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Housing minister promises law change that benefits homebuyers

Elkin to introduce limits on extra costs, prohibit buyer from being compelled to bankroll sellers’ lawyer fees

Minister of Housing and Construction Ze'ev Elkin attends a conference in Modi'in, December 5, 2021. (Tomer Neuberg/Flash90)
Minister of Housing and Construction Ze'ev Elkin attends a conference in Modi'in, December 5, 2021. (Tomer Neuberg/Flash90)

Construction and Housing Minister Ze’ev Elkin has promised to enact changes to the current Sale Law (Apartments), first legislated in 1973, that will benefit homebuyers in a bid to re-balance power dynamics that favor sellers and developers.

On Sunday, Elkin said in a government announcement (Hebrew) that the changes “are designed to correct injustices that go back many years. We need to offer transparency to apartment buyers and yes, lowering prices is essential.”

The minister is pushing forward an amendment to the Sale Law that will limit the added expenses for buyers and prohibit the rolling-over of sellers’ lawyer’s fees to the buyer, a common practice in Israel.

In addition to a 25% down payment on a property, buyers need to shell out funds for a number of other fees that often add up to significant amounts. If they are buying a new property and paying in installments, there is also a high risk, particularly at the moment with substantial inflation, that the cost of the property will change as the cost of building materials reflected in the Construction Input Index goes up. These extra costs cannot be borrowed against, and also add to uncertainty for buyers. Many sellers link the price of the apartment to the construction input index, even though a significant part of the apartment price consists of land and other components not actually affected by the rise in the index.

The amendment is complex but aims to increase transparency to create a more level playing field between buyers and sellers. Going forward, there will be stricter controls on how developers make use of the construction index so that it has less impact on the buyer through the duration of a new build home purchase. With building times in Israel getting longer rather than shorter, ֵElkin also believes that by pushing some cost risk back to developers there is a greater incentive for them to deliver apartments on time.

To put further pressure on developers to deliver to buyers, Elkin is stopping the practice of passing on legal fees and addressing when compensation should be paid to buyers for delays in getting the keys to their new apartments.

Separately, the ministry established a Department for the Protection of Home Buyers, although it is not entirely clear what its remit will be and where it can be expected to intervene on behalf of buyers in the future.

Aviad Friedman, director general of the Construction and Housing Ministry, said in the announcement, “creating a secure purchase market… means maintaining a stable market which allows prosperity for all partners in real estate transactions.”

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