Background
Gil Amiran and Yaakov Haddad each purchased an apartment in a residential building constructed by Shami Ashkeloni Ltd. The sales agreements were signed in 2016 and 2017, and the apartments were delivered in March and April 2021. After discovering alleged construction defects, the buyers sought repairs and, on January 16, 2022, sued for monetary compensation during the statutory inspection period. The company argued that the action was premature because it had not received an adequate opportunity to repair the defects, as required by Section 4B(a) of Israel’s Sale (Apartments) Law, 5733-1973.
The Magistrates’ Court found that the buyers generally had not afforded the company an adequate opportunity to repair, except regarding a defect in Amiran’s protected-room door. Nevertheless, relying principally on a court-appointed expert, it awarded damages based on the company’s own cost of performing the necessary repairs: NIS 24,177 to Amiran, including NIS 3,000 for distress, and NIS 40,248 to Haddad. The District Court reversed most of those awards, reasoning that granting even reduced compensation would deprive Section 4B(a)’s repair mechanism of effect. It preserved only Amiran’s award concerning the protected-room door and related distress.
The Court’s Holding
The Supreme Court unanimously treated the application for permission to appeal as an appeal, allowed it, vacated the District Court’s judgment, and reinstated the Magistrates’ Court’s judgment. Justice Alex Stein, joined by Justices David Mintz and Yael Wilner, held that a buyer’s failure to give the seller an adequate opportunity to repair a remediable nonconformity does not automatically extinguish the buyer’s right to damages for proven construction defects.
As a general rule, that failure warrants adjusted damages reflecting the financial harm caused to the seller by losing the opportunity to repair. Compensation ordinarily should therefore be limited to what the repairs would have cost the seller, rather than the higher market price charged by an outside contractor. The Court characterized this approach as an application of the duty to mitigate: the buyer may lose avoidable additional costs, but the seller remains responsible for the repair expense it would have borne in any event.
The Court recognized qualifications to the rule. Egregious bad faith or deliberate frustration of the repair process may justify a greater reduction and, in an extreme case, complete denial of damages. Conversely, a buyer who was justified in refusing further access—such as because of a genuine and profound breakdown of trust caused by the defects or the contractor’s prior conduct—may receive full damages. The company was ordered to pay costs of NIS 5,000 to each buyer, NIS 10,000 in total.
Key Takeaways
- Section 4B(a) requires an apartment buyer to give the seller an adequate opportunity to repair remediable defects, while requiring the seller to complete the repairs within a reasonable time.
- Failure to provide that opportunity ordinarily reduces damages to the seller’s own repair cost; it does not automatically eliminate compensation for proven defects.
- Complete denial of damages is reserved for exceptional cases, while a justified refusal to permit repairs may support an award of full market-cost damages.
Why It Matters
The decision resolves conflicting approaches in Israeli case law by establishing adjusted damages, rather than complete forfeiture, as the default consequence when an apartment buyer prematurely sues without allowing the seller to repair. It preserves a meaningful incentive to use the statutory repair process while preventing a developer from receiving a windfall merely because the buyer failed to comply with that process.
For developers and purchasers, the ruling makes the economic consequence more predictable: the opportunity to repair affects the measure of damages, usually by excluding outside-contractor premiums and related costs, but ordinarily does not erase liability for established construction defects.