Dovid and his wife recently got married. They would
like to buy an apartment in a new development for young couples. However,
at present the contractor can only show them an empty plot of land, plus
an artist’s impression of what the apartment will look like. The
contractor offers them a significant discount if they pay the full price
of the apartment up front. Since they have the funds available, they would
like to take advantage of his offer. Does such a transaction raise any
The rule is that one can only acquire an item which
already exists; one can not acquire an item which is at present
non-existent (dovor shelo bo l’olam). Thus, any money given in
order to purchase a presently non-existent item as and when it comes into
existence is considered, for the time being, to be a loan to the vendor.
This money will effectively acquire the desired item when it actually
Thus, it follows that if the purchaser receives a
discount for having “paid up front”, he is in effect receiving
financial benefit in return for lending money to the vendor. This falls
under the prohibition of ribbis. The Shulchan Oruch (Yoreh
Deah 175:4) writes that a vendor may sell an unfinished item if there
are only one or two final touches to complete. However, if three or more
stages have yet to be performed, this item is considered as being at
present non-existent, even if the craftsman could easily complete the job.
Any money given for such an item at this stage is deemed to be a loan.
Similarly, writes the Shulchan Oruch (Ibid.
173:7), if a purchaser pays less than the goods are worth because he pays
up front, this transaction is only permitted if the goods are already in
existence but it may take some time till they are available. Should they
not yet have been manufactured, the advance payment is regarded as a loan.
Since the goods received in payment of this loan are worth more than the
original sum lent, the extra value is deemed agar natar (payment
for waiting), a rabbinic ribbis prohibition. Indeed, in the case of
a sale, the vendor must have all the goods in his possession in
order to avoid this problem. As such, selling is stricter than borrowing.
As previously mentioned (see “Cross-currency loans” in this series),
lending a commodity for payment with the same amount of that commodity (seoh
b’seoh) is permitted as long as the borrower has a small amount
of that commodity in his possession. However, purchasing an item which
does not have a known value at a reduced price on account of advance
payment is permitted, as long as no mention of the reason for the
reduction is made (Shulchan Oruch 173:1). The Chavos Da’as
(175:1) rules that if the item being purchased is clearly defined,
acquisition through a reduced advance payment is in order, even if it is
far from completion. As long as the manufacturer undertakes to complete
the job, we do not consider this to be a non-existent article. Purchasing
a date palm for its future crop is regarded as a valid sale since the palm
tree, from which the fruit will grow, is already in existence (dekel
l’payrosov). Similarly, this clearly-defined article is in the
process of being manufactured and the manufacture has promised to complete
We could therefore conclude that if construction of the apartment had
already started, payment in advance or stage payments would be permitted,
even if they amounted to more than the present value of the building.
However, it is not clear at what stage an apartment under construction
falls into the category of a clearly-defined article (see Bris Yehudah,
Chapter 22, Note 29). You often do not receive what you originally
expected! Thus, drawing up a heter iska before signing the
contract would seem to be the way to avoid all problems. (Note that not
all potential problems have been listed above.)