Jerusalem Court Rules Developer Must Pay for Repairs After Loss of Trust
A Jerusalem District Court has ruled that a real estate developer must pay for repairs to a residential building, after a "crisis of trust" between the developer and 55 apartment owners led to the company losing its right to perform the repairs itself. The court ordered the developer, P.A. Development and Construction in Jerusalem, to cover the costs of an external contractor hired by the residents.
The ruling, issued by Deputy President Arnon Darel, stemmed from a lawsuit filed in July 2021 by the owners of 55 apartments in a 16-story building. The building was handed over and occupied starting in May 2019. During construction, the contractor chosen by the developer went into insolvency proceedings.
After moving into their apartments, the residents claimed significant defects in various systems and stated they had lost all trust in the developer due to its failures. They sought a court order declaring the developer had forfeited its right to fix common area defects and that the building had acquired a "bad reputation" that diminished property values.
The developer denied the claims, accusing the residents of obstructing repairs, distorting facts, and fabricating a legal case. The company argued that court-appointed expert opinions showed the claims were limited to standard defects costing hundreds of thousands of shekels. The developer maintained it never denied its obligation to fix defects and was consistently willing to cooperate, but that the residents prevented them from doing so.
The court partially accepted the residents' claim, ruling that the developer was not entitled to perform the repairs and that the residents were entitled to the cost of repairs by an external contractor. However, the judge stated it could not be broadly determined that the developer had shirked responsibility or refused cooperation, and acknowledged the residents also contributed to the delay in repairs. Nevertheless, the court concluded the developer lost its right to make the repairs, as it failed to prove the residents actively prevented urgent repairs. The court also noted that the contractor's insolvency did not absolve the developer of its full responsibility.
The judge found the residents had established a factual basis for defects, including urgent safety issues like fire system malfunctions, parking lot flooding, garbage chute odors, and significant leaks, some appearing immediately upon occupancy in May 2019 and remaining unaddressed for months. The court concluded there was a "continuous failure" by the developer to perform timely repairs, even if the residents contributed to the delay.
While the court ordered the developer to pay approximately 1.6 million shekels for repairs, plus legal fees of 100,000 shekels and plaintiffs' expenses of about 220,000 shekels, it rejected the residents' demand for over one million shekels in compensation for "psychological or reputational" value depreciation. The court found no factual basis for damage to apartment values due to a negative project image, awarding only 8,000 shekels for two specific defects.