Sand Castles in the Air

Owners in the Carmel Beach Resort sued when the hotels, shops and marina they say the company promised them never materialized - and lost in court.

The Carmel Beach Resort isn't a vacation village by the sea. It's a building - nothing more than that. And it's one of the more controversial property projects in Israel.

This giant edifice squats on the Haifa coast, closer than the law permits to the beach, and - claim residents across the highway, who once had a view of the Mediterranean and now see brick and glass - it's an eyesore. Many a lawsuit ensued.

Furthermore, it has turned out that the project's residents aren't very happy either, arguing that promises made to them about their apartments were broken. But there's not much they can do about it, after not only losing their case before the bench, but winding up having to pay heavy court costs to boot.

In 2005, at the Haifa District Court, no less than 43 residents of Carmel Beach Resort (often known as Carmel Beach Towers ) sued Carmel Beach Resort and Tourism Ltd, the company that built the project, for NIS 6.5 million. They claimed the company had breached terms of the sales contracts for the apartments there, which had caused them damage. What damage? To property value. How? The company had broken its promise to landscape the property. Ergo, it had lied to them, they claimed. So their homes are worth less than they would have been if the project had had a nice garden.

The buyers in question had bought their apartments between 1992 and 1998. Carmel Beach Resort and Tourism had marketed the project as the next Riviera, with two hotels and various luxurious trimmings. The dazzled buyers were told of a marina for yachts to dock, a diving club, a boardwalk with dozens of shops and restaurants, an international convention center, swimming pools and sports facilities, cinemas, a bank, a post office and what not. Indeed, the buyers thought they were buying homes in a resort, albeit a smallish one.

They claimed that they were also promised a return on investment of 8% a year; at one point that figure jumped to 20%.

These glittering and gauzy visions did not exactly materialize. In 1995 construction got held up after the Union for Environmental Defense managed to obtain court orders halting the job. Even then, said the homeowners, Carmel Beach Resort and Tourism continued to send them reassuring messages that the delays would pass.

Finally, out of six planned buildings, only two went up. The rest never got off the ground, so to speak. No sports center, no marina for yachts, no boardwalk even materialized; no restaurants and cafes, no cinemas.

The company said the claims are groundless. The contracts for selling housing in the complex explicitly state that if the buyer is given information not actually included in the contract, the buyer must inform the seller (i.e., the company ) of this information, so the company can consider it. Information about something in the project that the company agreed could constitute a basis for contractual relations would be added to the contract.

In other words, if it isn't signed in black and white on the contract, the company was declaring - it doesn't exist. Information not stipulated in the contract will not be binding, the contract itself says.

Thus, the company summed up, the residents may not base any claims on fliers or any other promotional material, only on the contract, which stipulates none of those tempting luxuries.

Prior lawsuits

As the trial wore on, something intriguing came to light. The group of 43 buyers were not the first to sue Carmel Beach Resort and Tourism for this sort of thing. Another group had sued at the Haifa District Court, but lost the case in August 2010.

And there was another case, in which Carmel Beach Resort and Tourism sued a resident who refused to pay management fees, not to mention city tax (arnona ). That case wound up at the Haifa District Court, sitting as an appellate court. There, the issue of the marketing prospects the company had distributed came up. The three judges in the appellate court unanimously concluded that the residents' claims were groundless.

Indeed, District Court Judge Amir Toubi, ruling on the case of the 43 residents, had reached much the same conclusion: However the brochures and whatnot had presented the project, the actual sales contracts for the apartments in Carmel Beach Resort stated that no building permits had been issued for many of the promised amenities. The contracts explicitly stated that the company had not committed actually to building the project as originally envisioned, Toubi pointed out.

Reasonable people, concluded the judge, would have studied the contract carefully, because it and only it is binding. Furthermore, Toubi noted that there had been three cases involving very similar circumstances. But the group of 43 who had bought properties in the same Carmel Beach Resort sued anyway, based on the very same contracts that were in dispute beforehand.

"Time and again the court has rejected the claims against the defendant about its false presentations, bad faith or fraud," Toubi wrote in his ruling.

The defendants would have been well advised to study the precedent and withdraw their claims before the sentencing stage, thereby saving everybody time and money. But they hadn't, and worse, they claimed their case was different from the preceding ones. It wasn't, fumed the judge.

In cases of this sort, the court tends to punish the side that erred by handing down heavy costs, and Toubi did just that: He ordered the claimants to pay Carmel Beach Resort and Tourism the very high sum of NIS 170,000.

As of now the company has racked up four victories in court against the people who bought apartments from it.

One has to ask whether the company's victory won't be Pyrrhic. It won its cased but may have badly damaged its reputation - and that of its beachside edifice.