Move-In Delay: Buyer Ordered to Pay Property Management Fees Months Before Receiving Keys

A recent decision by the Supervisor of Real Estate Registration addresses whether a buyer of a new apartment can be obligated to pay shared property expenses before receiving possession. The case involved a Rishon LeZion buyer who refused to pay management fees for the period between the issuance of the occupancy permit and actual handover of the apartment, arguing the developer was responsible for the delay. The Supervisor ruled that a contractual clause signed by all buyers requiring such payments overrides the default legal rule, making the buyer liable.

B Adv. Mor Kochavi, with the assistance of Gal Hadad

In October 2019, a buyer signed an agreement for the purchase of an apartment in a residential project in Rishon LeZion. Like the other buyers in the building, she also signed a project management agreement, which stipulated that all buyers would be required to pay management fees starting from the date that the Occupancy Authorization Form (Tofes 4) was issued and the first apartment in the building was occupied, even if their own apartment was not yet ready for possession.

Section 58(a) of the Land Law, 1969 states that an apartment owner must participate in the expenses required for the proper maintenance and management of the shared property. The participation rate is proportional to the size of the apartment compared to the total area of the other apartments, unless a different rate is set in the building bylaws. This is a dispositive provision, meaning that it can be modified by agreement in the building’s bylaws.

In this case, the Supervisor examined the core question: Can a buyer be required to pay shared property expenses before taking possession of the apartment, either under Section 58(a) of the Law or through a contractual commitment in a management agreement?

Case Background:

Section 6.1 of the Management Agreement, which is central to the dispute, states:

“The management company will begin providing services for the entire project from the date of receipt of Tofes 4 and the occupation of the first unit by any of the owners, and from this date, all unit owners and/or users shall be required to pay expenses and management fees. During the first six months of operation of the project — i.e., from the date of commencement of services under this agreement (even if only partially provided) — all expenses will be divided among all unit owners and/or users in such a way that those whose units are occupied will pay the full expenses and management fees, while those whose units are unoccupied will pay only 60% of the expenses and management fees, until the end of the six-month period and/or the occupation of their unit, whichever comes first. After the first six months of operation, all unit owners and/or users shall pay the full expenses and management fees.”

In April 2023, the Tofes 4 was issued, and the first apartment in the building was occupied. The buyer took possession of her apartment six months later, in October 2023, and immediately rented it out. The management company demanded that the buyer pay her share of the property management expenses for the period between April 2023 (issuance of Tofes 4 and occupation of the first apartment) and October 2023 (handover of her apartment).

The buyer refused to pay, claiming that the responsibility for covering these shared property expenses during the disputed period fell on the developer, who had delayed the delivery of possession. As a result, the management company filed a lawsuit for approximately NIS 5,758.

Legal Arguments:

The Buyer argued:

1. Until the date she took possession of the apartment, she could not be regarded as the actual owner, and therefore, Section 58(a) of the Law did not apply to her.
2. The responsibility for paying management fees during the disputed period lay with the developer, due to the delay in handover.

The management company claimed:

1. The sales agreement granted the buyer a “quasi-proprietary” right, and therefore, she was obliged to participate in shared property expenses even before taking possession.
2. The general rule that the developer is responsible for management fees until handover does not apply here, because of the explicit contractual commitment in the management agreement.

Court Ruling:

The Supervisor ordered the buyer to pay the management fees for the entire disputed period, along with interest and legal costs. It was determined that while Section 58(a) of the Law applies only to those who are actual owners of the apartment — and therefore does not require payment for a period before possession — Section 6 of the Sale Law (Apartments), 1973 allows deviation from the default building bylaws in sales agreements, including in relation to expense obligations.

The Supervisor further noted that case law recognizes that when all apartment buyers sign clear agreements that conflict with the standard bylaws, those agreements may be given by law-level force, not merely contractual force.

In this case, Section 6.1 of the management agreement constituted an explicit and clear commitment by the buyer to pay management fees even before taking possession. Since all buyers signed the agreement as part of the sales contract, it formed an integral part of the building bylaws. As such, it created a binding bylaw provision that overrides the default rule in Section 58(a) of the Law, and under which the buyer was obligated to pay the shared property expenses for the disputed period.

Conclusion:

The ruling clarifies the significance of obligations arising from contractual consent. As a rule, an apartment owner is not required to pay shared property expenses for a period before actually becoming the owner in possession. However, where there is an explicit contractual agreement to the contrary — particularly one signed by all buyers and incorporated into the condominium bylaws — that agreement will prevail over the general legal provisions that allow for deviation.

(Case: Rehovot 472/23 Giggis Management Rishon LeZion Ltd. v. Shai Elias (Ha’Arbaa) 2018 Ltd.)