“I'm going to sue you, you'll return every shekel I paid,” he shouted over the phone.
Tal bought, like some 30 other Israeli investors, an apartment in a hotel project on one of the Greek islands. The project was structured so that our office served as trustee for the buyers' funds, which were transferred, according to the terms of the agreement, to the developer company that was supposed to renovate the building, furnish it and hand over the apartments to the buyers. The project ran smoothly: every two to three months the developer's project manager sent us (and the buyers) a written report, photos and videos on the progress. Everything seemed to be on schedule, and the money was released each time we reached a milestone according to the construction supervisor's report. 90% of the consideration had been transferred/paid to the company, and only the final payment remained, against completion of the furnishing, receipt of the occupancy certificate and delivery of the apartments to the buyers.
About two weeks ago the project manager called me and informed me that the contractor had stopped working and claimed that he was owed a debt. I asked for a conference call with the contractor, since the developer was not returning my calls. In the call with the contractor I understood that the developer had stopped paying him several months earlier, and that until the debt was settled the contractor had no intention of completing the works. All the requests and pleas by me and by the project manager, including my promise to transfer him the funds as soon as he finished the construction and we collected the balance from the buyers, were in vain. The contractor dug in his heels.
As a lawyer experienced in accompanying Israeli investors abroad, I have learned that Tal's case is not unique. In fact, a study published in 2023 by Deloitte Real Estate found that about 38% of international real estate investors run into significant legal disputes during their first investment abroad.
According to a 2024 PwC survey, over 60% of Israeli real estate investors abroad choose to use legal trustee services - a high rate compared with the global average of 42%. The reason is clear: the trustee is a critical layer of protection between the investor and the many risks of the international market.
“Tal,” I said quietly, trying to calm things down, “the project is almost complete. All the money was transferred according to the milestones in the agreement. I don't know where the developer disappeared to or what he did with the money we transferred to him.”
“I don't care,” he kept shouting. “You were the trustee! You're responsible!”
“If you intend to shout and not listen, we'll end the call here,” I tried.
Tal kept shouting, and I had no choice but to end the call.
A 2023 study by the University of Cambridge points to an interesting paradox: the more complex the trust mechanisms, the greater the chance of a legal dispute in a crisis - not because the mechanism fails, but because of the high expectations it creates among investors.
I stood by the window, looking down at the cars speeding past below, frustrated and troubled. As trustee, am I responsible for the company's financial conduct? The legal boundary is indeed clear: my role was to ensure that funds were transferred in line with the project's progress, as set out in the agreement, and not to supervise how the developer itself managed its money.
I knew the professional answer was not clear-cut, and that is exactly what troubled me. My role as trustee was to ensure that funds were transferred in line with the project's progress, as set out in the agreement, and not to supervise how the developer itself managed its money. But in the situation that had arisen, the boundaries blurred. The investors' money was gone, the project was stuck, and accusing fingers began to point in my direction.
According to a 2024 study by KPMG International, a trustee in international real estate transactions has five main roles:
1. Safeguarding investors' funds until agreed milestones are met
2. Overseeing project progress through outside professionals
3. Mediating and facilitating communication between the parties during disputes
4. Monitoring basic financial risks
5. Enforcing the contract when necessary
It is worth noting that in the same study, 72% of investors expected the trustee to also carry out ongoing integrity checks on the developer - something that is not accepted as part of the traditional duties of a trustee.
The phone rang again. This time it was Dana, another investor. “What's happening with our money? Could we lose everything?”
I knew the investors were not interested in complex legal explanations. They want solutions. And rightly so.
I decided to take the initiative. I called a local lawyer in Greece, a longtime colleague who works in company law and insolvency receiverships. In a joint investigation, we discovered that the developer company had run into financial difficulties even before the project began, and that the developer had used the project's funds to cover earlier debts.
I felt as if I were inside a complex maze of legal, ethical and professional responsibility. But I knew one thing for certain: I had to find a solution for my investors.
Within two weeks we managed to locate assets belonging to the developer in another country, obtain a temporary attachment order, and open negotiations with the local contractor to complete the works. We also obtained temporary approval from the local authorities to operate the complex partially, which allowed the investors to begin receiving a partial return in the short term.
An important insight emerged from this case: modern trusteeship in international real estate investments requires a significant expansion of the traditional role, perhaps a new model of “proactive trusteeship” that combines early-warning systems with ongoing financial monitoring.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית