Assuring Apartment Purchasers’ Money
Israeli’s Ministry of Construction and Housing recently imposed a NIS 6.5 million financial sanction on the developer of a TAMA 38 project in Kiryat Bialik. The developer was fined after failing to produce a guarantee to purchasers of apartments in the project for funds they had paid toward the unit price, as required by the Assurance of Investments Law.
The Assurance of Investments Law provides that a seller of an apartment built or intended to be built in the future shall not receive from a purchaser an amount exceeding seven per cent of the unit price. The exception is if the seller has assured the funds paid by the purchaser in one of the manners listed in the Assurance of Investments Law, such as a bank guarantee.
The purpose of a bank guarantee, or the alternative assurance methods provided under the Assurance of Investments Law, is to guarantee the reimbursements of all funds paid by the purchaser in the event the seller is unable to transfer possession of the apartment and/or convey the rights to the apartment to the purchaser. This may occur for various reasons, such as liens, liquidation, stays of proceedings, etc.
In the event a seller violates the provisions of this law, an appointee of the Ministry of Construction and Housing may impose financial sanctions.
It should be noted that in addition to the possibility of financial sanctions, the violation itself constitutes a criminal offense punishable by imprisonment and a fine.
It is important to know the Ministry of Construction and Housing is keeping its hand on the pulse in terms of enforcing the provisions of this law. It is equally important that it continue to do so, as well as that it increase its supervisions and enhance the enforcement powers granted to it so that such cases are not repeated and harm to apartment purchasers is minimized.
In conclusion, it is important that developers and contractors who are financially unstable not take upon themselves the execution of complex projects that they cannot support. It is of no less importance that those purchasing apartments from developers or contractors in a construction project know and are familiar with their rights, particularly with regard to the assurance of their money, and that they seek proper legal advice. This will help ensure that, at the end of the day, they are not left without their money or the property.