The thought of a half-built apartment building sitting abandoned while your life savings are tied up in it is terrifying. Thankfully, Israel has a robust legal framework designed to prevent this exact nightmare scenario. While it’s a horrible situation, you are not left unprotected.
The single most important protection you have is the Sales Law (Apartments) (Assurance of Investments of Persons Acquiring Apartments). It sounds complicated, but its purpose is simple: it forces the developer (kablan) to secure your money. When you sign a contract for a new construction project, the developer is legally required to provide you with one of several forms of security.
The most common and best form of protection is a bank guarantee (arvut bankait). Here’s how it works: Every payment you make to the developer is deposited into a special closed account for the project. In return, the project’s financing bank issues you a guarantee for the exact amount you paid. If the developer goes bankrupt or fails to deliver the apartment, you can go directly to the bank with your guarantee and get all of your money back, linked to the cost-of-construction index to account for inflation.
This guarantee is your shield. It ensures that, in the worst-case scenario, you won’t lose your capital.
Your lawyer plays a critical role here. Before you make any payment, your lawyer must verify that the corresponding bank guarantee has been issued in your name. They will refuse to let you hand over money until the guarantee is in their hands. This is a non-negotiable step in the process.
While losing the apartment you dreamed of is heartbreaking, the Israeli legal system ensures that you won’t suffer a financial catastrophe on top of it. The bank guarantee system makes buying new construction one of the safer forms of real estate investment in the country.
Too Long; Didn’t Read
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Israeli law protects buyers in new construction projects if the developer fails.
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The most common protection is a bank guarantee (arvut bankait), which is legally required.
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For every payment you make, the bank financing the project gives you a guarantee for that amount.
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If the project fails, you can take this guarantee to the bank and recover all your invested money, ensuring your capital is safe.
Protection is everything. I only work with reputable developers and rock-solid lawyers. DM me at Semerenko Group.
