Apartment owners, representative offices and purchasing groups
Aug 25, 2026
By: Itzick Simon
Apartment Owners, Owners’ Representatives, Purchase Groups, and Changes in the Identity of the Party Commissioning the Work in Construction Projects
Most of the provisions of the regulations were drafted on the assumption of a “classic” contractual structure, in which the party commissioning the work enters into an agreement with a contractor to carry out the project. This model characterizes a substantial proportion of construction projects in Israel, in both the private and public sectors.
However, the construction industry also involves a variety of contractual structures, including urban renewal projects, purchase groups, combination transactions, private construction, and other business and legal models. In addition, significant changes may occur during the course of a project, such as the collapse of a developer, replacement of the developer, appointment of a receiver or trustee, or even completion of the project by the rights holders or another party.
In such circumstances, questions may arise regarding the identity of the party commissioning the work and the scope of the obligations imposed upon that party under the regulations. While in some cases the law provides a clear answer, in other cases—particularly where the contractual structure or the identity of the party leading the project changes—a case-by-case examination of the allocation of powers, the contractual arrangements, the respective responsibilities, and the risk-management framework is required.
The importance of such an examination is further underscored by the applicability provisions of the regulations, under which they will also apply to projects that are already under construction when the regulations come into force. Accordingly, it is not sufficient to examine the contractual structure of new projects alone. Projects already under construction may likewise require a renewed examination of the identity of the relevant parties, the allocation of responsibilities among them, the framework of appointed professionals and officeholders, the contractual arrangements, and the necessary preparations, in order to ensure compliance with the requirements of the new regulations.
Below are several common situations that require particular attention.
Apartment owners in urban renewal projects
Apartment owners are the rights holders in the project, but as a general rule, they are not the parties commissioning the work and do not bear responsibility for the management or safety of the project merely by virtue of being parties to an urban renewal transaction.
Their involvement in advancing the project, selecting the developer, receiving information, approving agreements, and making decisions required of them as rights holders in the property should not, in itself, make them the parties commissioning the work or impose upon them the obligations applicable to a party commissioning work under the regulations.
Nevertheless, care should be taken to ensure that the contractual documents clearly define the allocation of responsibilities between the apartment owners and the developer, and clarify that responsibility for project management, execution of the works, and compliance with the requirements of the regulations rests with the parties responsible for these matters under applicable law.
The homeowners' association plays a central role in promoting urban renewal projects, even though its members generally work on a voluntary basis and are not professionals in the field of construction or project management.
As part of its activities, the representative office serves as a liaison between the apartment owners and the developer, lawyers, consultants and officials accompanying the project, coordinates information, maintains contacts with the parties involved and assists in advancing the necessary decisions.
As a general rule, this role does not involve making the members of the delegation the ones who invite the work or holding them responsible for managing the project or its safety.
However, exceptional situations – primarily the collapse of the developer, the cessation of its activities or other circumstances that require the continued advancement of the project – may present the representative office with a completely different reality. In these cases, a natural tendency may arise to continue acting on behalf of all apartment owners, to conduct contacts with contractors, consultants or financing entities and even to make decisions regarding the continued implementation of the project.
It is precisely in these situations that caution should be exercised. To the extent that the continued advancement of the project requires making substantial decisions or new engagements, it is appropriate to examine, through the legal advisor accompanying the project, whether it is correct that these decisions will be made by all rights holders or by virtue of express authorization on their behalf, and not by the limited representation only.
In those cases, it is also appropriate to examine the need to provide appropriate protections for the members of the delegation, including letters of indemnity, waivers of claims by the apartment owners, or other legal mechanisms, all in accordance with the circumstances of the case and the recommendation of the legal advisor.
In these circumstances, questions may also arise regarding the status of the members of the delegation under the regulations, including whether, and to what extent, they may be considered as the work orderers and be subject to the obligations imposed on a work orderer under the regulations. These issues are expected to become clear with the implementation of the regulations in practice, and each case will require individual examination according to its circumstances.
The importance of distinguishing between ownership and management
A purchasing group is, as a rule, the one ordering the work, and therefore the provisions of the regulations apply to it, to the extent that they are not explicitly excluded.
This means that already in the stages of organizing the group, formulating agreements, selecting the positions, and establishing the project management system, the requirements of the regulations must be taken into account, the division of powers between all parties involved must be clearly defined, and preparations must be made accordingly on the legal, contractual, and risk management levels.
Purchasing groups
The distribution of rights, obligations, and the structure of the contract in combination projects require careful examination of the identity of the client and the distribution of responsibilities among all parties involved in the project.
Combination transactions are characterized by the division of rights, obligations and powers between the landowner and the developer, and sometimes also between different groups of rights holders. In certain projects, several contractual models coexist, such as combining combination transactions with construction service agreements or other contractual arrangements.
In these circumstances, it is important to examine the project as a whole, and not to be satisfied with examining each contractual system separately or with the title given to each of the agreements. Although in most cases it is possible to clearly identify the client of the work, it is important to ensure that the division of responsibilities, authorities and obligations is clearly regulated in the contract documents, and that the contractual arrangements are adapted to the structure of the deal and the division of roles determined between the parties.
The more multiple contractual models exist in a project at the same time, the greater the importance of a comprehensive examination of the project structure, the identity of the parties involved, the division of responsibility between them, and its implications in terms of regulations and risk management.
Combination transactions
The exemption stipulated in the regulations does not apply to any private individual, but rather to anyone who builds a private residence in accordance with the conditions stipulated in the regulations.
An individual who initiates a construction project that does not fall within the scope of the exemption, such as saturated construction, a commercial building, an industrial building, or any other project that does not meet the conditions of the regulations, may be considered to be ordering work for all intents and purposes and bear the full obligations imposed on him by virtue of the regulations.
Therefore, at the beginning of the project, it is important to examine whether the conditions for exemption are met, and in their absence, to prepare accordingly from a legal, contractual, and risk management perspective.
Private job seekers
During the life of the project, significant changes may occur in the identity of the entity leading the project, which may require a re-examination of the identity of the client and the applicability of the regulations.
The collapse of a developer, cessation of work, replacement of a developer, appointment of a receiver, trustee or other official, as well as situations in which the rights holders or another party are required to complete the project, may fundamentally change the structure of the project and the division of responsibility among the parties involved.
In these situations, the question may arise whether the party who actually steps into the shoes of the developer or the work client for the purpose of continuing to manage or complete the project may themselves be considered the work client and accordingly be subject to the obligations imposed on a work client by virtue of the regulations.
This is an issue with significant implications, requiring a detailed examination of the circumstances of the case, the nature of the actual involvement, the set of engagements, and the legal, contractual, and risk management implications arising from the change in the project structure.
Changes in the identity of the work customer following the collapse or replacement of a contractor
Apartment owners and representatives tend to view the project through several professional elements: the lawyer accompanies the agreement, the inspector accompanies the execution, the architect and consultants accompany the planning, and the developer and contractor are responsible for the execution of the project. Each of them is an expert in their field, but each of them sees only part of the picture.
The new safety regulations illustrate more than ever that safety, liability, and insurance are not separate worlds. A decision that appears to be purely legal may affect liability. An engineering decision may affect insurance exposure. A change in the contract structure or the identity of the role holders may affect the scope of obligations and risks for all those involved in the project.
Precisely for this reason, apartment owners and representatives do not only need legal, engineering, or planning support, as important as it may be. They also need a professional who is able to examine the project from a comprehensive perspective, understanding how each decision affects the division of responsibility, risk management, and the project's insurance coverage.
Safety, Responsibility and Insurance – Three Worlds That Must Connect
Comprehensive vision is the first layer of protection
Professional insurance support for an urban renewal project does not begin with reviewing policies or drafting insurance supplements. It begins with understanding the structure of the deal, understanding the division of responsibility among all parties involved, and assessing the unique risks of the project.
Its purpose is not only to verify that an insurance policy exists, but also to examine whether all of the engagements, obligations, control mechanisms, and agreements operate in harmony and support each other. Often, it is at this stage that it is possible to identify weaknesses in advance, prevent future disputes, and reduce legal and insurance exposures, even before work begins.
In urban renewal projects, which involve dozens and sometimes hundreds of homeowners, developers, contractors, banks, lending entities, consultants, and other professionals, it is not enough for everyone to perform their role well. A professional is also required who is able to connect all the pieces of the puzzle, see the full picture, and ensure that the project progresses based on a coordinated system of responsibility, risk management, and insurance.
The added value of professional insurance advice
Insurance consulting in an urban renewal project is not just for purchasing insurance. Its role is to protect the interests of the apartment owners by examining the entire project structure, early identification of risk points, examining the division of responsibility among all parties involved, monitoring insurance obligations, and providing professional support throughout the life of the project.
Summary
One of the key messages emerging from the regulations is that it is not always sufficient to examine who the work orderer is as defined at the beginning of the project. In appropriate cases, it is also necessary to examine whether the structure of the contract, or the changes that occurred during the execution of the project, have an impact on the identity of the work orderer and the scope of the obligations imposed on him by virtue of the regulations.
In many cases, the law provides a clear answer to this question. However, in special contractual structures or when there is a substantial change in the structure of the project or in the identity of the parties leading it during its execution, new questions may arise regarding the identity of the party on whom the obligations set forth in the regulations are imposed.
Therefore, the more complex the project structure, or the more changes occur in the identity of the factors leading it during its execution, the greater the importance of early and renewed examination of all legal, contractual and risk management aspects, to ensure that the arrangements that have been established continue to correspond to the reality that has actually been created.
The new regulations illustrate that in an urban renewal project, it is not enough for each professional to fulfill their role in their field. The success of the project also depends on the ability to combine the legal, engineering, safety and security aspects into one, coordinated and complete system. For the apartment owners and their representatives, the meaning is not to manage the project, but to ensure that they have a professional team with a broad vision working alongside them, capable of identifying risks in advance, building a correct system of responsibility and protecting their interests throughout the life of the project.
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