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1. In this law -

"Apartment" - a room or set of rooms for residence, business or any other purpose;

"Sale" - including the grant of a lease for a period of more than 25 years, an undertaking to sell or to grant a lease as aforesaid or to procure a sale or the grant of a lease as aforesaid, and an association act, as defined in the Land Appreciation Tax Law 1963;

"Seller" - a person who sells an apartment built or about to be built by himself or through another on land owned by himself or by another in order to sell it, including a person who sells an apartment bought by him from the person who built it or is about to build it as aforesaid in order to sell it, but not including a person who sells an apartment not built by himself or for the sale of which he has received no consideration from the purchaser.

Definitions (Amended 1976)

2. A seller will not receive from a purchaser, on account of the price of the apartment, an amount that exceeds 15% of that price, unless he has complied with one of the following:

(1) he has provided the purchaser with a bank guarantee as security for the return of all the monies paid to him by the purchaser on account of the price, in the event that he is unable to transfer to the purchaser the ownership of or any other right in the apartment, as agreed in the sale contract, because of a lien imposed on the apartment or on the land on which it is being built or because of a receiving order, winding up order or order to appoint a receiver made against the seller or against the owner of the said land;

(2) he has taken out insurance from an insurer, as defined in the Insurance Business (Control) Law 1951, approved for this purpose by the Commissioner of Insurance, as security for the repayment of all the monies provided in paragraph (1), with the purchaser named beneficiary under the insurance policy, and he has paid the insurance premium in advance;

(3) he has imposed a lien on the apartment or on a proportionate part of the land on which it is being built with a first mortgage in the purchaser's favor or in favor of a trust company approved for this purpose by the Minister of Housing, as security for the repayment of all the monies provided in paragraph (1);

(4) he has entered, in respect of the apartment or of a proportionate part of the land on which it is being built, a caveat remark as to the sale of the apartment, in accordance with section 126 of the Land Law 1969, and no lien, attachment or third party right that ranks in priority to the caution is registered in respect of the apartment or land;

(5) he has transfered to the purchaser ownership of or any other right in the apartment or in a proportionate part of the land on which it is being built, as agreed in the sale contract, the apartment or land being free from any lien, attachment or third party right.

Assurance of Purchasers Monies (Amended 1976)

2A. A seller who has assured the purchaser's monies under Section 2(1) or (2) may replace the security with one of the kinds of security under Section 2(3), (4) or (5), unless another kind was stipulated in the sale contract, provided that construction of the apartment has been completed and the purchaser has been given possession; the provisions of this Section will not derogate from the provisions of Section 3.

Replacement of Security (Amended 1976)

2B. (a) If the land on which the apartment sold is built on Israel land, within the meaning of that term in the Basic Law: Israel Lands, the seller only has to assure the purchaser's monies under Section 2 for a period ending at the time of fulfillment of all of the following:

(1) construction of the apartment has been completed in accordance with the sale contract;

(2) possession of the apartment has been given to the purchaser;

(3) a contract has been signed between the purchaser and the Israel Lands Administration (hereinafter: Administration), by which the Administration undertakes to have the purchaser registered as the apartment's lessee for a period of more than 25 years, free from every lien or obligation to set a lien, attachment or other third party right, other than a lien or obligation for a lien entered against the purchaser.

(b) A contract referred to in Paragraph (3) of Subsection (a), signed between the purchaser and the Administration between February 2, 1975, and March 30, 1979, is deemed to include an undertaking by the Administration, as stated in the said paragraph.

(c) If the Administration is ordered to compensate the purchaser for the non-fulfillment of its undertaking under Paragraph (3) of Subsection (a), the seller will indemnify the Administration, unless he proves that the Administration is responsible for the cause resulting in the said compensation.

Assurance of Monies of a Purchaser of an Apartment Built on Israel Lands (Amended 1976, 1981)

3. If the monies paid or to be paid by the purchaser of any apartment to the seller have not been secured as provided in Section 2(1) or (2),  then, notwithstanding any provision of the sale contract, the purchaser is not be bound to make any payment on account of the price of the apartment, in excess of such amounts as prescribed in regulations.

Restrictions on Payments

3A. (a) All expenses incurred for payments of fees, and for securing the monies of the purchaser, under this Law, (hereinafter: the expenses) will be born by the seller.

(b) The provisions of Subsection (a) will not apply, if, according to the sale contract, the seller must pay the expenses of the purchaser, the insurer or the bank guarantor, as the case may be, gave a receipt in the name of the purchaser.

Payments of Expenses by the Seller (Added 2000)

4. A seller who contravenes the provisions of Section 2 is liable to imprisonment for a term of six months or to a fine of IL 100,000, and, if he was a contractor for an engineering construction works within the meaning of that term in the Contractors for Engineering Construction (Registration) Law 1969, the court may disqualify him from registration in the Registry or, if he is already registered, cancel his registration for such a period as it will prescribe.

Penalties

5. The provisions of this Law will not apply to an apartment in respect of which the sale contract was made before this Law came into effect.

Scope

6. The Minister of Housing is charged with the implementation of this Law and he may prescribe regulations for its implementation, including regulations which prescribe ways of proving, for purposes of Sections 2A and 2 (b) (1) - that construction of an apartment has been completed.

Implementation and Regulations (Amended 1976)

7. This law will come into effect on February 2, 1975.

Commencement