If there are 3 things you can be sure about in the real estate field, it is that the real estate bubble is in no rush to burst, that significant legislation capable of providing a stable solution to the housing crisis is not in sight (if only because of the political situation), and that it is always worthwhile staying informed on legislation on the subject.
So if you are too thinking of purchasing an apartment, you are invited to get to know another change that has occurred recently with respect to the Sale Law:
A first familiarization with the Sale Law
For those who do not know, the Sale Law seeks to protect the party purchasing a new property from a contractor. The law seeks to require the contractor to refrain from negligent construction, construction deviations, and to adhere strictly to safety instructions. If a deviation is detected, the law supports filing a claim against the contractor, so that the contractor compensates the injured party financially. In addition, the Sale Law defines the period of the contractor’s responsibility for the property, and requires that an up-to-date specification be attached to the contract of sale of the property.
Clause 2 of the Sale Law
Clause 2 of the Sale Law is a clause that should be learned in depth, even though it is not directly related to the latest amendment that will be presented below. The clause states that the selling party may not charge 7% of the total cost, unless one of the following conditions is met:
- . The contractor provided a bank guarantee assuring reimbursement of the total amount paid if the property was not delivered as required.
- . The contractor submits to the buyer an insurance policy stating that the buyer is the beneficiary.
- The contractor transfers to the buyer an apartment free of any attachment and / or foreclosure and the like.
- The contractor mortgaged the property in favor of the buyer.
- The contractor wrote a caveat warning free of foreclosure or attachment.
The essence of the amendment - two important aspects
After briefly reviewing the Sale Law and its purpose, we move on to an explanation of the amendment to the Sale Law and what affect it may have. The law that was ratified recently, in July 2022, is intended to detract from the phenomenon of delays in the delivery of apartments by contractors, and makes some order regarding the issue of linking prices to the construction inputs index.
Construction inputs - the rules are changing
Until now, it was common practice to link the price of an apartment to the construction inputs index. This often led to a financial loss, as buyers paid more for parameters that should not be affected by price increases (such as the value of the land). This is where the new amendment came in, seeking to regulate this. In what way? The amendment states that from now on, a construction company cannot link construction prices more than 40% (as per the total value of the apartment). In addition, the amount paid at the time of signing the contract will also
not be linked to the construction inputs index and cannot be 20% higher than the value of the apartment. As for the payment balance, only half of it will be index-linked.
Is this an economic measure?
Is this indeed a significant and economic measure as far as homebuyers are concerned? Since now the linkage is only about 40% of the value of the property, buyers get to save a sizeable amount of money, especially when prices are constantly on the rise. However, it is important to find out how the contractors intend to cope with the amendment. At present, it is hard to ascertain if this law, designed to help, may just be another passing phenomenon in the general trend of rising prices – only time will tell.
The end of due date delays
As it is starting to become clear, real estate investments are going to be much more economic and safe. How so? Another amendment to the law is designed to protect the buyer from a delay in the property’s delivery. Hence, if a contractor delivers the apartment a month late, he will be required to pay the buyer full rent for this period. If there is a delay of 5 months or more, the contractor must compensate the buyer with monthly payment amounting to 125% of the total rent customary in that specific area. A delay of over 10 months in the apartment’s delivery, would then obligate the contractor to pay compensation in the amount of 150% of the total rent customary for that area.
Exceptional cases
Along with what has been said, it is important to know that there are exceptions. Thus, for example, if the delay was caused by an oversight on the part of the buyer, or due to contractual thwarting, then, the contractor is exempt from paying monetary compensation. Finally, it should be made clear that the law does not apply retroactively; in other words, the law applies only to transactions signed from the moment it was approved.
