ISRAEL Law and Practice Contributed by: Hagit Bavly and Adi Daniel Zamir, Arnon, Tadmor-Levy
7.6 Liens or Encumbrances in the Event of Non-payment In most cases, construction contracts prohibit the planners and contractors from pledging their contractual rights against the developer. Subject to the developer’s consent, contractors some - times pledge the right to receive their contractual fee. 7.7 Requirements Before Use or Inhabitation Once construction is completed, the building permit issuer must obtain a completion certifi - cate before the new building can be used. Sev - eral certificates should be obtained as a prereq - uisite for such completion certificate – namely: • a certificate confirming that the building is compliant with the building permit; • confirmation regarding the quality of con - struction; • confirmation that the building complies with safety requirements; and • a certificate confirming that the building complies with the rules regarding access for persons with disabilities, etc. Use of a building without a completion certificate is a violation of the Criminal Code, both by the owner and by the user.
A developer cannot disclaim liability towards purchasers of part of or all of the project. The developer will be liable directly towards purchas - ers, regardless of whether they have back-to- back liability against their contractor. Construction contracts usually impose broad lia - bility on the contractor, who assumes contractu - al liability and warrants for purchasing insurance, indemnifying the developer if the developer is found responsible or is required to compensate any third party for works for which the contractor is liable according to the construction contract. 7.4 Management of Schedule-Related Risk It is standard practice for contractors to be con - tractually liable for the project’s timetables. Liq - uidated damages for delays are also common practice. In real life, contractors always claim that they are not the cause for the delay, and disputes in this regard are endless. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance Contractors usually submit bank guarantees: first, a performance guarantee (the main pur - pose of which is to guarantee the contractual timetable), and later a warranty guarantee for the quality of the construction and for the handling of defects. The performance guarantee is usually equal to 5% to 10% of the contractual fee, while the war - ranty guarantee is usually half the performance guarantee and is sometimes reduced after the first year.
8. Tax 8.1 VAT and Sales Tax
VAT is payable on any transaction in which the seller or purchaser is registered with the VAT authority as a “business entity” for VAT pur - poses. The sale and purchase of corporate real estate will always be subject to VAT.
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