A seller covered by Israel’s Sale (Apartments) (Assurance of Investments of Purchasers) Law, 1974 may not collect more than 7% of the apartment price without providing one of the statutory forms of security. The threshold does not create a permanent 7% deduction from protected payments. The security and its enforcement conditions must be checked for the specific deal, including purchases by overseas buyers. This is a central part of buying a presale apartment in Israel, and this page explains the payment-security framework and bank guarantees. [1]
These figures describe different legal rules. The threshold does not authorize a payment that breaches the chosen security route, contract or applicable stage cap. Keep the new-construction buying process alongside this payment reference.
What does Chok HaMecher require?
The seller must arrange one of the five statutory forms of security before collecting more than 7% of the price. Under the bank-guarantee or insurance route, the law addresses all covered payments, with separate treatment of the VAT component where the statutory fund scheme applies. It does not permit the seller to subtract the first 7% from each cumulative coverage calculation. [1]
Treat this as a check on the legal structure of the purchase. Identify the security route, the payments it covers and the conditions for enforcing it. A compliant arrangement reduces exposure but does not guarantee completion on time or compensation for every possible loss.
Before paying, have your lawyer verify the security arrangement, the payment instructions and the documents due for that payment. In a financially accompanied project, check the designated payment voucher with the accompanying institution. Follow up on the guarantee or insurance document within the statutory issuance period; an unissued document immediately before a voucher payment is not, by itself, proof of non-compliance.
The seller must also explain your statutory security rights and the lawful methods in writing at signing. A seller without a financial-accompaniment agreement with a bank or insurer must disclose that position in writing by signing. Keep these notices with the contract; a sales representative’s verbal assurance is not the written notice. [1]
Which securities can a developer give you?
The law names five routes: a qualifying guarantee; an approved insurance policy in the buyer’s favour; a first mortgage over the apartment or the relevant share of the land; a qualifying warning note (he’arat azhara); or transfer of ownership or another qualifying right. Each route has its own legal conditions, including priority or freedom from conflicting rights where required. Your lawyer should verify the chosen route rather than rely on a general strength rating. [1]
- Qualifying guarantee: a bank or another provider meeting the statutory requirements undertakes to repay the covered amount when the statutory grounds for calling the guarantee are met. A delay or cancellation alone does not automatically trigger payment.
- Insurance policy: an approved insurer provides the statutory cover, with the buyer named as beneficiary and the premium paid in advance, subject to the relevant enforcement conditions.
- First mortgage: a first-ranking mortgage over the apartment or a proportional share of its land, satisfying the statutory requirements.
- Warning note: a registered note of the sale that qualifies as statutory security only if the required priority conditions are met.
- Transfer of rights: ownership or another agreed right is transferred to the buyer, with the property free of the third-party encumbrances specified by the law.
| Protection | What it gives you | Legal mechanism | What needs verification |
|---|---|---|---|
| Qualifying guarantee | Repayment when the statutory grounds are met | Payment security | Covered amount, validity and conditions for calling the guarantee |
| Insurance policy | Statutory cover in the buyer’s favour | Payment security | Approved insurer, beneficiary, premium and policy conditions |
| Warning note or transfer of rights | A qualifying right recorded in the property records | Two distinct statutory security routes | Priority for a warning note; clean qualifying rights for a transfer |
| First mortgage | A first mortgage over the apartment or the relevant share of land | Registered property security | The property, beneficiary and first-ranking status |
| Lawyer trust or escrow | Funds held under agreed trust conditions | A contractual holding arrangement | It supplements, and does not replace, statutory security or the required voucher route |
A lawyer’s trust account can support the transaction, but it does not replace one of the five statutory securities. Verify guarantee or insurance documents with the issuing institution and registered rights against the relevant property records. Keep the payment vouchers, receipts and documents together so the cumulative position can be reconciled. [1]
Ask who pays for the security before you sign. The law puts the cost of providing it on the seller, but lets the contract say that the buyer bears the cost of the bank guarantee or the insurance policy, so the Housing Ministry’s guide treats it as a point to negotiate before signing.
Check the actual guarantee provider
The 2026 amendment adds a defined category of other guarantee providers within the existing guarantee route. The definition covers the specified advanced credit or deposit-and-credit licence holders, prudential payment-service licence holders and insurers, subject to the relevant liquidity and capital requirements. It does not make every private guarantee acceptable or create a sixth general security route. Ask your lawyer to verify the actual issuer, licence category, regulator, applicable requirements and guarantee wording for your payment. [2]
The amendment also changes the related voucher, encumbrance-notice and VAT-repayment provisions. A document describing an older bank-only arrangement needs to be read with those changes. No particular provider’s eligibility can be established from its marketing name alone. [2]
How must payments be scheduled?
The contract sets the payment schedule. Statutory construction-stage payment caps apply when payments are secured by routes other than the qualifying guarantee or insurance routes in sections 2(1) and 2(2). In a financially accompanied project, all apartment payments must follow the designated voucher arrangement. That voucher-only duty dates from an October 2008 amendment to the law, and the Housing Ministry’s guide says the booklet is produced by the bank accompanying the project, which gives it to the seller to hand to you. The accompanying institution must issue the guarantee or insurance within 14 business days of the voucher payment, or ensure that another statutory security has been provided. Agree the permitted route for a transfer from abroad with the institution and your lawyer; routing every transfer through a lawyer’s trust account is not a universal legal requirement.
Choose the security route and project cohort before using either table. The 2019 amendment starts 30 days after its publication on 16 April 2019 and applies to a project whose included apartment sale contracts were all signed from commencement. Its transition provision excludes the specified strengthening and evacuation/reconstruction transactions from the sale-contract count. One buyer’s signing date alone does not establish this project-wide condition. Earlier projects require the earlier applicable rules. [3]
The percentages below are limits associated with completed milestones under the applicable schedule. They do not replace your contractual schedule or prove that a stage has been reached. Obtain evidence from the appropriate professional covering the exact part of the building named in the table. A lowest-level floor slab may belong to an underground parking or basement level; it is not the lowest-floor ceiling.
Two other terms in the tables have fixed meanings in the 2019 regulations. Internal cladding (חיפוי פנימי, chipui pnimi) is the apartment’s cladding, including wall cladding in ceramic or marble and a lowered plasterboard ceiling. Occupancy approval (אישור אכלוס, ishur ichlus) means the approval to supply water, electricity or a telephone connection under the Planning and Building (Approvals for Electricity, Water and Telephone Services) Regulations, 1981. [3]
New construction: eight stages
| Completed milestone and scope | Stage share | Cumulative share |
|---|---|---|
| 1. Completion of casting the lowest-level floor slab Whole building | 31% | 31% |
| 2. Completion of the structural work, including embedded electrical/plumbing work, internal partitions and protected-room opening frames The apartment floor and all floors below it | 25% | 56% |
| 3. Completion of the same structural-work scope Whole building | 5% | 61% |
| 4. Completion of exterior cladding Whole building | 6% | 67% |
| 5. Completion of plaster and flooring Apartment | 10% | 77% |
| 6. Completion of internal cladding and installation of windows, railings, entrance doors and fire doors Apartment | 13% | 90% |
| 7. Completion of shared systems, including lifts and fire safety, and the courtyard/common-area works required for occupancy approval Whole building | 5% | 95% |
| 8. Occupancy approval received and the apartment delivered according to the sale contract Apartment | 5% | 100% |
Arithmetic totals from the eight statutory increments in the table above. This is not a construction-time forecast.
- Stage 131%
- Stage 256%
- Stage 361%
- Stage 467%
- Stage 577%
- Stage 690%
- Stage 795%
- Stage 8100%
New apartments added in a strengthening project: eight stages
| Completed milestone and scope | Stage share | Cumulative share |
|---|---|---|
| 1. Completion of strengthening work, including added protected rooms and the stated foundations, excavation and shoring for the parking facility First floor of the existing building | 13% | 13% |
| 2. Completion of strengthening work, including the upper ceiling and added protected rooms Whole existing building | 13% | 26% |
| 3. Completion of structural work, including embedded electrical/plumbing work, internal partitions and protected-room opening frames All new floors | 20% | 46% |
| 4. Completion of exterior cladding Whole building | 6% | 52% |
| 5. Completion of plaster and flooring Apartment | 22% | 74% |
| 6. Completion of internal cladding and installation of windows, railings, entrance doors and fire doors Apartment | 10% | 84% |
| 7. Completion of shared systems, including lifts and fire safety, and the courtyard/common-area works required for occupancy approval Whole building | 10% | 94% |
| 8. Occupancy approval received and the apartment delivered according to the sale contract Apartment | 6% | 100% |
The strengthening table concerns the defined addition of new apartments while strengthening an existing building. Do not apply it automatically to demolition and rebuilding or to every urban-renewal purchase. The different percentages and construction scopes are deliberate. [3]
Where these caps apply, they override the contract. The Housing Ministry’s guide for new-apartment buyers says that if your security is not a bank guarantee or an insurance policy, the payment dates are the ones set in the regulations, whatever the purchase agreement says, and that a seller who does not keep to them commits a criminal offence. Complaints about a seller go to the Sale Law commissioner (ממונה חוק המכר, memune chok hamecher) at the Ministry of Construction and Housing.
A worked example (illustrative)
Take an illustrative apartment price of ILS 2,000,000, paid in four stages of ILS 500,000. Seven percent is exactly ILS 140,000. That is the threshold beyond which the seller cannot collect without statutory security, not an amount that remains permanently outside the security framework. Track the full cumulative payments at every stage:
- Rule: reconcile the full cumulative payments with the statutory security and any applicable VAT-fund coverage. Do not subtract ILS 140,000 as a standing deductible.
- Stage 1: paid ILS 500,000. Check the security for this payment and the applicable VAT treatment.
- Stage 2: paid ILS 1,000,000 in total. Reconcile both payments with the security documents and applicable VAT treatment.
- Stage 3: paid ILS 1,500,000 in total. Reconcile all three payments; there is no automatic ILS 140,000 allowance for missing cover.
- Stage 4: paid ILS 2,000,000 in total. Confirm the full payment record, the applicable security and the conditions for any release or replacement of that security.
Your lawyer should check the security wording, cumulative payments, VAT treatment and any required registration or priority. For a voucher payment, also check the issuance deadline and follow up if the document is late. A bank guarantee or insurance may be replaced by another statutory security only when the legal and contractual conditions are met. [1]
Developers sometimes push for faster payments or bundled schedules. The angles that matter are covered on split-payment new-build deals and on payment-plan pressure.
If the contract includes index linkage, ask your lawyer to check the applicable legal limits, the index, the base date, the amount that may be linked and the end date. Check the security’s linkage terms separately from the calculation of the outstanding purchase price.
Include agreed extras in the payment reconciliation
The Housing Ministry’s 2 December 2019 position distinguishes specified surveying, condominium-plan preparation and government registration charges from the cap on the lawyer’s own professional registration services. It also treats the described sums payable to the seller under the apartment-sale arrangements as relevant to statutory payment protection. Ask for each charge’s service, supplier, contractual basis and security treatment; relabelling a fee does not settle those questions. For the separate fee calculation, see the 2026 seller-lawyer fee section. [4]
What happens if the developer fails?
Recovery depends on the security, its validity and the grounds for enforcing it. A statutory bank guarantee is subject to defined triggers and documentation; delay, breach or cancellation alone does not automatically produce a refund. A warning note, first mortgage or transferred right protects through property rights and priority rather than the same repayment mechanism. Ask your lawyer to assess the actual documents and the insolvency or enforcement process. [1]
Use the same illustrative ILS 2,000,000 purchase to compare the records after ILS 1,500,000 has been paid. First account for the full payment total, the security route and any applicable VAT-fund component. Then investigate any unexplained gap:
- Complete records: documents account for the full ILS 1,500,000 paid under the applicable statutory security and VAT arrangements. There is no automatic 7% deduction, and this does not guarantee a particular recovery or cap every possible loss.
- Unexplained 60% coverage: if the documents account for only ILS 900,000 of ILS 1,500,000 after allowing for valid VAT coverage and any other statutory security, the ILS 600,000 difference needs immediate legal review. It is an accounting gap, not a prediction of the final loss.
- Large unexplained gap: if documents account for only ILS 500,000 of ILS 1,500,000 on the same basis, the difference is ILS 1,000,000. The 7% collection threshold does not authorize leaving that difference unsecured.
These are illustrative reconciliations, not predictions of recovery. The practical steps after a failure, including what to do about a stalled build, are on what happens if the developer fails to complete construction. Ask your lawyer to explain any mismatch between payments and security, including VAT, linkage and release conditions.
The VAT component has a separate repayment process
Where the statutory guarantee or insurance and VAT-fund provisions apply, the guarantee/insurance amount excludes the defined VAT component and the fund mechanism addresses that component on realization of the security. Under section 3C2, the issuer applies to the fund no later than seven days after realization; the fund transfers the amount to the issuer within fourteen days after the application; the issuer then transfers it to the buyer on receipt. Those are the statutory steps after qualifying realization, not a promise that every dispute is resolved in twenty-one days. Do not confuse these day periods with the 14 business days for issuing security after a voucher payment. [1] [2]
A regulatory complaint and a civil claim are separate paths. Section 3D preserves other rights and remedies, but submitting a complaint or having it investigated does not extend a statutory deadline for those other steps. Obtain advice promptly if payment security, delivery or recovery is disputed. [1]
Before replacing a guarantee or releasing security
Section 2A allows replacement of a section 2(1) or 2(2) security with one of the specified property-rights securities only after construction is complete and possession has been handed over, and only if the contract does not prohibit replacement. The stage-cap provision remains relevant. A special Israel Lands route has its own cumulative conditions, including the required agreement with the Israel Land Authority; keys alone do not establish that those conditions are met. [1]
For the applicable project cohort, the 2021 completion-evidence regulations require the specified local-authority completion certificate or occupancy approval covering the apartment, plus seller-connected electricity and water with the prescribed confirmations. Connections may be permanent or temporary under that instrument. Possession is handed over in the apartment with the parties or their representatives present unless the contract provides otherwise. These rules serve the named investment-security provisions; they are not the only test for every handover or delivery-delay dispute. [5]
The 2021 regulations have a project-wide transition starting thirty days after their 4 March 2021 publication and preserve the former rules for the specified earlier-contract cases. Have your lawyer establish the applicable regime and inspect the actual documents. See the handover and inspection reference for the condition record.
What should an overseas buyer check before paying?
Before each transfer, confirm the payment route and the security arrangement. Ask for the documents already due and a clear explanation of the documents that will follow the payment:
- The guarantee or insurance documents already issued, confirmation from the issuing institution, and the designated voucher and issuance timetable for the next payment.
- A land registry extract showing any warning note or title registration once it should exist.
- The exact legal basis for each protection in your contract.
- Confirmation of the institution’s regulator and the licence, authorization or valid exemption that applies to the actual payment service.
Ask the payment-service provider to identify its regulator and the current licence, authorization or lawful exemption for the actual service, and have your lawyer verify the explanation. Do not assume that holding funds in a lawyer’s trust account settles the authorization question. Ask the receiving institution for its identification, source-of-funds, ownership and transfer-document requirements before wiring. Agree the sequence and expected review time with the institutions involved; a three-week sequence is not a guaranteed processing timetable. The remote-payment position describes bank identity checks and leaves the parties to confirm their arrangements. [6]
Developers working with overseas buyers should identify the statutory security route and the permitted payment channels before taking payments. Payment instructions and security records should remain consistent with the contract and the law. Provide translations that the buyer can understand, and state clearly which agreed contract text governs; a Hebrew version is not automatically binding solely because it is in Hebrew.
A remote voucher payment: the documented route
The commissioner’s updated 15 June 2020 position describes a permanent remote-payment approach, but expressly says it is not a binding execution instruction and the parties are not obliged to adopt it. Confirm the paying bank’s present acceptance and requirements before treating the steps as your payment instructions. The buyer’s mortgage bank and the project’s accompanying institution have different roles and need not be the same bank. [6]
- Obtain and complete the voucher. Use the booklet delivered by the seller and verify the project and account details with the accompanying institution.
- Send the voucher copy and detailed instructions to the bank clerk. Use the digital method the clerk requires and supply the identification the bank requests.
- Let the bank complete its checks. Under the described route, funds move from the mortgage bank directly to the accompaniment account shown on the voucher.
- Receive and retain the transaction confirmation. The bank supplies it by its chosen method. Reconcile the amount, voucher and account.
- Mark the voucher as paid after completion and confirmation. This prevents using the same voucher for a duplicate payment.
- Follow up the statutory security separately. A transfer receipt is not the guarantee or insurance document. Record the applicable issuance deadline and investigate missing documents.
Own-funds payments have an additional condition in that 2020 paper. Its paragraph A.7 applies the preceding banking steps through the bank holding the buyer’s account and also calls for a voucher copy and identity-card or driving-licence copy to be sent to the commissioner at the unit address printed in the document. Before sending identity documents, confirm the ministry’s current submission channel and the bank’s requirements. The historical paper is not verification of today’s mailbox or process. If the mortgage bank requires an assignment letter for the guarantee, paragraph B.3 directs the seller to take the necessary steps to obtain it. [6]
Agree any foreign-bank remittance, currency conversion, beneficiary-reference and source-of-funds requirements with the institutions involved. The 2020 position does not specify all of those matters and does not require every payment to pass through a lawyer’s trust account. Keep the verified instructions with the voucher and receipt.
Track the lender’s encumbrance-release notice
Section 2C requires the seller to request the prescribed conditional release notice within thirty days of the applicable trigger: the first voucher payment in the specified accompanied arrangement, the first guarantee from a bank outside that arrangement, or the policy from an insurer outside it. The 2026 amendment adds the first guarantee from another qualifying provider that is not an insurer under the relevant paragraph. The recipient then has thirty days from the seller’s request to supply the notice. The seller must tell the buyer when requesting it and pass it on when received. [1] [2]
Check the trigger, request date, response and the actual conditions in the notice. It is a document about the financier’s encumbrance; it is not the same as ownership registration or an unconditional release of every right affecting the property. Use the rights-document reference to keep those records distinct.
What needs a lawyer?
Four things belong in writing, from an Israeli property lawyer, before you sign or send money:
- The security wording, cumulative payments, VAT treatment and the issuance timetable for your payment schedule.
- The registration and priority of any first mortgage, warning note or transferred right.
- The index-linkage clause and whether the guarantee follows it.
- A second opinion if anything is unclear; it is usually money well spent against the size of the transaction.
See choosing a purchase lawyer in Israel and signing a property contract in Israel.
Which tool or source do you use?
Use the land registry extract your lawyer pulls, the guarantee document and the issuing institution’s confirmation. For the wider buying path, read how to buy property in Israel and new versus second-hand property. To explore current developments, see our new projects in Israel page.
A short glossary helps when reading the documents. The Sale (Apartments) (Assurance of Investments of Purchasers) Law, 1974 governs the statutory payment securities described here. Payment-services licensing depends on the service and any applicable exemption. Customer due diligence is the process financial institutions use to identify customers and assess the purpose and risk of transactions.
Frequently asked questions
Is off-plan property in Israel safe for overseas buyers?
Statutory securities provide important protections, but off-plan purchases still carry legal, timing and financial risks. Verify the security route, payment instructions, coverage and enforcement conditions for the particular project before committing funds.
How much can a seller collect without statutory security?
No more than 7% of the apartment price before one of the statutory security routes is in place. For an illustrative ILS 2,000,000 apartment, that threshold is ILS 140,000. It is not a permanent deductible from the payments that must be secured.
How should the securities be compared?
Compare the type of right, enforcement conditions, covered payments and registration priority. Qualifying guarantees and approved insurance provide statutory repayment mechanisms; a first mortgage, qualifying warning note or transfer of rights uses a different legal structure. Have your own lawyer assess the route offered.
What is a warning note?
A he’arat azhara is a registered note recording an undertaking concerning the property. To serve as statutory payment security for a new-apartment purchase, it must meet the investment-security law’s requirements, including the relevant priority conditions.
Why do banks ask for source of funds?
Banks use customer-due-diligence procedures to identify customers and assess transactions. They may request evidence of the source of funds, ownership and purpose of a transfer according to the applicable rules and risk assessment. The institution should confirm the documents it needs for your case.
Sources
- Sale (Apartments) (Assurance of Investments of Purchasers) Law, Bank of Israel collection, sections 2–3D, read with the 2026 amendment. The Housing Ministry’s New Apartment Buyer Guide supplies practical document checks.
- Economic Plan Law for 2026, section 31 (investment-security amendment) and section 37 (commencement). Actual provider eligibility and current regulatory requirements still need transaction-specific verification.
- 2019 payment-stage amendment, Gazette 8208, pages 3154–3156. Original published instrument reproduced by a public Gazette archive; the project transition is part of the rule.
- Housing Ministry position of 2 December 2019 on surveying, condominium-plan and government registration charges. This is an administrative position, not a new statutory amendment.
- 2021 completion and possession evidence regulations, Gazette 9242, page 2410; and the official ministry publication page.
- Remote payment for a new apartment, updated 15 June 2020, both pages and all conditions, linked from the official ministry page. The procedure is expressly nonbinding.
Related pages
- What happens if the developer fails to complete construction
- Buying a presale apartment: what to check before signing
- Split-payment new-build deals: what to check first
- New-build payment-plan pressure
- How to buy property in Israel, step by step
Your one next step: ask your lawyer to confirm the lawful payment route, statutory security and documents due before you wire. Send us your details and the Semerenko Group team will get back to you. This is general information, not legal or tax advice; confirm with a licensed professional.
