Reprinted with permission from israelatlast.com.
www.israelatlast.com/single-post/2017/07/27/Tips-for-Buying-from-a-Developer-in-Israel—Part-2
1. The Contract – Get to Know It
A contract is a critical part of almost any transaction. However when it comes to buying something that doesn’t physically exist yet (or only partially exists) the contract takes on a great deal of added importance. This is because, among other things, when buying an existing property the payment usually takes place over a relatively short period of time, and, critically, you can see what you are buying right in front of you. You can see the layout, the color of the paint, the floor tiles, etc. This is not the case when buying from a developer ‘on-paper’.
In these transactions, the contracts are very long and detailed, and include many things, including:
– Payment Schedule (Luach Tashlumim) – This lays out, usually in percentage terms, when and how much needs to be paid to the builder. The timing of the payments will usually be according to the progress of construction, however sometimes the schedule can be negotiated to become more suitable for your cash flow needs.
– Technical Specifications (Mifrat Techni) – This lists the materials and finishes that the builder is planning to use during construction. The list should be detailed, and includes things such as types of internal and external doors, kitchen cabinets, material and size of floor tiles, number of electric sockets, etc. The level and quality of finishes can vary greatly from builder to builder, so it is worth becoming familiar with what you will be getting.
2. Buyer Protection – Find out What Type is Being Offered
The law (Chok Mecher) allows for various methods of protecting the buyer. These laws were strengthened after the collapse of the publicly traded Heftzi-Ba Plc back in 2007, whereby the company went bankrupt without having issued bank guarantees to all of its buyers – which was against the law.
It goes without saying that the type of protection is a crucial issue that your lawyer will need to check and clarify. Very often the bank that is financing the project will issue a bank guarantee (arvut bankait) for each sum that you pay to the builder. You will be given a booklet of payment vouchers issued by the relevant bank at the beginning of the process, and payments are usually made directly through your bank account using these vouchers.
Make sure your lawyer explains to you the type of protection you are getting from the builder.
3. Repairs After Taking Possession – Know Your Rights!
After you have taken possession,, the builder is still responsible for the working order of the property. There are two periods of responsibility laid out in the law:
(i) Bedek – lasting between one and seven years after taking possession, and
(ii) Achrayut – lasting for three years after the Bedek period has finished.
The difference between the two above periods is that during the first period, strictly speaking you do not need to provide proof that the builder is at fault in order for the builder to be responsible (it is enough that damage/non-functionality exists), whereas in the second period you would need to prove that the problems are due to the builder not doing his job properly.
In order to get a better understanding , below are the bedek periods as laid out by law (for a home purchased after 6th April 2011). There are nuances to each category, so be sure to consult your real estate lawyer for any specific issues:
Metal and woodwork – 2 years
Flooring and interior cladding – 2 years
Machinery and boilers – 3 years
External works (including paths, fences, parking space, etc) – 3 years
Thermal insulation – 3 years
Plumbing – 4 years
Sealing and waterproofing – 4 years
Cracks wider than 1.5mm – 5 years
External cladding – 7 years
Other issues – 1 year
Note that for problems relating to the stability of the structure of the building, there are different rules, and a much longer guarantee period.
Understanding the above points, as well as the ones we made in Part 1, will help you greatly when thinking about buying from a developer in Israel.
The contractor is showing his client around his half built house. There are changes that need to be made in the construction. The client wants to fix the 30 electrical outlets in one place, the sink was fitted high up-next to the ceiling, to name a few.
The contractor agrees to “upgrade” and demands thousands of shekel for all these “crazy luxuries.” This was comedy, but the family in this news feature, were certainly not laughing.
If you don’t have a clear signed contract,which explicitly states:
You will find yourself paying for a lot of extra work (and angst).
Find out more about preparing a contract, that will protect your interests, and your pocket.
Read more here about the importance of a contract.
Or watch here about a real family, who suffered the consequences, when they started a building project without a signed contract.
A family in israel with 3 children, wanted to renovate their house. They started working with one contractor, who disappeared. The new contractor offered an attractive price. They wrote up a contract, and committed to paying him a sum of 120,000 shekel. However the contractor would make excuses to avoid actually signing the forms.
After receiving the payment, the contractor started trying to squeeze more and more money out of them. He demanded payment of 300,000 for “extras” in order to finish the work.
The family were left just before Yom Kippur, with 3 kids, including a baby, with no way to pay the 300,000 shkalim that he was demanding, and a house that was not fit for living in.
Stories like this one are unfortantely not rare
The news feature explains:
In a year, 16 000 renovation projects end in disagreements like this one.
Be In touch with Meatzvim and we can help you draw up a contract to protect you. A detailed contract, will give you the confidence, that your building project goes to plan without a “balagan” like this one.
