After Selling Hundreds of Units: Ministry of Housing Demands Gindi Refund Buyers Over Option Agreement Violations in Sde Dov Project

After selling hundreds of residential units within just a few weeks in the Sde Dov project, the Ministry of Housing’s Sales Law (Hok HaMecher) Regulator, Ariel Rosenberg, launched an investigation into Gindi Holdings over payments it collected without providing the required legal guarantees under Israel’s apartment sale law. Following the investigation, the regulator concluded that the so-called “option agreement” signed with buyers were, in practice, full sale agreements. As a result, Gindi must either refund all amounts paid above 7% of the apartment price or issue the appropriate legal guarantees. Gindi Holdings responded: “The apartment marketing was conducted legally; we respect the position of the Contract Law regulator.”

By Nimrod Buso, Nadlan Center

Following one of the most high-profile sales campaigns in recent years—in which it sold hundreds of apartments within days—Sales Law Regulator Ariel Rosenberg instructed Gindi Holdings (Gindi Israel 2010 Ltd.) to refund buyers in the Vogue project in Sde Dov for payments made without receiving the required legal guarantees under Israel’s Sales Law (Hok HaMecher). This project is considered the most prominent of the year, with Gindi making waves by drastically undercutting North Tel Aviv prices and offering units starting at just 49,000 NIS per square meter.

The sale price was considered extremely low for the area. According to an analysis by the Nadlan Center, in some cases where buyers signed an “option agreement” to purchase an apartment, the company collected 9.5% of the total purchase price—exceeding the legal limit. Under the Sales Law, a developer may collect only up to 7% without providing a statutory guarantee. Once this came to light, the Ministry of Housing’s regulator ordered the company to either refund the excess 2.5% or provide the required guarantees. It remains unclear how many apartments were sold using this method.

The Ministry of Housing stated that the inquiry was prompted by complaints received by the regulator’s office. “An examination was conducted of the full set of agreements signed by buyers, including an ‘option agreement’ for purchasing an apartment in the project. The regulator determined that the ‘option agreement,’ along with all its annexes, effectively constitutes a binding sale agreement. As such, all legal obligations related to apartment sale transactions apply, including the Contract Law (Apartments), 1973, and the Contract Law (Apartments)–Guarantee of Investments by Apartment Buyers, 1974. This includes the requirement to provide guarantees for any payments exceeding 7% of the apartment price, restrictions on index-linking more than 40% of the price, and other provisions.”

It was also stated that following a discussion with representatives of Gindi Holdings at Rosenberg’s office, he instructed the company to either issue the required statutory guarantees for the funds it had collected or refund all amounts exceeding the 7% limit—even if those funds were held in an escrow account. The company was required to report back to the Ministry on the execution of the refunds and necessary adjustments.

450 Transactions in the Beginning of June

Two months ago, on June 3, the company launched a high-impact marketing campaign, offering “on paper” apartments in its new Sde Dov project at starting prices of just NIS 49,000 per square meter—tens of percent below the market rate at the time, which ranged between NIS 75,000 and 80,000 per square meter. The aggressive campaign led the company to announce, just ten days later, that it had already sold 450 units: 90 through full purchase agreements and another 360 through option agreements involving deposits. It was this method that was reviewed by the Sales Law Regulator.

Sales Law Regulator Ariel Rosenberg stated: “The Ministry of Housing is taking firm action to protect the rights of apartment buyers and uphold the rule of law. We will not allow the law to be circumvented through the use of contract titles that conceal the true nature of the agreement. This is our responsibility to the public, especially when it comes to what may be one of the most significant and expensive transactions in a person’s or family’s life. The law is clear: any interpretation or contract title that permits a seller to collect more than 7% of the apartment price without providing one of the statutory guarantees is strictly prohibited. I urge apartment buyers to carefully review their contracts and seek independent advice—and if you suspect a violation, you are welcome to contact the regulator at the Ministry of Housing.”

Gindi Holdings stated: “The company conducted its apartment marketing in a proper and well-advised manner, in accordance with the applicable guidelines in this field. We believe the marketing was legal—including the amounts deposited in escrow by or on behalf of buyers. Nevertheless, the company respects the position of the Sales Law Regulator at the Ministry of Housing, with whom we maintain ongoing dialogue. Accordingly, following the conclusion of the regulator’s review—and despite our view that there was no flaw in the transaction—the company is allowing buyers to receive a refund of the 2.5% of the sale price that was held in escrow for them.