Following the proliferation of apartment sales promotions, in which a developer allows the buyer a long postponement of the bulk of the consideration payments or various financing promotions for the purchase of new apartments from projects in the recent period – as well as the growth of a phenomenon in which the apartment buyers purchase the apartment not to live in it, but with the aim of selling it and enjoying the increase in value – the sales law commissioner of the Construction and Housing Ministry issued a position paper on Wednesday, April 17, on the issue that seeks to clarify the law.
According to the position paper, a significant portion of these buyers are not regularly involved in the real estate sector and are not familiar with the legal requirements involved in sales transactions of new apartments. At the same time, the various financing operations of the entrepreneurs opened up to them the possibility of purchasing an apartment with a low initial capital and subsequently selling it to a third party for profit.
In the described case, the purpose of the purchase is the sale of the apartment, therefore it is a transaction subject to the provisions of the sales law. Accordingly, if the buyer who has become a seller does not comply with all the obligations applicable to the "seller" according to the law, he will be exposed to the sanctions stipulated in the law.
The sale of an apartment to the buyer is the guarantee of the buyer's money. In the event that the first buyer becomes the seller, he must guarantee the money of the new buyer, especially if the construction of the apartment has not yet been completed and delivered to the buyer, and when the payment is from the second buyer, which is the profit component of the first buyer. This may not be guaranteed, contrary to the law.
The position paper contains clarifications, arising from the law, regarding the method of securing the funds of the new buyers and regarding the limitations on the collection of funds from them.
"The Ministry of Construction and Housing encourages active participation of the public in the real estate market, as buyers, sellers, entrepreneurs, etc., with the aim of strengthening the market, lowering housing prices and creating availability of a variety of different types of housing for the entire population," Ministry Director-General Yehuda Morgenstern said.
"This activity is done while paying attention to the protection of the rights of all those involved in the transactions, with an emphasis on compliance with the provisions of the Sales Law, in order to create a safe and financially stable environment in which to operate and grow."