is a financial protection instrument required under Israel's Sale (Apartments) (Assurance of Investments) Law (1974). Issued by the developer's financing bank, it enables a buyer to recover staged payments directly from the bank if the developer defaults, goes bankrupt, or fails to deliver the apartment as contracted. The guarantee must cover all payments above the minimum advance, be indexed to the Consumer Price Index, and remain valid until a defined release event. The Law Office of Adv. & CPA Shoshi Arbib verifies guarantee validity at every stage of off-plan purchases.
The Bank Guarantee Under Israeli Law
Israel's Sale Law (Apartments) — and specifically its Purchaser Protection Regulations — requires developers selling off-plan apartments to protect all payments above a minimal threshold with a bank guarantee (Avrahat Bank). This guarantee allows the buyer to recover their money directly from the bank if the developer fails to complete the project or deliver the apartment.
What the Guarantee Covers
A correctly issued bank guarantee covers: every stage payment made under the purchase agreement (beyond a small initial payment), indexed to CPI to maintain real value, and remains valid until one of several "release events" occurs — such as registration of the apartment in the buyer's name, registration of a mortgage in the buyer's favour, or delivery together with a building permit certificate.
How to Verify Your Guarantee
- Confirm the guarantee is issued directly by a licensed Israeli bank — not a surety from the developer itself.
- Verify the guarantee amount equals the total paid to date.
- Check the guarantee does not have premature expiry dates that could leave you unprotected during the registration period.
- Retain the original guarantee document in a safe place — you will need it to make a claim.
What happens to my bank guarantee if the developer goes bankrupt?
If the developer becomes insolvent and cannot complete the project, a valid bank guarantee allows you to present the guarantee directly to the issuing bank and demand repayment of all guaranteed amounts — without becoming an unsecured creditor in the bankruptcy proceedings. This is the key protection the law provides. The bank is obligated to pay on the guarantee regardless of the developer's financial situation. However, the guarantee must have been properly issued and must not have expired.
What the Guarantee Covers?
A correctly issued bank guarantee covers: every stage payment made under the purchase agreement (beyond a small initial payment), indexed to CPI to maintain real value, and remains valid until one of several "release events" occurs — such as registration of the apartment in the buyer's name, registration of a mortgage in the buyer's favour, or delivery together with a building permit certificate.
Official References: Israel Land Authority · Israel Tax Authority · Israel Ministry of Justice · Israeli Courts Administration · National Insurance Institute of Israel
Steps in an Israeli Property Purchase
- Pre-purchase checks — Verify Land Registry title, building permits, encumbrances, and compliance with any development agreement.
- Negotiate and contract — Negotiate price and terms, and draft a sale agreement with protective clauses against delays and building deviations.
- Tax planning — Calculate purchase tax, identify applicable exemptions, and plan the transaction tax position before signing.
- Land Registry registration — Transfer title and register the property in the buyer's name, including mortgage registration where applicable.
Shoshi Arbib Law Office — Attorney | CPA | Mediator, Netanya, Israel.
