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Buying from Plans – Revisited

Buying from plans means that the apartment exists on paper only.  It is not yet built.  You don’t see what you are getting unless you have the ability to envision how things would look by looking at the plans.

I have written in the past about buying from plans in two previous blog posts. I would like to bring here a few more things that you need to be aware of.

Here are 5 more questions you need to ask.

Question 1: Is there a building permit for the project?

All construction in Israel is subject to town planning laws. This means that all construction needs to be approved first and a building permit needs to be issued before construction can be begin. Very often constructions companies begin to market their projects before the building permit is issued.

If this is the case then your Israeli real estate lawyer will need to check the following:

  1. How will this affect getting a mortgage? Very often a mortgage can only be gotten after the building permit is issued.
  2. How much money should be paid to the construction company at this point? The law allows the construction company to charge 7 % of the price at this stage. This money is placed in escrow with the company’s lawyer until the building permit is issued. At that stage the money is moved to the special project bank account opened in accordance with the conditions of the financial backing to the project that the company gets from a bank or insurance company. When paying for the apartment during the construction stage the money is deposited in this special account through pay slips issued to the purchaser by the company.
  3. How does this affect you financially? The price of the apartment is linked to the Israeli building index starting from the date the registration form is signed by the purchaser. This linkage continues through the time that you are waiting for the building permit to be issued. The longer it takes the more the linkage can affect the price.

Question 2: Can I cancel the contract at some point if the building permit is not issued in the timely manner?

The answer is almost certainly yes. Most contracts allow you to cancel the contract if the building permit is not issued within 6 months.

Question 3: What if the plans of the apartment are changed?

At the time of the signing of the contract you sign on the plans of the apartment. However, very often the local authorities will ask that changes in the plans be made to coincide with the local town plan. If this happens then the buyer has the right to cancel the contract if there is a major change in the plan of the apartment die to the issuance of the building permit.

Question 4: When does the payment schedule actually begin?

As soon as the building permit is issued then the construction company notifies the purchaser of this and he is given a certain amount of time to make the next payment. At this point the purchaser is given a pad of pay slips which he can take to his bank and pay the payments in that manner. After payment is made in this manner the purchaser is issued with a bank guaranty or insurance policy as per the purchase agreement.

Question 5: Can I make changes in these plans?

You cannot make external changes in the apartment.  This would warrant a building permit from the municipality.  However, construction companies allow purchasers to make internal changes in the apartment.  The cost of these changes are not part of the original price but rather are added to the price and paid for separately.

Your Israeli real estate attorney should ascertain that the responsibility for the implementation of these changes be assumed by the construction company and not the subcontractor only.

When planning your internal changes it is important to consult with an interior designer who will negotiate these plan changes for you, advise you on what are the best changes to make, the best materials to use and who can supervise the work. The company will need to be given professional plans showing all the changes you would like done.  If you are buying with the intention of making major changes to the internal plans of the apartment it is wise to consult this professional before signing the contract to make sure that what you would like done can indeed be implemented.