I am punctual. I try to keep to the times set, and hate being late. A client who is late and does not update may lose my attention and certainly my goodwill. But keeping to times is also a cultural matter, and after years of activity in quite a few countries I understood that there are places where the time set for a meeting is merely a recommendation, and a meeting set for a certain hour may begin an hour late or even more. In the real estate industry, timetables are an even more problematic matter.
Mark and Galit came to the meeting with a binder full of documents. A few years earlier they had bought a presale apartment from an Israeli developer who was supposed to build a project in the country where our office operates. Galit told about the sales conference they attended at a Tel Aviv restaurant, about the glittering presentation and the price offered, so attractive that they simply could not refuse. They were explained that there is not yet a building permit, and that the expected delivery date is within 3 years of the signing date, and they paid a not insignificant sum that was deposited in an escrow account with a lawyer on behalf of the developer. Mark added that they did not bother to have the agreement checked by a lawyer of their own, although he has a few relatives who practice law, and were satisfied with the explanations given to them by the developer's lawyer. They also did not take care to read the agreement and get into its nuances. 5 years passed and they still had not received the longed-for apartment, and after visiting the site a few weeks ago it did not seem to them that they would receive the apartment even in the coming year, as the developer had not yet begun construction.
A brief review of the agreement revealed that the developer stated in the agreement explicitly, several times, that at the time of signing no building permit had yet been granted for the project and that this is known to the buyers. The developer undertook to obtain a building permit within a year of the signing date, with the option to extend the date each time by another year and in total up to 3 years. The buyers were given, under the agreement, the option to cancel if the permit changes the parameters of the apartment as described in the agreement, or after 18 months have passed from the latest date by which they were supposed to receive the apartment and it had not yet been delivered to them, this date being set within 24 months of receipt of the building permit.
The answer we received following an approach to the developer was that because of Covid there were delays, the lockdowns in Israel and abroad did not allow him to reach the country and advance the project, but he also did not name a date for completing construction and delivering the apartment to the buyers. We deepened the investigation somewhat with the help of the local office and it turned out that the plan the developer submitted was not approved at all initially by the local authority, and he submitted new plans twice until the plan was approved, and in practice received the building permit with considerable delay without bringing this to the buyers' attention.
From here a dispute developed over the buyers' right to cancel the agreement and receive their money back. The developer refused at first, claiming that he would meet the timetables, but when confronted with photographs taken only a few weeks earlier at the project site he began to bend. With a bit more pressure and the fear of a lawsuit he agreed to return the funds and even to compensate Mark and Galit.
Timetables in an agreement to purchase real estate are a central and important element that should be given thought, whether the property is in Israel or in any other country. Delays in delivery may cause significant financial and emotional damage, and therefore it is important to set a clear mechanism for dealing with them in the purchase agreement.
Remember, the buyer's exact rights in the event of delivery delays will be determined according to the laws of the country in which the property is located and according to the provisions of the purchase agreement.
Recommendations:
- Be sure to anchor in the purchase agreement an agreed and explicit delivery date. An agreement that includes conditions on how the timeline is counted will create difficulties for you in the future when dealing with delays.
- Insist that the agreement include clear sanctions in the event of delivery delays, such as payment of daily compensation or the option to cancel the agreement.
- Make use of a lawyer who works in international real estate in order to make sure that the agreement protects your rights in the best way.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית