Buying from a developer
Mechir Lamishtaken: what a lawyer checks before you sign the contract
Winning the lottery is only the start. You then sign a sale contract with the developer, and that contract needs the same checks as any purchase from a developer, plus a few that are specific to the program.
Do you need a lawyer for a Mechir Lamishtaken purchase?
The price per square metre is set in the tender, so the price is not negotiable. The contract itself, however, is drafted by the developer's lawyers, who represent the developer only. This is so even when the buyer contributes to their fee, in an amount capped by regulations (see the article on legal fees).
A lawyer acting for the buyer checks that the contract matches the tender documents and the binding specification, that every payment is secured, and that the payment schedule, the linkage and the delivery date are written in a way that protects the buyer. More on the buying from a developer page.
What applies as in any purchase from a developer?
The program does not reduce the protections of the Sale (Apartments) Law and the Sale (Apartments) (Assurance of Investments of Apartment Buyers) Law. The same points are checked:
- Security for every payment, and payment only to the project's escrow account. See Sale Law guarantee.
- Linkage to the construction inputs index, within the limits the law allows.
- The delivery date and compensation for delay. See late delivery.
- The specification and sale plans, and the warranty periods.
- Registration of the rights and its timetable.
When may a Mechir Lamishtaken apartment be sold?
Under sub-chapter 4.7 of the Israel Land Council decisions (section 4.7.10(a), in the version in force from 5 December 2020), a buyer in the program may not sell the apartment to a third party for 5 years from receipt of Form 4, or 7 years from the date of the lottery, whichever is earlier.
"Sale" for this purpose includes a transfer for no consideration or for reduced consideration. The Ministry of Construction and Housing may set rules for transfers in exceptional cases before the period ends (section 4.7.10(c)).
The buyer signs an undertaking on this as part of the purchase documents. Its exact wording, and the consequence of a breach, are checked in the contract and annexes of your project. The program rules are updated from time to time, so read the version that applies to the tender you won.
What is checked before signing?
- That the eligibility certificate is valid, and that the declarations it rests on are still correct.
- That the contract matches the tender documents and the binding specification.
- Who the developer is, the state of the rights in the land, and whether there is a building permit and bank financing.
- The payment schedule, the linkage and the security for every payment.
- The delivery date, and the circumstances in which the contract lets the developer postpone it.
- What is agreed on changes and additions to the apartment.
- The undertaking not to sell, and what it actually prohibits.
- Purchase tax. You can estimate it with the purchase tax calculator.
What if the eligibility turns out to be incorrect?
Eligibility rests on the buyer's declarations, signed in an affidavit. Under the Council decision, an application that does not match the applicant's personal circumstances leads to cancellation of the eligibility and the win, and to cancellation of the purchase. Before signing the affidavit, check that every detail is correct, including rights in an apartment or land received by inheritance or registered in a spouse's name.
What about the later programs?
After Mechir Lamishtaken, follow-up programs were launched under other names. Each has its own rules on eligibility, price and the restriction on sale, and these are read in the program and tender documents. The legal review of the contract with the developer is similar in all of them, because the Sale (Apartments) Law applies to all.
Related articles and pages: Buying from a developer | Sale Law guarantee | Late delivery | Legal fees | Purchase tax calculator
Questions and answers
For how many years is a sale prohibited?
5 years from receipt of Form 4, or 7 years from the date of the lottery, whichever is earlier (section 4.7.10(a) of the Israel Land Council decisions, in the version in force from 5 December 2020). Check the version that applies to you in the tender documents and the contract.
Is the developer's lawyer not enough?
He or she represents the developer only, even when the buyer contributes to the fee. The buyer's interests are checked by the buyer's own lawyer.
Can the contract be changed?
The price and specification are set by the program and the tender. In the legal clauses, corrections and clarifications can be requested, mainly where a clause does not match the Sale (Apartments) Law or the tender documents.
Does the Sale (Apartments) Law apply?
Yes. The apartment is bought from a developer under a sale contract, and the protections of the law apply: security for the buyer's money, compensation for late delivery, and warranty periods.
Not sure the deal is safe? Let's start with a conversation
In an initial conversation we will go over the property, the other party and the payment schedule, and tell you what needs to be checked before you sign.