When contractors tarry

Home buyers frequently find that builders build straight through the grace period and then some, leaving them homeless.

Buying a new home is an emotional process for a family. The closer you get to the moving date, the more excited you get. But when you buy a home that hasn't been built yet, excitement can turn into despair. The moving date specified in the contract is often a fantasy, leaving many buyers waiting for months to move in.

Contractors often give themselves grace periods, meaning they can deliver the apartment late without being in breach of contract, by three to six months. Even after the grace period has expired, contractors often delay delivery, agreeing to give buyers token compensation in exchange. First-time buyers often make the mistake of relying on the delivery date in the contract.

M. and his wife, for example, had their lives turned upside down by a four-month delay. The couple decided to move into a new apartment, and sold their old home in Petah Tikva, committing to leave by June 2010. The new apartment was in the same neighborhood, and they were supposed to take possession from the contractor in March 2010.

The couple, on tenterhooks waiting for their new home, were delighted when the contractors told them they would get the apartment as early as February, and informed their buyers they had to pay earlier, because they would be getting the apartment sooner.

"In the end, not only did the contractor not deliver early, but was actually four months late," says M. "This put us in an awkward situation vis-a-vis the buyers, who paid us early."

And that's not the end of it. "My wife was in an advanced stage of pregnancy and we had to move to an attic in my parents house in Or Yehuda. Luckily the contractor agreed to store our appliances, which made it a little easier for us," M. says.

The couple got their home only in June, and a week later their baby was born - in a new apartment, but the elevator still wasn't working. Given the first three months were the contractor's grace period, M. and his wife did not get any compensation for them. For the last month, the contractor paid them NIS 3000.

"If the contractor had let us know in advance about the delay, we would have had time to get organized or rent an apartment nearby. The contractor claimed that different authorities made demands right before the apartments were delivered, something he couldn't anticipate in advance," says M.

"The move-in date for the new apartment and the move-out from the prior home should be as close as possible," says the couple's attorney Moshe Erez. "The unfortunate reality is that contractors consider the grace period to be regular construction time."

Eran Nitzan, deputy director general of the contractors association, says every contractor has a vested interest in his clients being satisfied and pushing up the delivery date. The law obliges the contractor to compensate tenants if there are delays, he notes.

That said, Nitzan adds, building a housing project is very complex, so even though the contractor may want to deliver the apartment on time, it doesn't always work out: "Building any home in Israel involves, I would estimate, more than 600 craftsmen, starting with the manufacturers of the mortar, the kitchens and the doors, and on to the glaziers, joiners, electricians, construction workers and of course the contractor himself, who is forced to run around from one authority to another to get permits and pay taxes and levies. On top of that, the restriction on the number of foreign workers and lack of entrance permits for Palestinian workers also causes delays."

How two weeks turn into three months

And what do courts say when contractors refuse to compensate buyers for substantial delays?

S., age 70, bought an apartment in Tel Aviv a few years ago and found herself paying thousands of shekels on a hotel after the contractor was more than a year late in delivering the apartment. He refused to compensate her.

"I bought the apartment on paper and sold the one I owned at the same time. The interval between the move-in date for the new apartment and the move-out from mine was three months according to the contractor, but to be on the safe side, I rented a flat for six months at $800 a month.

"During the rental period I saw that the construction was not progressing and asked the contractor what was going on, because I would soon have to leave the apartment. Each time the contractor told me to extend my rental contract by a month."

Eventually the landlord told her he needed to know if she was coming or going, because he wanted to rent the flat for the summer. "I approached the contractor and asked what I should do and he told me we were just talking about another fortnight. My landlord would not agree to any more extensions and asked me to leave."

She moved to a hotel, and got her home 15 months late. The contractor refused to compensate her even though the grace period had been only three months, S. says.

She sued the contractor in Tel Aviv Magistrate's Court. The contractor blamed a subcontractor and a shortage of construction workers, and claimed that the contract exempted him from paying compensation in circumstances beyond his control.

Judge Mordehai Ben-Haim was not impressed.

"I am convinced that the plaintiff suffered an excessive amount of distress and frustration due to the unwarranted lateness," he said, and ordered the contractor to pay NIS 66,000 in compensation plus expenses. The contractor appealed to the district court, which rejected his appeal.

Even if the building is nearly finished, this does not guarantee that the contractor will deliver the apartment on time. For instance, R and his wife bought a new apartment in the Migdalei David project on Rothschild Street in Rishon Letzion.

"We bought the apartment in March 2008 when the building was almost ready, and the contractor agreed to deliver the apartment in June 2008," says R. "Since we were renting at the time, we decided not to take a chance and assumed that the contractor would use the three-month grace period, and even took the precaution of renting for another month, and undertook to leave the rented apartment in October. Meanwhile, our landlord found another tenant to replace us."

"In the end the contractor was four and a half months late. For the first three months we received no compensation, and for the extra month that we were renting, we received $700. At the end of that month we found ourselves on the street. For two weeks my wife and our daughter lived with her parents, and I went to live with my parents. At the end of October I took possession of the apartment, even though it was not yet ready, and lived in it for a week before it had electricity."

Their attorney Tal Yitzhak Ron notes several points to look out for when buying a new apartment. "First of all, there is a problem if the buyers settle for letting the contractor's attorney represent them. The contractor's attorney is concerned first and foremost with the interests of the contractor, and buyers should hire an attorney to represent their own interests."

Likewise, contractors always give themselves a grace period for which they won't pay compensation, usually six months. Buyers need to insist that this is changed to a maximum of three months, and ensure that it states calendar months and not working days, Ron adds.

"In some agreements the occupancy date is set for before the contractor submits Form 4 - the occupation form that the mayor signs to authorize the electricity hookup. In these situations the contractor gets the building occupied before the elevator is working in order to not be in breach of contract. Check whether the occupancy clause states that the occupancy will not be before the receipt of Form 4 and the elevator," he says.

Contractors also tend to insure against delays by a "force majeure," and do not define what this means. "Restrict the 'force majeure' clause to certain cases, so that it doesn't include things like increased steel prices. Also, ensure that the compensation for delays beyond the grace period equals the rental cost of the apartment being bought. Many contractors tend to compensate buyers with ludicrous sums," he says.

	Tal Yitzhak Ron
	Photo by: Shai Schcolnik