Financing Firms Challenge Supreme Court Ruling on Construction Project Funds
Translated & summarized from Ice by baba
Financing companies Yessodot and Ayalon, along with a project receiver, are seeking a rehearing of a Supreme Court decision that they claim alters decades-old construction financing practices. The ruling, concerning apartment buyers' rights against financiers in distressed projects, could impact ongoing projects financed by billions of shekels. The companies warn of increased costs and difficulties in project completion, while the Association of Banks plans to join as a friend of the court.
The story in 5 lines · by baba
- Financing firms seek Supreme Court rehearing of ruling impacting construction project credit.
- Companies argue decision retroactively alters decades-old financing practices and collateral status.
- The ruling could lead to higher financing costs and difficulties in completing construction projects.
- The Association of Banks plans to join the case as a friend of the court.
- The firms claim the decision was made without full argument and contradicts prior rulings.
Financing companies Yessodot and Ayalon, along with the receiver for a project in Bat Yam, are requesting an expanded panel of Supreme Court justices to rehear a recent ruling. They argue the decision fundamentally alters decades-old practices in the construction industry, impacting ongoing projects financed by tens of billions of shekels. The companies warn of weakened collateral, increased financing costs, and difficulties in completing projects facing crises.
The request for a rehearing, filed with the Supreme Court president, centers on a ruling from October 7, 2026. In that decision, the court allowed apartment buyers to offset damages for delayed delivery against the remaining payment owed, returning the case to the District Court for compensation assessment. The financing firms contend this ruling significantly disrupts the legal and economic framework of closed financial accompaniment for construction projects, where banks and lenders provide credit against project assets and revenue.
According to the applicants, the ruling retroactively changes the risk allocation and collateral status for projects already underway, after credit worth tens of billions of shekels has been extended annually. They highlight three key issues: the classification of floating charges granted to financiers, the recognition of delayed delivery compensation as an expense that could supersede secured creditor rights, and the ability to offset these damages against buyer debts despite existing collateral.
The companies assert that the ruling effectively eliminates the concept of closed construction project financing, where lenders rely on project assets for repayment, transforming it into an 'open' financing model where general creditors share collateral with secured creditors. They fear this will necessitate additional external collateral, complicate risk assessment, significantly raise credit costs, and ultimately increase construction prices, making financing harder to obtain and reducing incentives for financiers to step in for distressed projects.
Additionally, the applicants argue that the core findings were made without these issues being part of the original appeal scope, denying parties a full opportunity to argue their case, and that the rulings contradict previous Supreme Court decisions. The Association of Banks in Israel has announced its intention to request joining the proceedings as an amicus curiae.