The Time He Called Me Too Late

Alon called me at an hour when he doesn't usually call anyone. "Ilan, I need you to check something for me. I have a problem with the contractor, and I think I can't pass it on."

I had known Alon for a few years, from a distance. He had built in Israel, knew the industry from the inside, and when he decided to expand into Romania, he did it the way people like him do: found a local contractor, found a Romanian lawyer who knows the market, and closed everything quickly. The Romanian lawyer drafted his sale contracts with the buyers. Alon didn't think he also needed an Israeli lawyer for that. "He knows Romanian, he knows the registry there, why should I pay twice," he told me once, when we were talking about something else entirely.

The sale contracts the Romanian lawyer drafted were completely standard for the market there: a fixed price, not linked to any index. That's exactly the structure buyers in Romania expect, and no developer departs from it without losing clients. Alon didn't ask too many questions about that clause. He was busy with sales, cash flow, the construction schedule. The contract was signed with every buyer, one after another, and no one stopped to think what it would mean a year later.

Construction progressed. And then, just as happens to many Israeli developers in this period, the main contractor came with new numbers. The prices of steel, concrete, transport had all gone up because of the war in Ukraine, and the impact on the supply chain in Eastern Europe was tangible and real. The contractor wasn't crude about it. He presented a table, compared the agreed price with what he was paying today for the same materials, and asked for an increase.

Alon, like any developer facing a cost he didn't plan for, immediately thought of the most natural way to deal with it: pass part of it on to the buyers. He went back to the Romanian lawyer and asked him to check whether there was any opening in the contracts. The answer was short and clear: none. The price is closed, there's no indexation mechanism, no clause that allows an update because of rising raw material costs. That's the moment he realized he was stuck in the middle: a contractor demanding more on one side, buyers who couldn't be charged more on the other. And then he called me.

I went through both contracts side by side: the sale contracts and the construction contract with the contractor. I checked whether there was any interpretation, any general clause on "unforeseen circumstances" that could be relied on with the buyers. There wasn't. The contract the Romanian lawyer drafted was too clean for that, exactly as it should be from a buyer's point of view, and exactly as problematic from the point of view of a developer who didn't think ahead.

With the contractor, it was a different conversation. There we managed to open some room. We went through the construction contract and found points where the increase could be split between the parties: part at Alon's expense, part through deferred payments, part the contractor agreed to absorb in exchange for an extended schedule. It didn't solve the problem, but it made it smaller.

What I think about most in this story isn't the missing clause. That clause, as I said, wasn't supposed to be there; that's the right structure with buyers in Romania. The real problem was that no one sat on both contracts together, from the developer's side, before they were signed. The Romanian lawyer did his job correctly for the buyers. But no one looked at the whole picture from Alon's side: if the price with the buyer is locked, the price with the contractor has to be managed differently, from day one.

Alon finished the project with a profit significantly lower than he had planned. "Next time," he told me, "I'm bringing in someone who sees both contracts together, before I sign either of them. Not after the problem is already here."

If you're a developer building abroad, don't settle for a local lawyer who checks each contract separately. Someone needs to see the whole picture: what happens to your profit if the price with the buyer is locked and the cost with the contractor isn't. That question has to be asked before signing, not after.

Roy and Alon didn't know each other and never sat in the same room. But both learned the same lesson, each the hard way: a fixed price in a real-estate contract abroad is neither a favor nor a trap. It simply moves the risk from one place to another. For Roy, that clause was a shield. For Alon, it was a debt he didn't know he had taken on the day he signed. The difference between the two wasn't luck, and it wasn't in the clause itself at all. The difference was who sat and read both contracts together, before it was too late to ask "what happens if."

We as a firm learned from this too. Today, when we support an Israeli developer on a contract with buyers abroad, we make a point of including a clause that allows him to raise the apartment price under certain conditions, if raw material costs soar. Because after seeing what happens when that clause isn't there, we're not willing to leave a developer exposed to it again.