Every second person I ask in the street will tell me that a ma'acher (a “fixer”) is an influential person who offers his services as an intermediary for obtaining shortcuts in a tangled bureaucratic system, for arranging meetings with people whose door is not always open to the public, and sometimes even for obtaining benefits contrary to the law in return for a bribe.
Anyone who works in and develops international real estate comes across this term, and anyone operating in the countries of the former Eastern Europe has certainly come across it, although, as noted, I have run into fixers in other countries too, Western ones.
A 2021 Transparency International report determined that the real estate market is one of the markets most vulnerable to corruption and money laundering. The report noted that lack of transparency, weak regulation and insufficient enforcement contribute to the spread of these phenomena.
We were sitting in a status meeting with clients at the local partner's office in a European country, when one of the partners, Yair, a former army man for whom this is his first project abroad, explained to us that they had just come from a meeting with an architect who told them that if they hired his services he could obtain building concessions for them in the planned villa complex and also shorten timelines, since he was well connected in the local authority.
The local partner and I raised an eyebrow.
The local partner began explaining to Yair that if it is permitted by law then he will get it in any case, no matter which architect they choose to work with.
I tried to explain to them that usually those who present themselves as having “connections” to the authorities do not always turn out to be so, and that quite a few developers I have met over the years paid a lot to intermediaries and/or all kinds of promise-makers without receiving the consideration promised to them.
Yossi, too, who has several years of experience in developing projects in Eastern Europe, ran into a fixer who reached him through a mutual acquaintance. The local fixer presented himself to Yossi as having extensive connections in the local authorities and in the central government, and promised to obtain a building permit for Yossi's planned project within a few months. He explained to Yossi that the strenuous work involved payment to service providers and a “special payment” to speed up the proceedings, and collected from Yossi a sum of several tens of thousands of euros in advance.
When Yossi consulted me and the local partner, we recommended that he not pay in advance but set milestones, but the desire to speed up the planning proceedings and get going as quickly as possible, together with the fixer's persuasiveness, tipped the scales. The only thing I managed to get Yossi to do was sign a proper agreement with a company owned by the fixer.
A year passed from the date Yossi made the payment, and nothing happened. He received no building permits and there was no progress in the project. Despite the commitment I put into the contract between them that if no building permits were received by the end of a year, the agreement would be cancelled and the money returned - Yossi was left with no permit and no money.
These two short stories perhaps show the problem of dealing with “fixers,” but when many Israeli developers, who are not well versed in the ins and outs of the bureaucracy in the country where they operate, buy land or a building overseas every day, it is important to pay attention to a few rules of caution on this matter:
- Beware of “fixers” who promise benefits that are not legal or cannot be obtained through accepted means. It is important to check the credibility and reputation of people who offer shortcuts.
- It is recommended to rely on reliable and experienced professionals, to consult a lawyer who works in international real estate before signing any agreement, one who knows the market and the regulation. It is important to make sure the lawyer is familiar with the specific country in which you are investing. He should be well versed in the real estate and tax laws of that country. It is also advisable that he speak the local language fluently and be able to communicate effectively with all the parties involved.
- It is important to document all agreements in writing, and to include in them clauses setting milestones and conditions for payment. It is recommended to avoid paying in advance to “fixers” or to any other party, and instead to set milestones and payments in accordance with the project's progress. As a prime minister once put it: “They'll give - they'll get.”
- And most important - get to know the local market, the regulation and the relevant parties before making a real estate investment.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית