The practice of so-called flipping involves the bargain purchase of a property below market price by a flipper in order to sell it at a profit. The subject of the practice is usually secondary market properties that are eligible for general renovation. Flipping also does not exclude the trading of properties acquired on the primary market, which is the subject of this issue.
To date, the practice of flipping has not been subject to any legal restrictions – both under the pre-amendment Development Law and the Real Estate Management Law dedicated to real estate brokerage – and has operated on the principle of freedom of contract.
The amendment to the Development Law is aimed at strengthening the protection and safeguarding the interests of the potential buyer of a residential premises or a detached house. Consequently, the new Development Law is applicable between flippers who are entrepreneurs and buyers in the role of consumers in particular in the following cases:
(i) compliance with the provisions devoted to the reservation agreement, e.g., the amount of the reservation fee,
(ii) compliance with the provisions devoted to the property acceptance procedure, e.g., removal of defects in the residential premises,
(iii) compliance with the obligation to provide information on the property being sold, e.g., the title to the property reserved in the land register.
*The above-described obligations of the flipper, for obvious reasons, do not apply to non-residential premises.
14 October 2023
