Alon called me at an hour when he doesn't usually call anyone. “Ilan, I need you to check something for me. I have a problem with the contractor, and I think I can't roll it forward.”
I had known Alon for a few years, from a distance. He built in Israel, knew the industry from the inside, and when he decided to expand into Romania, he did it the way people like him do: found a local contractor, found a Romanian lawyer who knows the market, and closed everything at a fast pace. The Romanian lawyer drafted his sale contracts with the buyers. Alon didn't think he needed an Israeli lawyer for that as well. “He speaks Romanian, he knows the registry there, why should I pay double,” he once told me, when we were talking about something else entirely.
The sale contracts the Romanian lawyer drafted were completely standard for the market there, a fixed price, no linkage to any index. That is exactly the structure buyers in Romania expect, and no developer deviates from it without losing customers. Alon didn't ask too many questions about that clause. He was busy with sales, with cash flow, with the construction schedule. The contract was signed with all the buyers, one after another, and no one stopped to think what it would mean in a year.
Construction progressed. And then, just as happens to many Israeli developers in this period, the executing contractor arrived with new numbers. The prices of steel, concrete, transport, all rose following the war in Ukraine, and the effect on the supply chain in Eastern Europe was tangible and real. The contractor didn't demand it rudely. He presented a table, compared the agreed price with what he is paying today for the same materials, and asked for an increase.
Alon, like any developer who sees a cost he hadn't planned, immediately thought of the most natural way to deal with it: pass part of it on to the buyers. He turned back to the Romanian lawyer and asked him to check whether there was any opening in the contracts. The answer was short and clear: no. The price is closed, there is no linkage mechanism, no clause that allows an update because of rising raw material costs. That was the moment he understood he was stuck in the middle, a contractor demanding more on one side, buyers who cannot be charged more on the other. And then he called me.
I sat on both contracts in parallel, the sale contracts and the execution contract with the contractor. I checked whether there was any interpretation, any general clause on “unforeseen circumstances” that could be leaned on against the buyers. There wasn't. The contract the Romanian lawyer drafted was too clean for that, exactly as it should be from a buyer's point of view, and exactly as problematic as it was from the point of view of a developer who hadn't thought ahead.
Facing the contractor it was already a different conversation. There we managed to open some room. We went through the execution contract, found points where the increase could be split between the parties, part at Alon's expense, part through deferral of payments, part the contractor agreed to absorb in exchange for extending the schedule. It didn't solve the problem, but it made it smaller.
What I think about the most from this story is not the missing clause. That clause, as noted, wasn't supposed to be there, it is the right structure facing buyers in Romania. The real problem was that no one sat on both contracts together, from the developer's side, before they were signed. The Romanian lawyer did his job correctly for the buyers. But no one looked at the full picture from Alon's side, that if the price facing the buyer is locked, the price facing the contractor must be managed differently, from day one.
Alon finished the project with a profit significantly lower than he had planned. “Next time,” he told me, “I bring someone who sees both contracts together, before I sign either of them. Not after the problem is already here.”
If you are developers building abroad, don't settle for a local lawyer who checks each contract separately. Someone needs to see the full picture: what happens to your profit if the price facing the buyer is locked and the cost facing the contractor is not. That question needs to be asked before signing, not after.
Roy and Alon never met, and never sat in the same room. But both learned the same lesson, each in his own hard way: a fixed price in a real estate contract abroad is neither a favor nor a trap, it simply moves the risk from one place to another. For Roy, that clause was a shield. For Alon, it was a debt he didn't know he had taken on the day of signing. The difference between the two was not luck, and it wasn't in the clause itself at all. The difference was who sat and read the two contracts together, before it was too late to ask “what happens if.”
We too, as a firm, learned from this. When we now accompany an Israeli developer on a contract with buyers abroad, we take care to include a clause that allows him to raise the price of the apartment under certain conditions, if raw material costs jump, because after seeing what happens when that clause isn't there, we are not willing to leave a developer exposed to that again.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית