Real Estate Attorney
Buying an apartment from a contractor
Highlights and the importance of legal assistance in a real estate transaction
The purchase of an apartment is always a complex process that requires careful and calculated actions, but this rule is particularly relevant when it comes to purchasing an apartment from a contractor. So there are essential aspects that do not exist in buying a second-hand apartment and furthermore, there is a power and knowledge gap between the contractor and the buyer that must be bridged. We will discuss the main points to consider when purchasing an apartment from a contractor in this article.
By Igal Mor, Adv. & Notary
Accuracy in Legal Advice. Excellence in legal support.
The apartment's price
It must be verified that the consideration stated in the agreement constitutes a final price after VAT and includes all additional payments applicable to the buyer, including: installation of a solar water heater, connection to water, electricity and gas, registration expenses, etc. In this context, attention should be paid to the issue of changes and additions, something that is not usually included in the price of the apartment. A type of window of opportunity is provided to the buyer until a specified date determined in the contract to ask the contractor for modifications without additional payment, such as moving and/or adding electricity points and/or water points in the property.
The specifications.
As opposed to purchasing a second-hand apartment, buying an apartment from a contractor is a purchase on paper because the property does not yet exist and the purchase transaction takes place before the construction is complete. Therefore, it is important to ensure that the purchase agreement contains detailed technical specifications, referring to all relevant aspects: electricity, air conditioning, flooring, doors, and windows. A key objective is to ensure that the apartment is suitable for the buyer’s needs and that all the promises made by the contractor in this regard are legally enforceable. It is the time to negotiate with the contractor on this matter if the buyer is interested in making changes before signing the contract.
Guarantee from the bank
Israeli law prohibits the direct deposit of funds into the bank account of a contractor in order to ensure the security of the money of apartment buyers. It is intended to prevent him from using these funds for personal purposes. Nowadays, most projects are financed by banks, so payments are made to the contractor through voucher books rather than directly to his bank account. The buyer’s money can also be secured by registering a cautionary note. In addition, as long as the bank supports the project, a warning note has probably been issued in its favor, so an exclusion letter should be obtained from the bank which prioritizes the buyer’s warning note. It is also important to include a clause in the purchase agreement stating that if the land is seized due to legal proceedings against the contractor, the money paid by the buyer will be refunded.
Possession of the apartment
When an apartment purchase agreement is prepared by a contractor, the date of delivery of possession of the apartment must be included. It has occurred on several occasions that the contractor has failed to meet the set date, despite the fact that the law allows a delay of 60 days from the date set in the agreement without the contractor having to pay compensation to the purchaser. For any period beyond that, the buyer is entitled to compensation in accordance with the law or according to the agreement between the parties, whichever is higher. It is possible and important to negotiate on this issue. The parties will agree on a fair compensation amount, which will serve as an incentive for the contractor to meet the schedule and as a sufficient compensation for the buyer in the event of a delay exceeding 60 days.
Support From a Lawyer is Essential
Are you considering purchasing a new apartment from a contractor?
We invite you to a legal consultation meeting regarding preliminary checks related to the transaction execution, including tax implications. This is before signing the memorandum of understanding/purchase agreement.
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.
