Couple Awarded Compensation for Delayed Property Delivery
Background on the Case
A couple who purchased a five-room garden apartment in Modiin experienced a significant delay in the delivery of their new home, receiving it 14 months later than originally promised. The apartment, bought in late 2019, was slated for delivery in May 2022; however, it was not handed over until July 2023. Following this prolonged wait, the couple took legal action against the construction company and successfully obtained compensation amounting to 126,000 shekels, equivalent to approximately 9,000 shekels per month.
Legal Rulings and Responsibilities
The construction company attempted to shift blame to the electric utility, claiming that delays in connecting the apartment to the electricity supply caused a seven-month holdup. However, the court dismissed this claim, affirming that the construction company held ultimate responsibility for the delay.
According to the Israeli Sales Law (Apartments), 1973, there is a clear mechanism in place for compensating buyers in cases of delayed property delivery, circumventing the need for proving direct damages. Specifically, under Section 5A of the law, if a developer fails to deliver the apartment within the contractual period, the buyer is entitled to monthly compensation based on the following framework:
- Months 1-4 Post Grace Period: Compensation is equal to the rent of a comparable apartment in the same locality (1.0 times the rent).
- Months 5-10: Rent multiplied by 1.25.
- Months 11 and Beyond: Rent multiplied by 1.5.
In the couple’s case, the expected delivery date was May 2022, which meant that the grace period of 60 days ended in July 2022. The actual delay lasted until July 2023, accounting for 12 months after the grace period.
Compensation Calculation
Average rental rates for a five-room apartment in Modiin in 2022 were estimated at 6,000 shekels per month. The compensation can thus be calculated as follows:
- Months 1-4 (August to November 2022): 6,000 shekels per month, totaling 24,000 shekels.
- Months 5-10 (December 2022 to May 2023): 6,000 shekels × 1.25 = 7,500 shekels per month, totaling 45,000 shekels over six months.
- Months 11-12 (June to July 2023): 6,000 shekels × 1.5 = 9,000 shekels per month, totaling 18,000 shekels for two months.
This brings the estimated total compensation to 87,000 shekels. However, the court awarded a higher sum of 126,000 shekels, indicating that the judge assessed rental values at approximately 7,200 shekels per month, aligned with trends in the local real estate market.
Precedents Supporting Compensation Assessments
Recent court rulings substantiate the monthly compensation estimates ranging between 6,000 to 9,000 shekels for five-room apartments in desirable neighborhoods. For instance:
- In a 2019 ruling involving Daniel Tzavivch against Boulevard Real Estate, a four-room apartment in Tel Aviv was appraised at 7,000 shekels per month, with total compensation awarded being 63,000 shekels for a nine-month delay.
- A case from 2018 featuring Shlomo Eliyahu versus Plasim Development and Construction detailed a five-room apartment in Petah Tikva, where the court valued rental income at 6,500 shekels, resulting in a total compensation of 68,250 shekels for a ten-month delay.
- In 2022, Yossi Asaf Malka versus T.S.C Holdings highlighted a four-room apartment in Bat Yam, delivering after seven months, with rental values assessed at 5,500 shekels, leading to compensation of 45,375 shekels.
These judicial precedents reinforce the calculated compensation standards and illustrate the consistent acknowledgment of financial consequences associated with delivery delays in the real estate sector