| The Supervisor of the Banks has published a directive that creates a standardized text for the guarantee document required by the Sale (Apartments) (Assurance of Investments of Persons Acquiring Apartments) Law, 5734–1974, which will apply to all banking corporations. |
| The text of the guarantee document creates a uniform framework for all the conditions included in the guarantee document and specifies, among other things, the cases in which the bank is obligated to redeem the guarantee, the guarantee's mechanism of indexation, the timing of payment once payment has been demanded and the cases in which the guarantee expires. |
| In creating a standardized text, the Supervisor of the Banks is applying the lessons learned from his involvement in issues related to guarantees according to the Sale Law and from court rulings in this area. One of the sources of the standardized text is the court ruling concerning standardized contracts issued on November 25, 2007 which validated the agreement reached between the Supervisor of the Banks and Bank Mizrahi-Tefahot Ltd. regarding the elimination of discriminatory conditions in a guarantee according to the Sale Law. The ruling eliminates several discriminatory conditions: the conditioning of the redemption of the guarantee on the deposit into the financing account; the condition requiring that the buyer first demand that the contractor fulfill his obligation; the requirement for the buyer to provide a declaration that he has made a written request to the contractor to fulfill his obligation according to the contact, etc. |
| The guarantee is one of the ways specified in the Sale (Apartments) (Assurance of Investments of Persons Acquiring Apartments) Law, 5734–1974 to ensure that the seller does not improperly channel the funds paid to him by the buyer towards the price of the house. This is the most commonly used of the possible methods of guarantee according to the Law and constitutes the main tool for guaranteeing the investment of home buyers. |
| This directive complements a previous one recently issued by the Supervisor of the Banks regarding project financing, which specifies the method of payment for a house using coupons and which creates an additional layer of protection for home buyers. Both directives will go into effect on June 1, 2008 and will apply to all guarantee documents from that day onward. |