Construction Defects in a Private Home – Key Ruling on Contractor and Subcontractor Liability

By: Adv. Michael Lev

Construction Defects in a Private Home: Ruling on Division of Liability Between General Contractor and Subcontractor

At our office, we repeatedly encounter cases involving buyers of apartments and residential properties who, after transfer of the property, discover serious construction defects. These issues affect not only quality of life but also asset value. A ruling issued by the Magistrate Court in Tel Aviv-Yafo (TA 78759-12-20) serves as a compelling illustration of the rights buyers face against real estate developers, and how liability is divided between the general contractor and the subcontractor.

In this case, we dealt with the purchase of a residential property in the Ashkelon area from the company Oron Nadlan Ltd. Serious defects were discovered both in the construction of the building itself and in the finishing systems. The plaintiffs sought compensation totaling 368,000 NIS for the damages caused to them.

The Serious Defects Discovered in the Property

When we examined the case, it became clear that the defects were numerous and significant. The main issue involved moisture and seepage damage, both within the apartment and in the irrigation systems. Expert testimony presented to the court clearly established the extent of the damages.

The first expert testified that the execution of construction work suffered from comprehensive defects, from the sealing to the machinery room. The expert was unequivocal and left no room for engineering doubt regarding the existence of the defects, also identifying additional deficiencies resulting from the construction issues alone. These findings expose significant negligence throughout the entire construction process.

Subcontractor Substitutions: A Warning Sign

A deeper examination reveals a particularly telling detail: the replacement of contractors and site managers during the project. Oron Nadlan replaced two execution contractors and three site managers. In these facts, we see a clear warning sign of difficulties in project execution and management instability.

In our experience, recurring changes of contractors and site managers indicate deep execution problems. This lack of continuity in the team can create critical information gaps, undermine accountability, and create an environment conducive to defects during the work.

Ruling on the Division of Liability Between General Contractor and Subcontractor

Another interesting aspect was Oron Nadlan’s attempt to transfer liability to the company Hydroform Chemicals and Equipment Ltd., which acted as a subcontractor for the irrigation systems. Hydroform rejected the claims and argued that the source of the defects lay in the construction of the irrigation structure itself, not in the equipment installation.

This ruling reflects a common finding in the construction sector. When a dispute exists between a general contractor and a subcontractor, the buyer should know that they may remain above the dispute and sue the general contractor directly.

Central Legal Principles in Construction Defect Litigation

This ruling presents several central legal principles. First principle: the contractor is obligated to build in accordance with the standards and specifications defined in the contract. This obligation remains with the general contractor even when they delegate parts of the work to subcontractors.

Second principle: the contractor is liable for defects that arise during execution of the work. This means the buyer is entitled to compensation reflecting the cost of repair and all consequential damages caused to them.

Third principle: the right to compensation is based on contract law and tort law. Its purpose is to restore the buyer to the condition they would have been in had the construction been carried out properly.

What Is Important for Property Buyers to Know

This ruling raises several important practical lessons. First, a thorough professional inspection of the property before receiving it is essential. A professional inspection by a qualified expert can identify issues early and save costly disputes later.

Second, it is highly important to document comprehensively every defect that is discovered. At our office, we always recommend photographing defects in detail and seeking professional expert opinion at the earliest stages of identifying the problem.

Finally, this case testifies to the importance of prompt and effective legal action when construction defects emerge. As time passes, it becomes increasingly difficult to prove the connection between the defect and the original construction.

When Is It Worth Suing for Construction Defects?

A claim regarding construction defects is warranted when the defects are significant and affect the use of the property or its value. In cases of seepage, moisture, or defects in the building structure itself, urgent treatment is required to prevent further deterioration.

How Is the Existence of Construction Defects Proven?

Proof relies on testimony from qualified experts, detailed photographic documentation, and specific technical inspections. In our present ruling, two different experts clearly confirmed the existence of the defects.

Can a Subcontractor Raise Defense Claims?

A subcontractor may raise defense claims against the general contractor, but their position vis-a-vis the buyer is different. The general contractor remains directly responsible to the buyer. The disputes between the subcontractors are an internal matter that does not affect the buyer’s rights.

What Is the Expected Compensation in Cases Like These?

Compensation generally covers the cost of repairing the defects, secondary damages incurred such as water damage, and compensation for discomfort and interference with use of the property. In each case, the compensation is calculated in accordance with the specific damage that occurred.

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The above is not legal advice. For advice tailored to your personal situation, please contact our office.