Israeli Supreme Court Rules Contractors' Collapse Doesn't Bar Buyer Compensation for Delivery Delays
Translated & summarized from Ynet by baba
Israel's Supreme Court ruled that apartment buyers can receive compensation for delivery delays even if the contractor goes bankrupt. The court affirmed that sales agreements remain binding and sent the case back to a lower court to determine compensation amounts. This decision applies to delays occurring both before and after a receiver was appointed to complete the project. The ruling aims to protect buyers' rights in such financial collapses.
The story in 6 lines · by baba
- The Supreme Court ruled buyers are entitled to compensation for delayed apartment deliveries, even if the contractor collapses.
- The court affirmed that sales agreements remain fully binding under such circumstances.
- The case was returned to the District Court to determine the buyers' eligibility for and the amount of compensation.
- Compensation for delays before the receiver's appointment is payable after lenders are repaid.
- Compensation for delays after the receiver's appointment can be offset against the remaining apartment price.
- The respondents were ordered to pay the buyers NIS 25,000 in legal costs.
The Israeli Supreme Court has ruled that apartment buyers are entitled to compensation for delivery delays, even if the contracting company collapses and a receiver is appointed to complete the project. The ruling came in an appeal by apartment buyers in a building reinforcement project in Bat Yam. The buyers sought compensation for a delayed delivery after the contracting company faced financial difficulties and a receiver was appointed.
Justice Ruth Ronen, joined by Deputy President Noam Sohlberg and Justice Yael Vilner, determined that the sales agreement remains fully binding. The case has been sent back to the District Court to determine the eligibility for and amount of compensation. The original agreement stipulated that the apartment would be delivered within 24 months of receiving a building permit, with compensation for delays exceeding 60 days as per the Sales Law (Apartments).
The contracting company had entered into an agreement to reinforce a building and, in return, received rights to build 14 new apartments. The project was financed by loans from two lending companies, secured by a lien on the project's rights. In January 2021, after the company defaulted on its loans, a receiver was appointed. The lending companies opted to complete the project through the receiver, using the existing sales agreements.
While other buyers received their apartments by April 2025, the appealing buyers' apartment had not yet been delivered due to legal proceedings. The buyers argued that whoever chooses to uphold the sales agreement cannot selectively disregard its provisions. The receiver and lending companies contended that the contracting company alone was responsible for compensation, and their obligations were limited to guarantees for the buyers' funds, with their rights superseding those of the buyers.
The Supreme Court clarified that the project's completion under receivership falls under insolvency laws, requiring the receiver to act for the benefit of all creditors, including the buyers. The court distinguished between two periods for compensation: delays before the receiver's appointment are payable only after the lenders are fully repaid, while delays after the appointment are payable beforehand, and buyers can offset this compensation against the remaining balance of the apartment's price. The respondents were ordered to pay the buyers NIS 25,000 in legal costs.
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