Purchasing Groups Bill, 5783-2022

This bill is intended to regulate the field of purchasing groups, in which individuals organize together to purchase real estate and build apartments. Until now, this field has not been regulated by law, leading to cases of consumer failure, lack of information, and financial risks for participants. The proposed law stipulates that anyone who systematically acts to organize purchasing groups, promote the construction of apartments for them, or purchase real estate for them, shall be considered an "organizer." The organizer is obligated to act with diligence, skill, and good faith for the benefit of the group members, and not to prioritize their personal interests over the members' interests. The organizer will be required to provide group members with an activity report every six months, detailing all actions taken regarding the group's affairs. Furthermore, group members will be able to replace the organizer by a majority vote if they find that the organizer is not acting in accordance with their obligations. The law establishes prerequisites for forming a purchasing group and requires obtaining a cost report and a real estate appraisal. An organizer is prohibited from marketing or advertising the possibility of joining a purchasing group unless they have an up-to-date appraisal and a detailed cost report. An organizer is prohibited from charging joining fees beyond an amount to be determined by the Minister, which will reflect the cost of reserving the right to join for a certain period. In any advertisement or marketing of a purchasing group, the organizer must clearly disclose that it is a joining of a purchasing group and that there is no commitment to delivering an apartment or a final delivery date. A group member will be able to cancel their obligations under certain circumstances. The organizer will be required to provide a prospective member with a detailed disclosure document, including the agreement details, estimated delivery dates, estimated final price, and additional details to be determined by the Minister. The law details the content of an organization agreement, which will include the identity of the organizer, a breakdown of the services they commit to provide, their fee, and whether they are a relative of a group member. An organization agreement can be terminated by a majority of the group members if the organizer acted contrary to the law or fundamentally breached the agreement. The organizer's fee will be set as a certain percentage of the total final costs of the project and will be paid in stages according to the project's progress. The law requires the establishment of a partnership agreement between the group members, which will include details on the real estate, planning status, number of planned apartments, estimated schedule, method of apartment allocation, and the identity of a trustee if one is appointed. The law stipulates that joining a partnership agreement may be conditional upon an organization agreement. Group members are entitled to appoint a representative body to represent them in common matters, and the members of the representative body will be bound by a fiduciary duty toward the group members. The group's funds will be managed in a separate trust account, which will be opened by the organizer for the benefit of the group members only. Withdrawal of funds from the trust account will be permitted only for financing the purchase of the real estate, construction of the apartments, and related payments. The trustee, who will be appointed by the organizer (but will not be a relative or have a business connection to them), will oversee the management of the funds and report to the group members. The trustee will be bound by a fiduciary duty toward the group members and will be liable for damages caused due to their omissions.

Source: הצעת חוק לקריאה הראשונה