The Inbal Or affair recently put purchase groups in the headlines. Suddenly the idea of banding together as a buying group to get cheaper apartments, and to choose your own neighbors along the way, does not look so appealing anymore.
If you thought the final price and the completion date were the main risks, here is one you probably have not heard about: apartments built through purchase groups have far more construction defects than other new apartments in Israel,* and their defects tend to be more severe.
As a bonus, the buyer who felt lucky to be part of a strong buying group turns out to be in a weak position exactly when it is time to get those defects fixed, because he bought through a purchase group.
*To be clear, this is not an official statistic. It is my own assessment, based on 15 years inspecting hundreds of apartments and common areas on behalf of Arad Bedek Bayit, and serving as a court-appointed expert consultant in construction-defect disputes.
Why do new apartments have construction defects at all?
We assume a new product is a good product, the same way we would with a new car. Construction does not always work that way. Some 70 to 80 percent of new apartments in Israel have construction defects: some are minor, around ₪20,000, and others are severe enough to cost hundreds of thousands of shekels in lost property value.
That is the reality of construction today.
Building a building is complicated. Dozens of different professionals, mostly outside subcontractors with almost no coordination between them, each build a piece of the project, and it takes real integration to get a flawless result out of that.
The odds that every one of them does a perfect job are low, and without supervision, and under schedule pressure, the damage gets plastered over, literally.
Contractor A does his part and misses something small.
Contractor B, scheduled for the next day, has to build on top of A's flawed work, and now has three options. He can simply not notice, since no one may be supervising on his behalf. He can notice, and insist on tearing it out and redoing it properly, the ideal contractor's choice, except that this throws off the schedule for everyone still to come, and demolishing and rebuilding also costs money.
Or he can move on: a little crooked is not the end of the world, and whoever comes after him will improvise around it. This is how construction defects are born, some from poor planning and some from what happens on site.
For the contractor, tearing out and redoing the work is the expensive option, and he is generally trying to finish as cheaply and quickly as possible before moving to his next project. Besides, you might never notice: without an engineer's home inspection, you simply will not know the defects are there.
Many residents also never use the warranty period the Sale Law gives them, which lets a contractor who cut corners get away with it.
Why purchase-group apartments end up with more defects
So the contractor on site is what actually determines the level of construction, and whether defects appear at all. Every contractor leans toward finishing fast and cheap. The real question is whether anyone is watching him.
A construction-industry developer versus a purchase-group developer
The classic way to buy a new apartment is from a professional developer in the construction industry, companies like Gindi, Shikun Ubinui, Danya Cebus or Ashtrom. Being from the industry gives a developer real advantages.
He knows contractors, has worked with them, and can pick one who is attractive to work with but not suspiciously cheap. With dozens of projects behind him, he has already run into and solved dozens of problems, and knows how not to repeat past mistakes, which shapes every decision he makes.
A purchase-group developer is a different story. He is usually a lawyer or businessperson, not someone immersed in construction, and since the whole promise of the group is a cheaper apartment, the contractor's price becomes the deciding factor in his choice, quality be damned.
And because construction is genuinely complex, if he has not run dozens of similar projects, there is a real chance he will do his learning on yours. That is not always how it goes: some purchase-group developers are experienced and their projects succeed, but the potential for trouble is built in.
Who is actually supervising the contractor?
In a purchase group, there is no one holding a whip over the contractor, and that single fact makes a huge difference. Once you sign with the contractor, the group's developer is out of the picture. You are in the contractor's hands, with no one supervising him, even if you hired your own supervisor, and this is usually where the trouble starts: pay cheap, and you get cheap.
A professional developer also looks for a cheap contractor, but because his own professional reputation is on the line, he prefers a contractor who will not mess up, and he knows the industry well enough to tell the difference.
He supervises the contractor throughout construction so nothing foolish damages his name, and he stays in the picture the whole way, carrying legal responsibility toward the buyer. When the Hadera balcony collapse made headlines, it was the developer's name that got burned in the public mind, not the contractor who built it, and every developer knows a good name is what brings the next project.
What happens if defects turn up?
Say a home inspection turns up construction defects, in the apartment or in the common areas. What now? With a construction-industry developer, the Sale Law protects you, since it binds whoever sold you the apartment.
The developer's name matters to him, so he would rather fix the defects, both because the law requires it and to protect his reputation, and he has the professionals and resources on hand to do it smoothly.
A purchase group is a different, much messier story. The Sale Law does not apply to the contractor, because he is not the one who sold you the apartment. The developer is long gone, shielded by the group agreement, so the only party left to sue is the contractor.
He is not bound by the inspection-period warranty, and there is no set time limit on when he must fix a defect. In other words, the matter is wide open, and you are caught in the middle. The contractor will do everything he can to avoid the expense, and will happily drag you through the courts instead.
The engineers of Arad Bedek Bayit, led by building engineer Ron Arad, whom courts appoint as their own expert on construction defects. The company has been inspecting apartments and buildings since 2001. Engineer Ron Arad · More about the company