Currently, there are dozens of apartments undergoing construction through TAMA 38 urban renewal that are up for sale. For the potential buyer, a sales transaction through TAMA 38 is usually a particularly worthwhile transaction. Apartments are sold at significantly low prices – 7–15 percent less than identical apartments in completely new buildings – representing an opportunity to live in a new apartment at a relatively reasonable price.
If you are interested in purchasing an apartment from a contractor through a TAMA 38 project, you should know that the process is completely different from purchasing a new apartment from a contractor or the purchase of a secondhand apartment.
In a secondhand purchase, the buyer is entitled to register a caveat in his or her favor after the execution of the contract in order to ensure his or her property and contractual rights. In TAMA 38 transactions, the issue is more complicated. The contractor’s rights in the apartments under construction have yet to be registered as independent rights and therefore a caveat for the specific apartment purchased cannot be registered.
In addition, during the purchase of a new apartment from a contractor, the latter is required to provide a guarantee under the Sales Law for any consideration paid for the apartment. In a TAMA 38 transaction, the developer is generally unwilling to provide a guarantee according to the Sales Law because of the financial accompaniment by the bank.
So, what should be considered during the purchase of an apartment from a TAMA 38 project?
- The developer’s experience with similar projects;
- The agreement between the contractor and the residents of the building;
- If the contractor is fulfilling its performance requirements under the agreement;
- Whether the contractor is a registered contractor;
- The anticipated completion date of the project;
- Guarantees;
- Sureties;
- Penalties for delays;
- The possibility of including different notes in the sales agreement; and
- Exploration with a bank as to guarantees and terms for receiving a mortgage.
Source: barlaw.co.il