Buying from a developer
Changes rider to a developer contract: what to ask to change, and what the law already gives you
A developer almost never changes its standard contract. What changes is a rider: a document that sets out the changes agreed with the buyer's lawyer, and that prevails over the contract. This is the only moment when you have bargaining power, because after signing every change depends on the developer's goodwill. Here you will find what not to waste the rider on, and what to use it for.
First: what protects you without asking
The Sale (Apartments) Law is a consumer law, and many of its protections apply even if the contract says otherwise. These are the main ones:
| Subject | What the law provides | Section |
|---|---|---|
| Late delivery | Compensation without proof of damage, from the end of one month after the contractual date, at the rate of the rent for a similar apartment, rising to 1.25 and then to 1.5 times that rent | 5A |
| Linkage | The first 20% is not linked, and of the balance up to half of each payment | 5C |
| Late-payment interest | No more than the rate set by the Minister, and only after 7 days have passed from the due date | 5B |
| Change in the specification | Any amendment of the specification requires the signature of both parties | 2(b) |
| Priced items | A price list for waiving, adding or moving items, with a credit or charge according to the price list | 3 |
| The developer's legal expenses | A cap set by the Minister, payment directly to the lawyer, and an invoice in the buyer's name | 6C |
| Registration of rights | Binding deadlines for registering the condominium and registering the rights | 6B |
| Management company | The first contract does not bind the residents for more than three years | 6A |
| Waiver as a condition of delivery | A waiver of compensation for late delivery or of non-conformity claims, required as a condition for delivering the apartment, carrying out repairs or transferring rights, is void | 7A(b) |
A clause in the contract that contradicts any of these is void in any case. It is still worth asking to delete it in the rider, because a void clause left in the contract is usually a basis for argument after the fact. The money paid to the developer is protected separately, under the Sale (Apartments) (Assurance of Investments of Persons Acquiring Apartments) Law; see Sale Law guarantee.
And what if, on delivery day, the developer makes handing over the key conditional on some other waiver that the law does not mention explicitly? Do not sign. You are not required to give up a right granted to you in the contract in order to receive what the developer has already undertaken to give. In such a case, notify the developer immediately and in writing that you demand performance of the contract exactly as written, and that delivery of the apartment cannot be conditional on changes to the contract.
Ten topics worth including in the rider
- The definition of delivery. Many contracts define delivery in a way that allows the developer to "deliver" an apartment that is not fit for occupancy, and so stop the compensation for the delay. It is worth providing that delivery takes place only after Form 4 or a completion certificate, a permanent connection to electricity and water, and safe access to the apartment through the common areas.
- Circumstances that justify postponement. The contract sometimes lists a long series of reasons for postponing delivery, such as a shortage of workers or delays at the authorities. Under the law, the developer is exempt from compensation only when the delay was caused solely by the buyer, or by circumstances of frustration within the meaning of section 18(a) of the Contracts (Remedies for Breach of Contract) Law, 5731-1970. A broader list is worth deleting or narrowing. In addition, it is worth providing in the rider that a postponement due to exceptional circumstances takes effect only if the developer gave advance written notice that the construction site was closed and that construction cannot be carried out in the exceptional circumstances that arose.
- Apartment area and deviations. Contracts usually set a "permitted deviation" in area, with no compensation. It is worth asking for compensation at a price per square meter for any shortfall in area, and the right to have the apartment measured by your own surveyor before delivery, using the measurement method in the specification.
- Changes in the specification and "equivalent". Developers reserve the right to replace products with an "equivalent". It is worth providing that the replacement will be of the same quality and brand level, with advance written notice, and that any material change will require your consent.
- Buyer changes and priced items. Ask for the full price list, and the timetable for submitting change requests. The law prohibits setting a deadline earlier than six months from the end of the foundations stage. What does not appear in the price list is worth pricing in advance, or at least agreeing on how it will be priced.
- Mortgage. A release letter from the financing bank, an undertaking by the developer to cooperate with your bank, and a timetable that fits the release of the loan funds. It is also worth providing what happens if the mortgage is not approved in time.
- Cancellation of the transaction and agreed damages. Developer contracts set high agreed damages for a breach by the buyer, and low or no compensation for a breach by the developer. Ask for symmetrical compensation, and a period to cure the breach after written notice, before the developer may cancel.
- Transfer of rights before registration. If you want to sell the apartment before the rights are registered in the Land Registry, the contract usually requires the developer's consent and payment of a handling fee. It is worth setting a cap on the handling fee, and providing that the developer will not refuse without reasonable cause.
- The common property and the bylaws. Developers reserve the right to attach roofs, yards and parking spaces to other apartments, and to change the building's design. It is worth limiting this right to changes that do not harm your apartment, and checking the bylaws the developer intends to register (section 6).
- Registration of rights. The law sets deadlines for registration. You can ask for agreed damages for a delay in registration beyond these deadlines, and in the meantime an undertaking to register a cautionary note in your favor; see cautionary note.
What developers agree to change, and what less so
Large construction companies usually have a ready-made changes rider, and they agree to clarifications, to correcting clauses that contradict the law, and to reasonable adjustments to the mortgage and the timetable. It is harder to change the price, the delivery date and the rates of agreed damages. Small developers are more flexible, but their contracts are also less orderly, so the review there is even more important. In any case, what is not written in the rider does not exist, even if it was said orally at the sales office.
How it works in practice: four stages
- Receiving the documents: the contract, the specification, the plans, the payment schedule, the wording of the guarantee or the payment voucher booklet, and the proposed bylaws.
- Review and preparation of a rider of comments: going through every clause against the law and against your needs, and drafting the requested changes.
- Negotiation with the developer's lawyer: agreeing on what is accepted, what is rejected, and where to compromise.
- Signing and registering a cautionary note: signing the contract and the rider together, and making sure every payment is protected by security.
Timeline and cost
Timeline: reviewing the contract and preparing the rider of comments usually takes a few business days from receipt of all the documents. The negotiation depends on the developer, and usually takes from a few days to a few weeks.
Cost: the fee is set in a fee agreement. You can calculate the ancillary costs of the purchase with the purchase tax calculator.
Signing as is, or with a rider: a comparison
| Subject | Signing the contract as it is | Signing with a changes rider |
|---|---|---|
| The protections of the law | Apply | Apply |
| What "delivery" means | As defined by the developer | Defined in the rider |
| Shortfall in area | Usually no compensation up to the permitted deviation | Compensation at a price per square meter, and measurement on your behalf |
| Cancellation and breach | One-sided agreed damages | Symmetrical compensation and a cure period |
| Mortgage | According to the developer's timetable | Coordinated with your bank |
Related articles and pages: Buying an apartment from a developer | Linkage calculator | Sale Law guarantee | Late delivery of an apartment | Cautionary note | Purchase tax calculator
Questions and answers
Doesn't the developer's lawyer represent me too?
No. The developer's lawyer drafts the contract and handles the registration, and you share in the registration expenses up to the cap in section 6C. The lawyer does not represent your interest in negotiating the contract terms, so a changes rider is drafted by a lawyer acting for you.
Does the rider really prevail over the contract?
Yes, when it is signed together with the contract and states explicitly that in any conflict the provisions of the rider prevail. This is the first clause to check in the rider itself.
What if the developer refuses any change?
The protections of the law remain in force in any case. The decision whether to sign is yours, once you know exactly which risks remain open.
Can changes be added after signing?
Only with the developer's consent. A change in the specification after signing requires the signature of both parties under section 2(b). So close what matters to you before signing.
What about buyer changes?
The law requires a price list for priced items and limits the deadline for requests. Any change beyond the price list is worth agreeing in advance and in writing, including price and date.
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.