Summary
- Two separate laws: the 1973 Sale (Apartments) Law governs the contract; the 1974 law on guaranteeing purchasers' investments governs the money paid.
- Cap without a guarantee: the developer cannot collect more than 7% of the price before providing a guarantee (art. 2 of the 1974 law).
- Five accepted forms: bank guarantee, approved insurance, first-rank mortgage, registry cautionary note, transfer of ownership free of encumbrances.
- Bank deadline: the bank issues the guarantee within 14 business days following payment, for payments made through the project's accompanying account.
- Payments by voucher: the voucher booklet (פנקס שוברים, pinkas shovrim) is specific to each unit; payments go only through these vouchers.
- Point of caution: the registry cautionary note protects the right to register the property, not the money paid.
1. Two Laws for Two Protections
An off-plan purchase in Israel rests on two different texts. They must be distinguished to know what protects what.
The Sale (Apartments) Law 1973 — חוק המכר (דירות), תשל״ג-1973 (Chuk HaMecher Dirot) — governs the contract. It sets the seller's obligations, the delivery date, construction warranties and delay compensation. It is the text that frames the contract day to day.
The law on guaranteeing purchasers' investments (תשל״ה-1974) deals with a narrower and more concrete subject: the money you pay before becoming the owner. It is this law that requires the developer to guarantee the sums collected. A buyer who reads only the contract misses this second protection, even though it is the most useful one if the developer runs into difficulties.
The two laws complement each other. The first tells you when you will receive the apartment. The second tells you what happens to your money if you never receive it. Under article 2 of the 1974 law, the seller cannot receive more than 7% of the price without a guarantee.
2. The 7% Cap: The Rule That Triggers Everything
The mechanism is simple to understand. As long as the guarantee is not in place, the developer can collect only 7% of the price. This threshold is not a commercial deposit: it is a legal limit.
In practice, no payment may exceed this cap until the guarantee has been provided. The rest of the payment schedule must be backed by one of the forms of guarantee provided by law.
The sanction is real. If the seller collects more without a guarantee, he is exposed to a criminal penalty: up to one year's imprisonment or a fine (art. 4(ב)(1) of the 1974 law). This rule protects the buyer, but it assumes that he claims the guarantee after each payment.
A practical piece of advice: after each payment, claim the corresponding guarantee (legal deadline of 14 business days). An announced guarantee is not a guarantee received.
3. The Five Forms of Guarantee Accepted by Law
The 1974 law does not impose a single model. It recognises five forms of guarantee.
| Form of guarantee | What it protects |
|---|---|
| Bank guarantee or guarantee from another guarantor | Refund of the sums paid if the property cannot be transferred. |
| Approved insurance | The buyer is the beneficiary of the insurance contract. |
| First-rank mortgage | The property is encumbered in favour of the buyer. |
| Registry cautionary note (הערת אזהרה, hearat azhara) | Protects the right to register the property, not the money paid. |
| Transfer of ownership free of encumbrances | The buyer becomes the owner, with no encumbrance on the property. |
These forms are not all equivalent for a buyer making staged payments. The bank guarantee and approved insurance protect the money. The registry cautionary note protects the future right to the property. These are two different securities.
4. How the Bank Guarantee Works
The bank guarantee has a simple principle: the bank undertakes to refund the sums paid if the property cannot be transferred to the buyer (art. 2(1) of the 1974 law).
The deadline matters. The bank issues the guarantee within 14 business days following payment, for payments made into the project's accompanying account (art. 3ב(ה)).
In concrete terms, you do not pay money to the developer freely. The circuit goes through the bank that accompanies the project. This architecture explains why the voucher booklet is so important: it makes that circuit visible and traceable.
5. The Voucher Booklet: The Trace of Each Payment
The voucher booklet (פנקס שוברים, pinkas shovrim) is a document specific to each unit. It is issued by the bank that accompanies the project, and payments go only through these vouchers (Association of Banks, ibank.org.il, 2015).
The mechanism is simple. Each instalment corresponds to one voucher in the booklet. You pay by means of that voucher. So you do not pay the developer directly, and you do not settle an instalment without a voucher.
This detail looks administrative. It is in reality central. A payment outside the booklet falls outside the voucher circuit described by the Association of Banks: ask your lawyer for advice. Before signing, ask to see the booklet and check that every instalment in the contract appears in it.
6. Amount Covered and Indexation
The guarantee covers the sums paid. It does not cover a flat percentage of the price, and it does not make you the owner: it refunds what you have paid if the transfer of the property fails.
Indexation follows what the contract provides. In the absence of a clause, it follows the construction input index (ibank.org.il, 2015). In other words, the guaranteed amount may change over time, according to the formula retained in the contract.
This point deserves careful reading. Two contracts may provide for the same bank guarantee and different indexation. The question to ask is therefore twofold: which guarantee, and on what indexed basis?
7. Bank Guarantee or Registry Cautionary Note?
The registry cautionary note (הערת אזהרה, hearat azhara) is provided for by article 126 of the 1969 Land Law. It protects the right to register the property, not the money paid (Melnik law firm, 31/08/2026).
The distinction is essential. A registry cautionary note protects your right to register the property, not the money paid. It does not refund you if the developer does not deliver and you have already paid.
It is not a financial guarantee. For the money, you need a bank guarantee, approved insurance, a first-rank mortgage or a transfer of ownership free of encumbrances.
8. Mistakes to Avoid
- Believing the guarantee covers the entire price from signature. That is false. The system rests on a 7% cap without a guarantee, then on the guarantee of the sums actually paid.
- Paying outside the voucher booklet. A direct transfer to the developer falls outside the voucher circuit described by the Association of Banks: ask your lawyer for advice.
- Settling for a registry cautionary note. It protects the property, not your cash position.
- Not checking indexation. The guaranteed amount depends on the contract clause.
- Signing without a lawyer. The contract and its annexes are in Hebrew, and the guarantee clauses deserve an independent reading.
9. Frequently Asked Questions
Does the bank guarantee cover the whole price from signature?
No. The developer can collect only 7% of the price without a guarantee (art. 2 of the 1974 law). Then the guarantee covers the sums actually paid, according to the form retained and the contract's indexation clause.
How long does the bank take to issue the guarantee?
For payments into the project's accompanying account, the bank issues the guarantee within 14 business days following payment (art. 3ב(ה) of the 1974 law). After the payment, claim the corresponding guarantee (legal deadline of 14 business days).
What happens if the developer goes bankrupt?
The main protection remains the guarantee of the 1974 law: it aims at refunding the sums paid if the property cannot be transferred. That is why the form of guarantee and the payment circuit matter as much as the price.
Is a registry cautionary note enough to protect my money?
No. It protects the right to register the property (art. 126 of the 1969 Land Law), not the funds paid. A separate financial guarantee is required.
Can I pay the developer directly to move faster?
No. Payments go only through the booklet vouchers issued by the bank that accompanies the project. A direct payment falls outside the voucher circuit described by the Association of Banks: ask your lawyer for advice.
Sources
- Sale (Apartments) Law 1973, consolidated text on Nevo: https://www.nevo.co.il/law_html/law00/72490.htm
- Law on guaranteeing purchasers' investments (תשל״ה-1974), version updated to 2026 (Wikisource).
- Association of Israeli Banks, ibank.org.il, 2015 (voucher booklet, indexation).
- Melnik law firm, note of 31/08/2026 (registry cautionary note, article 126 of the 1969 Land Law).
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Disclaimer: this is not legal advice. Guarantee rules and contractual clauses vary from project to project; consult an Israeli lawyer before signing.
Rules and sources checked: 8 November 2026.