This is the scenario every off-plan buyer fears: work on site stops, the developer does not answer, and the news reports financial trouble. Your position will depend mainly on the protections you obtained when you bought.
First step: check what you hold
- Sale Law guarantees for all payments, and the financing bank’s details. See Sale Law guarantees and payment vouchers.
- A caution note in your favour.
- The contract, receipts and correspondence.
Projects with bank financing
With bank financing, the financing bank supervises the project and holds the project account. In many cases the bank prefers to complete the project, itself or through another contractor, rather than pay all the guarantees. Buyers usually have an interest in completing construction and receiving the apartment.
Calling the guarantees
The guarantee is meant to return the money paid when the developer cannot transfer the apartment. Calling it has conditions and deadlines, so do not wait too long and act on legal advice.
Insolvency proceedings
If insolvency proceedings are opened against the developer, office holders such as a trustee are appointed to manage the assets. Buyers must file a proof of debt on time and protect their rights. Caution notes and guarantees greatly improve their position compared to other creditors.
Act together
Buyers who organize and act through one lawyer usually do better with the bank, the office holders and the developer, and it also saves each of them money.
Reducing the risk in advance
Check the developer and the bank financing before signing, pay only with vouchers and make sure every payment has a guarantee. See what to check before signing.
Where do you go from here?
A developer’s contract is written by the developer’s lawyers, so it protects the developer first. At Paz Israel & Co. Law Office we represent buyers of new apartments and landowners in combination deals: we check the developer, the security and the specification, negotiate the contract and accompany you through handover and registration at the Land Registry. For more information see our property purchase and sale representation page, or contact us to schedule a meeting in Tel Aviv, Jerusalem or Modi’in.
This article provides general information, is correct as of the time of writing, and does not constitute legal advice or a substitute for reviewing your specific circumstances.