Legal Updates

A purchaser of an apartment from a contractor is entitled to compensation for a delay in the delivery caused as a result of a delay in receiving Form 4 (Occupancy Permit)

November 25, 2020

A contractor was late in delivering an apartment for about five months and refused to compensate the purchasers.
The Court held that the contractor must compensate the purchasers for the late delivery of the apartment. Israeli law allows a contractor and a purchaser of an apartment to agree that the purchaser's right to compensation after sixty days, which is recognized as a "legitimate" period of delay, will not apply in the case of a delay "caused by reasons beyond the seller's control and the chance they materialize is not under the seller accountability". Here, the delay in delivering the apartment was not due to changes made in the apartment at the request of purchasers, but mainly due to non-fulfillment of the Ministry of Housing's obligation to complete the development work, which led to a delay with the local authority in receiving Form 4 (Occupancy Permit). The contractor is to pay compensation in this case because the circumstances of the delay are not such as those that allow a contractor to evade payment of compensation to the purchasers as set by law as the risk of delay in carrying out the development work should be imposed on the contractor and not on the purchaser of the apartment. Any other result is not acceptable because it makes the purchasers of the apartments "captive" in the hands of other entities with whom the contractor entered into an agreement regarding the construction of the apartment, its infrastructure and environmental development.