As part of in-depth staff work, today the Minister of Construction and Housing, Yitzhak Goldknopf, approved a pilot that will allow another type of insurance for apartment buyers - so that trust companies can guarantee the funds of new apartment buyers in TMA 38/1 projects of the strengthening and thickening type. Today (
D ') A call was published asking trust companies, which are subsidiaries of financing companies, to submit to the Minister a request to recognize them as trust companies for this matter. The pilot will allow companies that meet the conditions set forth therein to serve as trust companies, for the purposes of the Sales Law, in a limited number of projects. The Sales Law (
apartments ) (Investment Guarantee of Apartment Buyers), 535 1974, states that a seller of an apartment may collect money from a buyer only if he has provided him with collateral from among the collateral specified in the law.
Illustration: TMA 38 project in Bat Yam (Photo: ShutterStock)
Until today, an apartment seller could provide a guarantee through banks or insurance policies through the insurance company, or register a warning note in the buyer's name.
A recent ruling damaged the status of buyers who hold a warning note, and led the Ministry of Construction and Housing to create another option for providing a security.
Today, close to 90% of the transactions for the sale of new apartments in Israel are done through financial support for the project by a bank or an insurance company, which provides the apartment buyer with a guarantee to secure the funds he paid for the apartment.
As part of these guarantees, the bank or the insurance company is obliged to return its money in the event that the project fails.
Along with this, in about 10% of the transactions, the buyer is given security in the form of registering a warning note on the land in the name of the apartment buyer.
Many cases in recent years where buyers lost their money
The Department of Protection for Apartment Buyers in the Ministry of Construction and Housing has received many cases in recent years in which, after the buyers were given a security of the type of a warning note, the developer ran into difficulties, including the liquidation of the company, and it was not possible to complete the construction of the apartments or return the money to the buyer.
In these cases, apartment buyers lost a significant part of the money paid for the apartment.
The common factor for most of the projects - being of the TMA type 38/1, strengthening and adding apartments.
This issue was given validity in the ruling of the District Court (Parak case 14785-05-18) and the rejection of the appeal that was submitted to the Supreme Court (A.A. 459 /20), in connection with the project of the "Derech Al-Tana" company in Ramat Gan, where the court ruled that the warning notes that were registered in favor of the apartment buyers were "burdensome property" and canceled the protection given to the buyers through the warning notes and the sales agreements.
As a result, the apartment buyers found themselves at increased risk of losing significant funds.
After this case, in December 2020, the sales law commissioner issued a warning to buyers of projects of the TMA 38/1 type in the route of warning notes.
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A call for trust companies (photo: screenshot, Ministry of Construction and Housing)
The new alternative is going to be safer than the warning note method, and its goal is to reduce the use of warning notes.
It should be noted that the cautionary notes are an important tool in the real estate industry and this does not prejudice the use of this tool in projects other than TMA 38/1.
Yitzhak Goldknopf, Minister of Construction and Housing:
"For close to 50 years, there has not been a substantial change in the type of collateral in the construction industry, and unfortunately the situation resulted in the loss of the apartment buyers' money. The Sales Law Commissioner presented me with the problem and the solution, and I found that it was a safe option to protect the buyers' money, and I approved To go out in a pilot. I call on trust companies that meet the conditions to access the voice of the reader for the benefit of the public."
Yehuda Morgenstern, Director General of the Ministry of Construction and Housing:
"Our job is to enable the real estate market to run efficiently and safely.
The solution that we are offering to the market now is the product of hard work done in the office and I am happy for the privilege to present to all those involved in this craft a new alternative which hopefully will lead to the perfection of the protection of the buyers."
Real estate
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real estate
Tama 38