Construction Defects in Shared Property: Residents’ Rights and Contractor Obligations

By: Advocate Moshe Taieb

Construction Defects in Shared Property: Residents’ Rights and Contractor Obligations

The Haifa Magistrate Court recently issued a significant ruling that clarified the rights of apartment owners in relation to construction defects. Eighteen residents of a building on HaHasida 12 Street in Zikhron Ya’akov won compensation for significant defects in the shared property. The ruling reflects a clear stance on buyers’ rights and the scope of liability imposed on construction companies. At our firm, we see this ruling as an important turning point in apartment and construction disputes in Israel.

What Happened in This Building: The Defects and the Legal Process

The plaintiffs were 18 out of 20 apartment owners in the building at HaHasida 12 Street, Zikhron Ya’akov. Each of them had purchased their unit from the defendant construction companies. After moving in, significant defects in the shared property of the building came to light within a short time.

The owners initially approached the construction companies about repairing the defects, but the repairs were not carried out properly. As a result, they decided to bring the matter to court. With the filing of the lawsuit, an expert opinion was submitted to the court estimating the cost of the required repairs to the shared property at 113,970 NIS, exclusive of VAT. This estimate was based on a professional assessment of the scope of work required to repair the defects in the shared property.

The Arguments of Both Sides in the Lawsuit

The owners filed a total claim of approximately 630,000 NIS. In their arguments, they relied on the expert opinion of a private expert, who estimated the costs including VAT at 483,474 NIS. They argued that the construction companies had violated the conditions of the purchase agreement and that they were entitled to compensation covering all repair costs.

The defendant construction companies denied their claims and raised two central defense arguments. First, they argued that the warranty period had already passed and the building had already been inspected, and therefore they were not liable for defects that emerged afterwards. Second, they argued that the owners had waited a long time before filing the claim. Attorneys at our firm know that such arguments are common in cases like these, but as was seen in the proceedings, the court did not accept their arguments.

The Court’s Ruling and Important Legal Principles

The Haifa Magistrate Court partially accepted the claim and ruled in favor of the owners. In its ruling, Judge Ziv Arieli rejected the defense argument that the owners had delayed in filing the lawsuit. He placed at the center of the discussion Section 4B of the Apartment Sales Law, which explicitly states that the seller must give the buyer the appropriate opportunity to repair the defects before he is entitled to monetary compensation.

Moreover, the court ruled that although the construction companies were given the opportunity to repair the defects, they failed in providing a reliable response for carrying out the repairs. As a result of this finding, the judge determined that the owners were entitled to receive compensation reflecting the repair costs by an external contractor. In our view, this recognition of buyers’ rights is vital, as it guarantees them fair compensation when the contractor fails to meet his obligations.

In terms of the expert opinion, the court confirmed the principle established by the court-appointed expert that court-appointed experts are accepted unless there is a clear reason to reject them. This is reinforced by the careful selection of trusted experts in legal proceedings of this type.

The Compensation Amount and the Additional Surcharge

The court determined that the owners would receive compensation on the basis of 113,970 NIS, plus an additional 20%. This addition covers the additional costs that arise when an external contractor carries out the work: supervision of the work, planning, management, and other items such as VAT. In this case, the court set 20%, but it is important to note that this rate may change depending on the specific case data.

Why exactly 20%? The answer is simple: when the owners are compelled on their own to organize the repairs, they bear costs that the construction company would not have borne had it carried out the work itself. This is an important recognition in the economic context, and as we see in the firm, this is a fair approach that reflects the actual damage caused to the owners.

What Can Be Learned: Implications in the Field of Construction and Apartment Purchases

For buyers, this ruling clarifies something important: your right to sue for defects does not end the moment you move into the apartment. As long as you act within a reasonable time and after giving the construction company the appropriate opportunity to repair, you have strong legal protection.

For construction companies, the lesson is completely different. Every delay in responding to complaints or any negligence in carrying out repairs may lead to costly and complex legal proceedings. The correct approach is developing efficient and clear systems that respond quickly to complaints about defects. At our firm, we advise construction companies to act precisely and immediately in dealing with defects.