Buyers Beware: Why You Need Your Own Lawyer When Purchasing Property
When purchasing a new apartment in Israel, buyers often receive a thick package of documents, including a sales contract, technical specifications, and bank financing papers. While the sales office may state that a law firm is handling the project and that a payment for legal expenses is included, this firm represents the contractor, not the buyer. The contractor's lawyer's role is limited to registering the buyer's rights, and buyers are often required to sign separate declarations acknowledging this.
This distinction is crucial, especially when buying an apartment "on paper" before construction is complete. The contractor's lawyer does not negotiate terms for the buyer, assess payment schedules, or address clauses allowing the contractor to delay delivery, alter plans, or impose additional charges. These are critical areas that a buyer's independent legal counsel should examine.
An independent review should begin before contract amendments, investigating the contractor's land rights, encumbrances, building permits, and the project's financing. The contract must align with the plans and specifications, detailing apartment size, included parking and storage, common property rights, and any changes requiring extra payment. Verbal promises made during sales pitches are irrelevant if not documented in binding agreements.
The collapse of the Heftsiba Group in 2007 highlighted the risks of buyers transferring large sums without adequate security. Following this, the Sales Law was amended to protect buyers, limiting sellers to receiving no more than 7% of the apartment price without providing statutory security. While financial accompaniment usually involves payments via vouchers to a designated account with corresponding guarantees, buyers may not always verify the accuracy of these details or the validity of the guarantees.
A buyer's lawyer scrutinizes financing documents, guarantee terms, and the link between payment schedules and security. For projects without financial accompaniment, the lawyer assesses alternative protections and payment structures. Even a valid guarantee protects against specific risks defined by law, not necessarily against delivery delays, specification disputes, construction defects, or additional costs. Therefore, a buyer's lawyer examines payment schedules, delivery dates, grounds for delay, compensation for late delivery, change order procedures, defect handling, and the process for registering rights, as well as associated expenses like purchase tax.
