When setting out on a new project I like to put questions to the developer not only in the narrow legal field, but to understand the essence of the project, the planning (to see the fit with the needs of the local market and not with the developer's fantasies), through to the way of marketing and the project's target audience.
Ronen (a pseudonym) really did not understand why I was asking all the questions, and what difference it makes how and to whom the apartments to be built will be sold. Even when I tried to explain that Israeli customers would ask for security for their money, he laughed and replied that he has been a contractor in Israel for 20 years, everyone knows him, and he would have no problem selling. I nodded and moved on.
At the stage of drafting the sale agreements he insisted that there was no need for any security, and explained to the marketer chosen to market and sell the project that he needed to know how to sell him and the project. The most he agreed to was to define the payment terms in line with the pace of construction progress.
Ronen hired a media company and went on air with a landing page and an invitation to a presale for friends, and in practice the salespeople ran into the same barrier again and again... and the pace of sales was very slow....
Three months passed and Ronen replaced two marketers, because they did not manage to close even a single sale (apart from 2 friends of his who agreed to buy apartments in the building). At that point I too “threw up my hands” and stopped trying to persuade Ronen to change the deal structure offered to buyers.
“I don't understand what they want from me?” he asked angrily at one of our meetings. “The plot is mine, unencumbered, there is a building permit and I agreed that they pay according to the pace of construction progress. What's wrong with that?”
I tried to explain that this is a foreign country, that even if he is a well-off and experienced contractor or developer in Israel, customers are apprehensive when they buy property abroad. Customers want to sleep peacefully.
Israeli buyers are in no hurry to make purchases abroad without some security. Not in every country is it possible to give them a priority notice (hearat azhara, a caveat registered against the property) or a quasi-priority notice, which they know from Israel. Not every project or developer has the ability or the option to give buyers bank guarantees. As the one accompanying the developer, the role of the lawyer is to find the mechanism that will secure the buyers' money and give them the confidence and peace of mind to buy.
What security do you give the buyers in your projects abroad? How well does the deal structure you offer fit your target audience?
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית