Tel Aviv apartment buyers win court ruling to reclaim funds from stalled project
A TAMA 38 project in Neot Afeka, Tel Aviv, faced significant delays, leading to the appointment of a receiver. In a landmark ruling, a judge allowed two families to cancel their contracts and recover their payments, setting a new precedent for the real estate industry.
Is a significant delay in the delivery of apartments in a project under receivership a fundamental breach of the sales contract? The Tel Aviv District Court has answered in the affirmative, setting a major legal precedent. Judge Noa Grossman, presiding over a TAMA 38/1 project in Neot Afeka, Tel Aviv, ruled that buyers severely harmed by construction delays are entitled to a full refund of their money.
The project, located at 50-52 Shlonsky Street, was initiated by Y. Heuberger Initiatives Ltd. and consists of 32 existing units and 20 new apartments, 14 of which were sold. Following the developer's financial collapse, Judge Grossman appointed attorney Gonen Kastenbaum as receiver at the request of lenders Michlal Real Estate Finance Ltd., Clal Insurance, and capital provider Sigma City.
Two families who purchased three apartments sought to cancel their contracts, represented by attorneys Mani Koren and Yaakov Antwerg. They argued that the original delivery date was mid-2025 and that ongoing delays have forced them to shoulder the burden of both mortgage payments and rent, causing severe financial distress.
Financing companies, represented by attorneys Ran Keren and Ron Turkeltaub, argued against the cancellation, stating that additional funding had been provided to complete the project by November of next year. They maintained that Sale Law guarantees are intended to ensure delivery, even if delayed, rather than to facilitate contract termination.
However, Judge Grossman emphasized a shift in judicial perspective: "It is not enough for the apartments to be delivered; we must insist on timely delivery. The appointment of a receiver demonstrates a crisis point where a buyer should be allowed to exercise their Sale Law guarantees and exit the project." This ruling may have profound economic implications, as lenders may now face increased risks and higher costs for financial backing, which could ultimately be passed on to future homebuyers.
