase process, will protect the buyers from any dangers and will uphold the rights of the buyers in the process.





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