The author is a partner in the real estate department at the office of Lipa Meir & Co. and specializes in financing real estate projects
The Law of Sale (Investment Guarantee of Apartment Buyers), 535 1974, is intended to improve and protect the status of buyers. Following the collapse of the “Haftziva” company, the law was amended and a developer was prohibited from receiving from an apartment buyer an amount exceeding 7% of the price of the apartment, unless he guaranteed the buyer’s money in one of the five securities listed in section 2 of the law.
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The most common collateral in the housing market is the issuance of a bank guarantee and the insurance of the funds in insurance companies. The guarantee of the investment by registering a warning note in favor of the buyer is also an effective tool that is sometimes used, however, as far as TMA 38/1 transactions (strengthening and thickening) are concerned, the situation has recently been undermined following the ruling of the Supreme Court in the “Derech Tana” case, which confirmed that notes The warning that was registered in favor of the apartment buyers is a “burdensome property”, and should be canceled.
her mortgage on the rights
This ruling created some uncertainty (despite the court’s clarification that it is not a halacha), as a result of which the Commissioner issued a warning to apartment buyers in projects of the TMA 38/1 type whose rights are guaranteed through a warning note.
Recently, the commissioner of the sales law published a “call for trust companies in accordance with section 2(3) of the law” in which the commissioner announced the beginning of a pilot that will allow additional security to be provided to the apartment buyers in relation to the projects of TMA 38/1 and within the framework of which trust companies will be given approval for The commissioner will ensure the return of the buyers’ investment through the registration of a first mortgage on the rights in the apartment or a proportional share in the land in favor of the trust company for the buyer.
As part of the voice of the reader, the commissioner determined that the trust company requesting to participate in the pilot is required to be a subsidiary of a company for financing construction projects, and that the financing company is required to meet several threshold conditions as a condition for the approval of the trust company by the commissioner, including the following conditions: experience in financing at least eight construction projects that have been occupied , of which at least three projects are in the field of urban renewal; Equity of at least NIS 75 million in each of the last three years and the employment of at least five full-time employees during the aforementioned period, as well as other conditions.
New Spirit
It was also determined within the call that any trust company that is approved can operate in connection with a maximum of two construction projects that will be approved by the commissioner; The deed of trust and the fiduciary duties applicable to the company towards the apartment buyers will be determined later by the commissioner; The trust company will open a dedicated bank account for the project where the apartment buyers’ money will be deposited, using voucher books that will be issued by it.
There is no doubt that the pilot proposed by the commissioner brings with it a new spirit while partially utilizing the option given to the commissioner under section 2 of the law. This matter can and will lead to an increase in the options available to entrepreneurs when they come to implement an urban renewal project, as well as increase the variety of services provided by the non-bank entities for such projects, sometimes at the expense of the banks and insurance companies – something that can lead to an increase in competition in the aforementioned field.
However, the reduction of the pilotage to projects of the TMA 38/1 type, the threshold conditions set by the commissioner and especially the conditions concerning the ongoing financial strength and the proven experience in financing completed projects – may burden some of the financing companies to implement the change and implement it in the field and in fact lead to the commissioner’s initiative being crowned as “A voice calling in the desert.”