Late Apartment Delivery

Buyers of new apartments base their plans on the delivery date of the apartment they bought: the end of a rental lease they are bound by, a move and enrolment in schools, mortgage payments taken to buy the home that begin to fall due and leave the account, and more. When the apartment is not delivered on time, there are both financial and personal consequences. This article explains the general principles that apply when a developer is late in delivering an apartment bought from them, and what to do from the moment it becomes clear that delivery will not take place on the agreed date and the developer does not intend to meet it.

The information is general only. The wording of the law, the regulations and the case law change, and in every case the contract and the circumstances must be reviewed.

What the law provides

The sale of an apartment by a developer in Israel is governed mainly by the Sale (Apartments) Law, 5733-1973, alongside the Contracts Law and other laws. The law is mandatory (peremptory): its terms cannot be waived by a contract signed with the developer.

Among other things, the law addresses what happens when the seller does not deliver the apartment on the date set in the contract. Under the mechanism in the law, a seller who is late may owe the buyer compensation, subject to the conditions, periods and exceptions in the law. We deliberately do not state amounts or exact numbers of days here, because they depend on the current text of the law and on your contract.

What is the "delivery date"

The first question is when the apartment is supposed to be delivered. Check the contract for:

• The agreed date, and any grace period agreed in advance.
• The definition of delivery: whether it means a finished apartment that is ready to live in, and not merely handing over a key. An apartment without an occupancy permit, or with material defects, may not count as a delivered apartment.
• Circumstances that allow postponement: contracts often include clauses on force majeure and delays outside the developer's control. These are examined on their merits, and not every claim by a developer is accepted.

It is worth reading these clauses before signing, as described in our article on buying an apartment from a developer.

Compensation for the delay

Compensation for a delay may come from several sources, so it is important to distinguish between them:

• Statutory compensation, determined under the mechanism in the Sale (Apartments) Law, intended to compensate the buyer for the harm caused by the delay, including compensation that may cover the cost of alternative housing.
• Agreed compensation in the contract: many contracts include a clause setting fixed compensation for each month of delay. Check whether the clause is clear, what the amount is and when it begins to apply. There may be an imbalance, for example high interest on a buyer's late payment against low compensation for the developer's delay.
• Actual damage: in some cases additional damage caused by the delay can be claimed, if it can be proved and subject to the law.

There is no promise of any outcome. The extent of compensation is determined by the contract, the law and the circumstances of each case.

What to do when a delay becomes apparent

It is best to act in stages, and above all to document:

1. Review the contract and its appendices: delivery date, extensions, compensation clauses and conditions for postponement.
2. Keep evidence: messages from the developer, update letters, photos from the site and correspondence with sales representatives.
3. Write to the developer: a written notice that sets out the agreed date, the delay and the demand for compensation creates useful documentation.
4. Check the security: if you have paid toward the apartment, make sure the security you were given (a guarantee or a registered caveat) remains valid and does not need extending. See our article on the caveat in the land registry.
5. Do not sign waivers without checking: sometimes the developer offers a "settlement" or "waiver" document. It is advisable to consult a lawyer before signing such a document, given its importance.

Defects and the occupancy permit

Sometimes the apartment is offered for delivery but is not ready: there are defects, an occupancy permit is missing, or work is still going on in the project. Such a delivery is not necessarily delivery under the contract. Before taking possession, it is worth carrying out an inspection, preferably through an engineer or inspector acting for you, and recording the defects in the delivery protocol. That preserves your rights after you receive the key.

Common mistakes

• Waiting in silence. As time passes it becomes harder to prove and to manage the matter. It is better to write early.
• Relying on oral promises from sales representatives that do not appear in the contract.
• Signing a full delivery protocol before the defects are recorded.
• Assuming every delay entitles you to the same compensation. The law and the contract determine when and to what extent.

Frequently asked questions

Does a short delay entitle me to compensation? It depends on the contract and the law, including any grace periods. Check the contract and the current text of the law before drawing a conclusion.

Can the transaction be cancelled because of a delay? In some cases, mainly where the delay is significant, there may be grounds for cancellation. This is a significant decision that requires a legal review of all the circumstances, including the state of the project and the security.

Can the developer claim force majeure? It may raise the claim, but the claim is examined on its merits, and a contract that defines it very broadly may be problematic.

In summary

Late delivery of an apartment is a situation in which it is important to act in an orderly way: read the contract and the relevant clauses in depth, document, write to the developer before starting legal proceedings, and avoid ill-considered waivers. If you are facing a delay, or are about to sign with a developer, you are welcome to contact us. For the field in general, see Real Estate. See also checks before buying an apartment.

The information in this article is general, is not legal advice, and does not replace a review of your specific case.