Background and purpose of the amendment
The primary purpose of the Sale Law (Apartments) (Assurance of Investments of Apartments Purchasers) (the "Act") is to secure the consideration paid by purchasers by granting them various securities. The Act enumerates five types of securities that the seller can give to the purchasers to secure their money, with two of the aforementioned securities being the granting of an insurance policy and the provision of a bank guarantee to the purchasers in respect of the consideration paid to the seller.
Under the provisions of the existing Act, such securities are supposed to protect all monies paid by the purchasers. Thus, since the price of the apartment includes a component of VAT, it emerges that the volume of the security given to the purchaser also includes the VAT component.
Since the seller, the guarantor, is usually a real estate company (entrepreneur / contractor), the VAT component is transferred to the tax authorities on a regular basis, but on the other hand the seller gives the purchaser a bank guarantee for the entire amount including the VAT component. An ostensible financial burden, from the point of view of the security provider, is due to the high commissions it must pay in respect of the production of the bank guarantee or the insurance policy, as the case may be.
In order to reduce the burden on the security provider, Amendment No. 9 to the Act, published on March 30, 2017, provides that the amount of security given to the purchasers will be all the consideration paid by the buyer to the seller, with the exception of the VAT component.
The effect of Amendment...