You were late - you paid.

May 12, 2021

By: Shlomi Hadar, Attorney – John Geva, Hadar & Co. Law Offices

Recently, the Tel Aviv Magistrate’s Court addressed a lawsuit filed by apartment owners in a shared residential building against the developer and contractor, as well as against their owners and manager, concerning delays in completing construction and alleged construction defects. In their claim, the plaintiffs requested that the defendants be ordered to complete the building in which they had purchased apartments, and sought financial relief of 2.4 million NIS.

The plaintiffs argued that the defendant failed to meet its commitment to complete construction on time. They further claimed that the defendant abused their vulnerable position, following a year-and-a-half delay in delivery, and in order to “save on the accumulating monthly costs” such as rental losses, persuaded them to occupy the apartments even without an occupancy permit.

They also alleged that the defendant promised them that within two weeks to a month after moving in, he would complete the construction of the common property in the building, including performing any necessary finishing work and repairs in the apartments themselves. The plaintiffs further claimed that the building was dangerous and unfit for habitation.

It should be noted that the plaintiffs’ funds were not secured by a bank guarantee, but rather by recording cautionary notes in their favor. The project’s lending bank appointed a specialist engineer on its behalf, who authorized the plaintiffs to make payments to the defendant according to the completion of each stage, based on the percentage of construction progress.

By: Shlomi Hadar, Attorney – John Geva, Hadar Attorney

The Tel Aviv Magistrates' Court recently heard a lawsuit filed by rights holders in a joint residential building against the developer and contractor company, and against its owner and management, for delay in completing construction, as well as for construction defects. As part of the lawsuit, the plaintiffs sought to compel the defendants to complete construction in the building, in which they purchased apartments from the defendant, and to receive financial relief in the amount of NIS 2.4 million.

The plaintiffs claimed that the defendant failed to fulfill its obligation to complete the construction on time. They also claimed that the defendant took advantage of the "stressful" situation they were in, a year and a half delay in delivery, and in order to "save on the costs" that accrued each month, of rental losses, he persuaded them to enter the apartments, even without an occupancy permit.

Yes, they claimed that the defendant promised them that "about two weeks to a month" after they occupied the apartments, he would finish the construction of the common property in the building, including making additions and repairs to the apartments themselves. They also claimed that the building was "dangerous and uninhabitable."

It should be noted that the plaintiffs' money was not secured by a bank guarantee, but by recording cautionary notes in their favor, when the project's lending bank appointed an expert engineer on its behalf, who authorized the plaintiffs to make a payment to the defendant, according to the completion of each stage, according to the percentage of progress of the construction.

The plaintiffs' claim

The plaintiffs claimed that this fact "intensified their dependence on the defendant." The plaintiffs also claimed that the defendant exercised a "regime of terror and intimidation" against them, such as threatening phone calls, profanity, telephone harassment, threats of violence, and even forced one of the plaintiffs, who suffers from a disability, to occupy an apartment on the second floor of a building that did not even have an elevator.

The defendants, for their part, attributed the delay in completing construction to the plaintiffs' "invasion" of the apartments, contrary to the agreement and the provisions of the law, while "making changes to the apartments, the structure and the electrical system," as well as to the "pirate" and non-standard connection of the apartments to the electrical grid.

They also claimed that they never convinced the plaintiffs to enter the apartments before receiving an occupancy permit (Form 4). The defendants also claimed that the electric company "blundered" in moving a power line near the building, since "it was not possible to build a safe building with the power pole so close to the building," for reasons of tenant safety, environmental quality, radiation, and the like, and even filed a third-party notice against the electric company. Furthermore, the defendants claimed that the plaintiffs should be required to pay the defendant amounts that "Mei Avivim" had charged them for water consumption, over a long period.

The plaintiffs claimed that this situation “increased their dependence on the defendant.” They further alleged that the defendant maintained “a regime of terror and intimidation” against them, including threatening phone calls, verbal abuse, harassing calls, threats of violence, and even forcing one of the plaintiffs—who suffers from a disability—to occupy an apartment on the second floor of a building where no elevator had been installed.

The defendants, in turn, shifted responsibility for the delay in completing the construction to the plaintiffs, alleging that the plaintiffs “trespassed” into the apartments in violation of the agreement and the law, while making unauthorized modifications to the apartments, the building, and the electrical system, including “pirated” and non-compliant connections to the electricity network.

The defendants also claimed that they never pressured the plaintiffs to occupy the apartments before receiving the occupancy permit (Form 4). Furthermore, they argued that the Electric Company delayed relocating a high-voltage line near the building, as “it was not possible to construct a safe building with a high-voltage pole so close,” due to resident safety, environmental quality, radiation concerns, etc., and even filed a third-party notice against the Electric Company.

Additionally, the defendants contended that the plaintiffs should be required to reimburse the defendant for amounts charged by the “Mei Avivim” water company for water consumption over an extended period.

The court rejected the defendants' claims regarding "frustration of the contract", and even adopted the expert's opinion, according to which the defendant knew from the beginning that she had to cause the power line to be moved, but she "was dragging her feet."

The court also ruled that the defendant prevented the building from being connected to the electricity grid due to non-payment to the electricity company. It was also determined that, from the totality of the evidence, it appears that the defendant did indeed invite the plaintiffs in writing, at the beginning of 2016, after the deadline for completing construction, to enter the apartments, before an occupancy permit was received, in order to save the plaintiffs from paying rent. The court ruled that inviting the plaintiffs to enter the apartments, without an occupancy permit, was prohibited and "clearly deviates from normal commercial conduct."

As for the defendant's claim that the plaintiffs (the apartment buyers) must pay her money collected for water consumption, the court ruled that if the defendants' claim regarding the plaintiffs' "breaking" into the apartments were true, the defendant would have been expected to immediately ask "Mei Avivim" to stop the building's water consumption.

The court also determined that the defendant violated its fundamental obligation to complete the construction on time, in a clear manner, and for an extended period of time, and therefore should be required to pay agreed compensation.

As for the defendant's liability, the court ruled that there was no reason to hold him liable under the "curtain-lifting" doctrine, but rather for inviting the plaintiffs to enter the apartments, an action that the defendant personally performed, so that the plaintiffs found themselves living for a long time on a "construction site," without a standard connection to the electricity grid, without an elevator, and without other basic facilities. Therefore, the court ruled that the defendant should be held liable for 1/3 of the value of the compensation for each apartment purchaser.

In total, the court ruled in favor of the plaintiffs for approximately 1.8 million NIS.