Contractor not given an opportunity to repair construction defects? Supreme Court: compensation is reduced, not denied

The judgment: LCA 18136-03-26 Amiran and Yaakov Hadad v. Shmi Ashkeloni Ltd (the Supreme Court, Justices Mintz, Willner and Stein, 18 August 2026).

Background and facts

Two buyers purchased apartments in a residential building built by a development company. The agreements were signed in 2016 and 2017, and the apartments were delivered in March and April 2021. After moving in, the buyers claimed that numerous defects had come to light, and approached the company asking for them to be repaired. On 16 January 2022, before the inspection period had ended, they filed a monetary claim for a total of NIS 240,942, based on an expert opinion obtained on their behalf.

The contractor argued that the claim had been filed prematurely, in the middle of the inspection year, and that it had not been given a proper opportunity to carry out repairs. An expert appointed by the Magistrates' Court estimated the cost of repair in one buyer's apartment at NIS 15,750 (NIS 20,240 with supervision and VAT added, if the work is done by the contractor), and in the other buyer's apartment at NIS 43,850 (NIS 56,400 with supervision and VAT added). The expert added that if it were held that the contractor had no right to repair, 20% should be added to each of the amounts.

The Magistrates' Court allowed the claim in part. It held that the buyers had not given the contractor a proper opportunity to repair (except for one defect in the door of the protected space), and therefore reduced the compensation to the contractor's cost of repair: NIS 24,177 to one buyer (including NIS 3,000 for mental distress) and NIS 40,248 to the other. The Tel Aviv-Jaffa District Court reversed the outcome: in its view, even reduced compensation empties the contractor's right to repair of content, and it therefore denied compensation for the defects almost entirely. An application for leave to appeal to the Supreme Court was filed against that decision.

The legal question

Section 4B(a) of the Sale (Apartments) Law, 5733-1973 provides that where a non-conformity capable of repair is discovered, "the buyer or sub-purchaser shall give the seller a proper opportunity to repair it, and the seller shall repair it within a reasonable time". The Law does not say what the consequence is where the buyer has not done so. The question the Supreme Court decided: does failure to give a proper opportunity to repair deprive the buyer of compensation entirely, or does it only justify reducing it?

The Supreme Court's decision and its reasoning

The Supreme Court, per Justice Alex Stein (Justices David Mintz and Yael Willner concurring), heard the application as if it were an appeal, allowed it, set aside the judgment of the District Court and reinstated the judgment of the Magistrates' Court. The main reasons:

• The burden on the buyer remains, but the sanction is not denial. The Court reiterated that the law prefers actual repair by the seller, and that as a buyer you must give the seller a proper opportunity to repair before going to court. However, the section contains no provision stating that breach of the burden deprives the buyer of compensation, and the Court considered that "there is no room to read into the section a sanction of complete denial of the remedy of damages".
• This is an application of the duty to mitigate damage. A buyer who did not let the contractor repair did not mitigate their loss. The usual consequence of failure to mitigate is a reduction of compensation by the amount of the loss that could have been avoided, not its denial. The contractor would in any event have borne the cost of repair had it been given the opportunity, and there is no reason for it to be exempt from that cost.
• The incentives are balanced. If a buyer who did not let the contractor repair were to receive the full cost of repair by an outside contractor, they would have an incentive to sue prematurely. They therefore receive only the contractor's cost of repair, without the contractor's profit, mobilisation costs and VAT. On the other hand, the contractor does not profit from delivering a defective apartment, since it pays the cost of repair. According to the Court, the reduction may be greater in other circumstances; in the case at hand it was approximately 20%.
• The previous approach in case law. The Court relied on the judgment in CA 5602/03 Segal v. Shikun Ufituah LeIsrael Ltd, in which the claim was filed within the inspection year and without an opportunity to repair, and the compensation was reduced by one third rather than denied (as set out in the judgment). It also relied on the legal literature and on bills on the subject, which were not enacted but do not indicate an adoption of denial of compensation.
• Exceptions in both directions. The Court emphasised that awarding adjusted compensation is the general rule: "awarding adjusted compensation constitutes a rule". However, in exceptional circumstances, where the buyer acts in flagrant bad faith and deliberately frustrates the repair mechanism, a larger reduction may be considered, and in extreme cases even denial. Conversely, where there was a genuine reason not to allow the contractor to repair, for example a deep breakdown of trust arising from the nature of the defects or from the contractor's previous conduct, the buyer may receive full compensation. The Court added that the buyer cannot be left facing a "broken trough", that is, left without a remedy for defects that have been proven. It further noted that improper conduct by a buyer can be reflected in the award of costs. In the case itself, the contractor was ordered to pay costs of NIS 5,000 to each applicant, NIS 10,000 in total.

What it means in figures

The case at hand illustrates the difference. According to the opinion of the court-appointed expert, repairing the defects in the second buyer's apartment cost NIS 43,850, and NIS 56,400 with supervision and VAT added, where the work is done by the contractor. The expert noted that if it were held that the contractor did not have the right to repair, 20% should be added to each of the amounts determined. The outcome ultimately determined, NIS 40,248 for this buyer, is based on the contractor's cost of repair and on the findings of the Magistrates' Court regarding the specific defects. In other words, the buyers received real compensation based on the contractor's cost of repair rather than the market price, but well above the zero at which the District Court had arrived.

What has not changed: the buyer's duty to give the contractor a proper opportunity to repair remains in force, as does the established rule that a claim for defects is, as a rule, filed after the end of the inspection period and after an opportunity to repair has been given. The judgment deals only with the question of what happens when the burden has not been discharged, not with whether it exists.

Analysis and practical implications

• For buyers of an apartment from a contractor. The good news: you will not lose compensation merely because you went to court too early. The less good news: the compensation will not be full. As a rule, you will receive the contractor's cost of repair, which is lower than the market price (in this case by about 20%, and according to the literature cited in the judgment such gaps can reach much higher rates), and the compensation may be reduced further. In addition, the Court noted that improper conduct by a buyer can be reflected in the award of costs.
• For contractors. The right to repair remains protected, and the ruling confirms that a buyer's failure costs the buyer money. But the judgment also closes off the option of relying on the argument that the claim was premature in order to escape payment altogether. A contractor wishing to benefit from the mechanism must offer actual repair, within a reasonable time and in writing, and document the offer.
• For litigants in civil proceedings. Even those not dealing with construction defects can learn from the approach taken: the Supreme Court chose to decide an application for leave to appeal as if it were an appeal in order to clarify a legal position that had remained unclear, in accordance with its power under Regulations 149(2)(b) and 138(a)(5) of the Civil Procedure Regulations, 5779-2018.

What to do in practice

• You discover a defect: give written notice before filing a claim. A properly drafted letter setting out the defects and specifying a reasonable date for repair discharges the burden under Section 4B(a) of the Sale (Apartments) Law. The article on a letter to the contractor also includes a letter generator that runs in the browser only.
• Give access and keep records. Set dates for access to the apartment, keep all correspondence, and check on completion of the repair whether it was done properly. If the contractor ignores you or delays, this record is the basis for arguing that you may go to court even before the end of the inspection year, as emerges from the case law cited in the judgment.
• An urgent defect or a recurring defect: there is a separate route. Under Section 4B(b) of the Sale (Apartments) Law, if a defect recurs after the contractor repaired it within two years of the buyer's notice, or its repair is urgent and the contractor did not repair it within a reasonable time, the buyer may repair it themselves and the contractor will bear the expenses. The new judgment does not change this. We have written in detail about the difference between repair and compensation.
• Prefer not to let the contractor repair? Give reasons and keep records. If trust has broken down, for example because of failed repairs in the past or defects whose extent calls for a different contractor, it is important to document the reasons in advance and to obtain an engineer's expert opinion. You can read about engineer's expert opinions here, and the inspection and warranty periods can be calculated using the inspection periods calculator.
• Seeking compensation? Ask for an expert opinion setting out two alternatives. The expert opinion should present both the contractor's cost of repair and the market cost of repair, so that the court can choose without appointing a further expert, and you will have a realistic picture of the expected compensation before starting proceedings.