Supreme Court Rules on Buyer Compensation in Bat Yam Real Estate Project Delay
Supreme Court rules that apartment buyers in a Bat Yam project are entitled to compensation for construction delays following the appointment of a receiver.
The Supreme Court recently upheld an appeal filed by apartment buyers in a Bat Yam real estate strengthening project, who sought compensation for delivery delays after the contracting company faced financial distress and a receiver was appointed to complete construction. Justice Ruth Ronen, with the consent of Deputy President Noam Solberg and Justice Yael Wilner, ruled that the purchase agreement remains fully binding and returned the case to the District Court to determine eligibility for compensation and its exact amount.
The project involved a contracting company entering into an agreement with building rights holders for reinforcement works in exchange for rights to add 14 new apartments. The construction was financed through loans from two lending companies against a lien on project rights. The appellants purchased one of the new apartments, which, under the agreement and subject to fulfilling their obligations, was supposed to be delivered within 24 months of receiving the building permit granted in December 2017. The agreement included compensation clauses for delays exceeding 60 days, in accordance with the Sale (Apartments) Law.
In January 2021, after the company failed to repay its loans, a court receiver was appointed. The lending companies chose to complete the project through the receiver on the basis of existing purchase agreements. While other buyers received their apartments no later than April 2025, the appellants' apartment has not yet been delivered due to ongoing legal proceedings. The buyers sought to obligate the receiver to pay compensation or alternatively offset it against the remaining balance, arguing that whoever chooses to uphold a contract cannot selectively ignore its terms. Conversely, the receiver and lending companies argued that compensation liability rests solely with the contractor.
Justice Ronen determined that although the proceeding was presented merely as the realization of fixed liens, the nature of the liens and project completion require the application of insolvency laws, meaning the receiver must act for the benefit of all creditors, including the buyers. The choice to complete construction does not permit collecting full contract consideration while unilaterally canceling the right to compensation. The Supreme Court distinguished between two periods: compensation for delays occurring prior to the receiver's appointment will be paid only after debts to the lending companies are settled, whereas compensation for the post-appointment period takes priority, and buyers are entitled to offset this component against the remaining apartment price. The case was returned to the District Court to calculate the precise compensation, and the respondents were ordered to pay 25,000 NIS in legal expenses to the buyers.
