Delay in delivery of an apartment by a contractor or second-hand seller – how to receive compensation?

Delay in the delivery of an apartment from a contractor or a second-hand seller may cause the buyer significant financial damages. For this reason, the buyer must be well aware of his rights in such cases, both as specified in the apartment purchase agreement and in accordance with the relevant legislation and case law, in order to receive compensation for the delay in the delivery of the apartment.

Attorney Eddie Blitstein has been representing plaintiffs and defendants in lawsuits against contractors for over a decade. Need professional legal advice? Contact our office.

What is stipulated in the agreement regarding the issue of late delivery of an apartment?

Whether it is purchasing an apartment from a contractor or purchasing a second-hand apartment, the starting point is to read the apartment purchase agreement and check what is written in the agreement regarding the issue of late delivery of the apartment.

In these cases, it is important to pay attention to two main sections: 1. The section that talks about delay in the delivery of an apartment; 2. A section that refers to agreed compensation in the event of breach of contract.

In a significant number of cases, especially when it comes to purchasing an apartment from a contractor, the agreement states that a 60-day delay will not be considered a delay that entitles you to compensation, and only starting on the 61st day will the contractor (or seller of a second-hand apartment) pay you any compensation.

In these cases, you need to understand the amount of compensation and how and when exactly the seller must pay you this financial compensation for late delivery.

In addition, we need to examine whether a delay in the delivery of an apartment provides additional and agreed compensation for Breach of contractIn this regard, we need to delve into the apartment's purchase agreement and see exactly how the agreements between the seller and the buyer were formulated.

What does the law state regarding late delivery of an apartment?

Please note that the law was updated in July 2022. (Read the explanatory notes to Amendment No. 9 to the law), and what is written below Refers to the new instructions.

The issue of delay in the delivery of an apartment is regulated in Section 5A. לחוק המכר (דירות), תשל"ג-1973 Which states as follows:

(a) If the seller has not made the apartment available to the buyer after one month has passed from the end of the period specified in the sales contract (in this section – the contractual period), the buyer is entitled to compensation, without proof of damage, in the amount as specified below, for each month or part thereof from the end of a month from the contractual period until the apartment is made available to him, or to compensation in the amount agreed upon in the sales contract due to a delay in the delivery of the apartment, whichever is higher:

(1) An amount equal to the rental fee for an apartment of similar size and location – for the period beginning at the end of one month from the contractual date and ending at the end of four months from the contractual date;

(2) An amount equal to the rental fees of an apartment of similar size and location multiplied by 1.25 – for a period beginning five months after the contractual date and ending ten months after the contractual date;

(3) An amount equal to the rent of an apartment of similar size and location multiplied by 1.5 – for a period beginning 11 months after the contractual date and thereafter.

(b) The compensation stipulated in this section shall be paid at the end of each month for that month.

(c) The provisions of subsections (a) and (b) shall not apply if one of the following applies with regard to the delay in handing over the apartment:

(1) It is caused solely by the act or omission of the buyer;

(2)הוא תוצאה מנסיבות כאמור בסעיף 18(א) לחוק החוזים (תרופות בשל הפרת חוזה), התשל"א-1970, ומתקיימים לגביו שאר התנאים הקבועים באותו סעיף.

That is, according to these provisions, a delay in the delivery of an apartment from a contractor or a second-hand seller obliges the seller to pay the seller the compensation agreed upon in the contract or the compensation stipulated in Section 5A of the Sales (Apartments) Law, According to the highest of them. Please note that the amount of compensation increases depending on the number of months of delay in handing over the apartment. The longer the delay, the higher the compensation becomes.

Another important thing to note is that a change has been made regarding the period during which the seller is not obligated to pay any compensation. While in the past the seller did not have to pay anything if the delay did not exceed two months, now the seller can be delayed by no more than one month, after which he will be forced to pay compensation to the buyer.

Who can I complain to when there is a delay in the delivery of an apartment?

When a contractor delays the delivery of an apartment, a complaint can be filed with the Ministry of Construction and Housing. Sometimes, contacting the Israeli Consumer Council may also help the buyer of an apartment from the contractor.

However, in most cases, filing a claim for late delivery will be the most effective, and may lead to significant financial compensation for late delivery of an apartment.

באחד המקרים איחור בגין מסירת דירה על ידי גינדי מגדלי הלאום בע"מ הוביל להגשת תביעה במסגרתה נפסק פיצוי כספי בגין איחור במסירת דירה ועוגמת נפש בסכום העולה על 60 אלף ש"ח (ת"א 44112-02-17).

If it has been decided to file a lawsuit for delay in the delivery of an apartment, one can also refer to the position of the Ministry of Construction and Housing, which states, among other things, as follows:

In the response submitted by the Ministry of Construction and Housing to the court, for the first time, its position was detailed regarding the cases that cannot be used as a claim for a justified delay in the delivery of the apartment, including:

* Delay in the delivery of an apartment resulting from the conduct of a public authority in connection with the project, such as a local authority, electricity company, water corporation, government office, etc.

* Delay in the delivery of an apartment resulting from a contract between the seller of the apartment and professional entities providing services in the project, such as an operating contractor, legal advisor, architect, etc.

Alongside this, it was clarified in the position that it is not possible to establish a clause in the sales contract that gives the seller of the apartment or a party on his behalf the authority to determine, exclusively, that the delay in delivery was caused by a reason beyond the seller's control, and therefore the buyer is not entitled to the compensation stipulated in Section 5A of the Sales Law.

Filing a request for approval of a class action lawsuit against a contractor for delay in delivering an apartment

Submission Request for approval of a class action lawsuit Against a contractor for delay in delivering an apartment is relevant only in those cases where there are very many victims from the same contractor (at least several hundred buyers). That is, the contractor does not pay financial compensation for delay in delivering an apartment to many buyers, contrary to the terms of the agreement.

If there are not many victims, the case is not suitable for a class action lawsuit, and you can consider Financial claim personally.

Filing a personal lawsuit against a contractor for delay in delivering an apartment

If there is no desire or possibility to file a request for approval of a class action lawsuit against the contractor for late delivery of an apartment, any apartment owner can file a personal lawsuit against the contractor. In this case, the apartment owner will have to present to the court the contract he signed with the contractor, which specifies the latest delivery date of the apartment to which the contractor committed.

Depending on the date of delivery of the apartment and the duration of the delay, the apartment owner will be able to easily calculate the amount of compensation he is entitled to for a delay in delivering the apartment.

The contractor will try to explain why the apartment owner is not entitled to any compensation (for example, delays resulting from the coronavirus or a security situation), but in most cases the courts rule in favor of the apartment owners. Even if the apartment owner does not receive 100% of the amount of financial compensation he is entitled to, he will definitely receive significant financial compensation. For your reference Example of a lawsuit against a contractor For defects.

Delay in apartment delivery due to the coronavirus pandemic

לא תמיד איחור במסירת דירה מקבלן יוביל לפיצוי כספי לרוכש. ארבעה חודשי איחור במסירת דירה עקב מגפת הקורונה הוכרו באחד המקרים על ידי בית המשפט כאיחור סביר ולא נפסק לרוכש הדירה פיצוי כספי (ת"ק 29214-05-21 דיויד בראל נ' אזורים בנין (1965) בע"מ).

Regarding the delay in the delivery of an apartment due to the coronavirus pandemic, the court ruled, among other things, as follows:

There can be no dispute that the Corona pandemic, which broke out into our lives in late February 2020, was unexpected and its occurrence or effects could not have been predicted before its outbreak. The pandemic led to a change in the order of life both in the immediate term immediately after its outbreak; and in the longer term. The consequences of the pandemic are still evident today, more than a year and a half after it broke out. It is no exaggeration to say that the Corona pandemic has affected all areas of our lives - on the health level, on the social and family level, and on the economic level, both at the general and individual levels.

The construction industry was exempted from the restrictions imposed on the economy as a result of the pandemic lockdowns, and even during the lockdowns, the construction industry continued its activities. However, even given this fact, there can be no dispute that the pandemic still had an impact on the construction industry and the pace of project progress. For the construction industry does not operate in a vacuum, but is affected by the availability of the workforce working in it; its activity is linked to the activities of local authorities and various government authorities that did not work as usual during the lockdowns; it involves the activities of various suppliers; it is linked to the pace of import of construction products and delays that occurred in imports due to the global pandemic, and more.

However, the existence of the pandemic does not in itself cancel charges or nullify contractual systems concluded between the parties. Despite the assumption that the coronavirus pandemic has changed the routine of existence and affected the existence of contractual and business systems, the applicant must claim the impact of the pandemic on contractual conduct to prove the existence of such an impact, and a mere claim or assumption is not sufficient.

As has been determined more than once, in order for the provisions of Section 5A of the Apartment Sale Law not to apply to delays in the delivery of an apartment, it is not enough that the delay resulted from circumstances beyond the seller's control, but rather there must be a causal connection between those circumstances and the delay in delivery. In this framework, it must be examined whether the seller could have prevented the occurrence of those circumstances and whether he could, after they occurred, have eliminated or mitigated their impact (see in the Eliyahu matter, at paragraph 14; and in the Yount matter, at paragraph 26; and in the Najer matter, at paragraph 38). When the seller has the power to take reasonable steps to remove the cause of the delay, it cannot be said that the circumstances are beyond his control.

…

It cannot be ignored that in the months of January to February 2021, a third lockdown was imposed on Israel, in which movement restrictions were imposed on the country's citizens, as well as additional restrictions. Therefore, although delays by local governments and public authorities are normally delays that the contractor must anticipate and prepare for and cannot be defined as a delay beyond its control, this is not the case during the period when a lockdown and additional restrictions on gatherings and movement were imposed, which the contractor could not anticipate in advance and prepare for.

…

As noted above, the inter-ministerial team recommended that for contracts in which the delivery date is set for the period between March 15, 2020 and April 1, 2021, a two-month delay beyond the grace period will be recognized, which will not require compensation in accordance with the Sale of Apartments Law, in light of the implications of the Corona pandemic on the construction market. These recommendations do not have binding legal force, but they do indicate the manner in which a reasonable delay should be interpreted, due to which the delivery of the apartment may be delayed. In the circumstances of our case, when I found that the Corona pandemic resulted in a delay in the contractual delivery date, a delay that is not within the defendant's control; the delivery of the apartment on April 20, 2021, within the two-month period after the end of the grace period, is a reasonable period of time in the circumstances. And in particular when Form 4 was issued on March 3, 2021.

In the circumstances of this specific case, a delay in the delivery of an apartment by a contractor was also caused by the existence of closures imposed by the government. In these circumstances, the court recognized the difficulty of completing the delivery on time. It is doubtful whether the court would have reached the same conclusion if the closures had not been in place.

It is also important to understand that this is a ruling from a small claims court. It is not a binding ruling and other courts may rule differently when there is a delay in the delivery of an apartment, and it is certainly possible that compensation may be given for a delay in the delivery of an apartment.

Delay in delivery of a second-hand apartment

The provisions of the Sales Law (Apartments) may in certain cases also apply to someone who is selling an apartment and is not a contractor, and therefore it is very important to check the identity of the seller of a second-hand apartment and his connection to the real estate, as well as whether he built the apartment or someone on his behalf, for the purpose of selling the apartment to someone else.

בהנחה שמוכר דירת יד שניה נכנס להגדרת "מוכר" בחוק מכר (דירות) הרי שאין מניעה להתבסס על הוראות הדין שפורסמו במאמר זה. במידה ולא, צריכים לחשוב על דרך אחרת "לתקוף" את הסוגיה.

One way to examine what you are entitled to in the event of a delay in the delivery of a second-hand apartment is to examine the provisions of the agreement between the seller and the buyer. Typically, agreements dealing with the sale/purchase of an apartment contain a clause that refers to agreed compensation for a delay in the delivery of the apartment. If there is such a clause, it will be possible to file a financial claim and rely on it.

If there is no clause relating to agreed compensation, the plaintiff will be forced to prove the damages he suffered due to the delay in delivering an apartment (for example: rental expenses because the buyer was not able to enter the apartment he purchased).

Lawsuit against apartment seller It will usually last more than one year, and usually more than two years. The higher the amount of damage, the longer the court process usually takes.

Frequently asked questions regarding late apartment handover