How Sale Law guarantees and bank accompaniment protect buyers
How Sale Law guarantees and bank accompaniment protect buyers
Anyone who buys a new apartment in Israel pays a large part of the price before the building is complete. Israeli law recognises that risk and requires developers to secure buyers' payments. Owners in combination and urban renewal deals face a similar gap, because they give up land or homes in return for future apartments. This guide explains the main protections, how bank accompaniment works and what to check so that the security is real rather than theoretical.
The Sale Law and its purpose
The Sale Law for apartments requires a developer who receives payments from buyers to secure them through one of several approved methods. The aim is that a buyer who has paid will not lose the money if the developer fails before transferring the apartment.
The most common forms of security are a bank guarantee and an insurance policy. Other methods, such as a registered caveat combined with specific conditions, exist but offer different levels of protection.
Bank guarantee – issued by the accompanying bank for sums paid
Insurance policy – an insurer secures the buyer's payments
Caveat – registration in the buyer's favour, with conditions
How bank accompaniment works
In a closed accompaniment arrangement, the bank finances the project, supervises its account and issues guarantees to buyers. Buyers receive payment vouchers and must pay only through them into the project account.
Paying the developer directly, outside the voucher system, can leave a payment unsecured. Buyers should confirm that each payment generates the appropriate guarantee.
Guarantees in renewal and combination deals
Owners in pinui binui, TAMA 38 and combination deals typically receive a Sale Law guarantee for the value of their new apartment, and often additional guarantees for rent during construction, for taxes and for completion of the works.
The timing matters. Guarantees should be in place before owners vacate their homes or transfer land rights, not promised for a later stage.
Apartment guarantee – secures the new unit
Rent guarantee – secures payments for alternative housing
Tax guarantee – covers taxes the developer undertook to pay
Completion guarantee – supports finishing the works
What to check before paying
Ask which bank accompanies the project, request a copy of the guarantee format and read what it covers and when it can be called. Check whether the guarantee is linked to an index and how it is released on handover.
A lawyer who represents only the buyer or owners should review the guarantee mechanism. The wording of a guarantee is as important as its existence.
Where guarantees fall short
Guarantees do not usually cover delays, defects or changes in specification. Those are addressed through the contract, the law and compensation clauses. Buyers should therefore assess the developer's reliability as well as the security.
Elkayam Group works with backing companies and provides guarantees for clients in development and renewal deals, and can explain how a proposed guarantee package compares with what the situation requires.
Frequently asked questions – buyer guarantees
Is every payment to a developer protected
Payments should be protected under the Sale Law, but only if the developer provides the required security. Buyers should confirm the security for each payment and pay through the project account.
What happens to the guarantee when I receive the apartment
It is generally released once the apartment is handed over and the buyer's rights are secured, for example by registration. The contract and guarantee specify the conditions.
Do renewal owners receive the same guarantees as buyers
Owners in renewal projects usually receive a Sale Law guarantee for their new apartment and often additional guarantees. The package must be defined in the agreement.
Why Elkayam Group
The group works in development, urban renewal, combination deals and complex deals, cooperates with backing companies and provides guarantees for clients. The team works in Hebrew, English and French.
Contact: +972-53-658-4252 · support@kobielkayamrealestateltd.com · Rival St 37, Tel Aviv