Supreme Court: Contractor’s Collapse Does Not Cancel Compensation for Delay in Delivering the Apartment

The Apartment Was Not Delivered

The contracting company received the right to build 14 new apartments in exchange for reinforcing the existing building. The appellants purchased one of them: the apartment was to be delivered within 24 months from the date the building permit was obtained, which was issued in December 2017. The agreement provided for compensation for a delay exceeding 60 days, in accordance with the Sale (Apartments) Law.

The Receiver Continued the Project

After the contractor failed to repay the loans, a receiver was appointed in January 2021. Two financing companies decided to complete the construction through the receiver in accordance with the existing sale agreements. The other purchasers received their apartments no later than April 2025, but the appellants’ apartment had not yet been delivered as of the source’s publication date because of the legal proceedings.

The Agreement Cannot Be Performed Selectively

Justice Ruth Ronnen, with the concurrence of Deputy President of the Supreme Court Noam Sohlberg and Justice Yael Willner, held that the sale agreement remained fully applicable. Although the proceeding was formally presented as the enforcement of liens, the nature of the security and the decision to complete the project required the application of insolvency law. Accordingly, the receiver must take into account the interests of all creditors, including the apartment purchasers.

Priority Depends on the Period of Delay

Compensation for the delay up to the receiver’s appointment will be paid only after the debts to the financing companies have been repaid. By contrast, the claim for the period following the appointment has priority over their debt, and the purchasers may set off that amount against the balance of the apartment’s purchase price. The case was remanded to the District Court, which must determine the purchasers’ entitlement to compensation and calculate its precise amount; the respondents were also ordered to pay them legal costs of 25,000 shekels.

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