No. The court held this is a matter of priority: the compensation is paid from the assets of the proceeding, and for the period from the receiver's appointment it ranks ahead of the lender's floating charge.
The contractor collapsed and the lender completed construction: the Supreme Court held that buyers are entitled to delay compensation
In brief: When a contractor runs into difficulties, and the body that financed the project under a financial accompaniment arrangement chooses to complete construction through a receiver under the existing sale contracts, it cannot perform only what suits it. On 7 October 2026 the Supreme Court held that compensation for late delivery for the period from the receiver's appointment is a "proceeding expense", ranking ahead of the lender's floating charge, and buyers may set it off against the balance of the price. For the period before the receiver's appointment, the compensation remains an ordinary "pre-proceeding debt", and buyers may not set it off.
The judgment: Civil Appeal 3301/23 Midili v. Ibuy Binuy Project - HaNevi'im 63, Bat Yam Ltd. et al. (Supreme Court, Deputy President N. Sohlberg and Justices Y. Willner and R. Ronen, 7 October 2026). The main judgment was written by Justice Ronen, and the result was unanimous.
What happened?
In a National Outline Plan 38 project in Bat Yam, the contractor failed to repay the loans, and at the end of January 2021 a receiver was appointed, who completed construction on behalf of the lenders. The appellants' apartment was not delivered on time, and they demanded that the receiver pay compensation for the delay or set it off against the balance of the price.
In a residential building in Bat Yam, a National Outline Plan 38 agreement was signed to reinforce the building, and in return the contractor received rights to build 14 new apartments. The project was financed by two bodies, Yesodot and Ayalon Insurance, against fixed and floating charges. When the company failed to repay the loans, the lenders applied to enforce the charges, and at the end of January 2021 a receiver was appointed. The lenders, through the receiver, chose to complete construction under the sale contracts already signed with the buyers.
The appellants bought one of the apartments before the collapse. Under the contract, the apartment was to be delivered within 24 months of the building permit, with compensation for a delay of more than 60 days. The apartment was not delivered on time. The appellants asked that the receiver be ordered to pay the compensation, or alternatively to set it off against the balance of the price. The receiver argued that the duty to deliver on time rested on the contractor alone, and that the lenders had undertaken towards the buyers only to provide a guarantee under the Sale (Apartments) (Assurance of Investments) Law. The Tel Aviv District Court (Judge A. Lushi-Abudi, 22 February 2023) rejected the application.
What did the Supreme Court decide?
1. No "selective completion". A lender that chooses to continue and complete the project on the basis of the existing contracts takes the contract as a whole. Absent other agreement, it cannot collect the price from the buyers while disclaiming the duty to deliver on time. Deputy President Sohlberg added that such a contract is a "package deal".
2. Not personal liability, but order of priority. The question is from which money and in what order the compensation is paid, out of the assets of the proceeding. There is no personal obligation on the lender to pay from its own pocket.
3. Two periods, two classifications. Compensation for delay accrued up to the receiver's appointment is a "pre-proceeding debt" (section 4 of the Insolvency and Economic Rehabilitation Law, 5778-2018), and the lenders' rights under the floating charge prevail over it. The court relied on the buyers' agreement in the sale contract to subordinate their rights to the accompanying bank. By contrast, compensation for delay from the receiver's appointment until delivery is a "proceeding expense", which ranks ahead of debts secured by a floating charge (but not a fixed charge). In this case, since it was not argued what state construction was in when the receiver came in, or how long completion required, all the compensation accrued from the appointment was classified as a proceeding expense.
4. Set-off. By default, and before proceedings are opened, buyers may not set off against the price compensation the contractor owes them. Set-off gives a creditor an advantage similar to a charge, at the lender's expense, and here it was also expressly prohibited in the sale contract. The court referred on this point to Civil Appeal 2457/24 Rachamim v. Bomgarten (14 October 2024). But for compensation classified as a proceeding expense, the balance changes: it is no longer subordinate to the lenders' rights, so buyers may set it off against the price still to be paid.
5. The result. The appeal was allowed. The case was returned to the District Court to examine the appellants' entitlement to compensation and its amount, under the rules laid down, taking into account the right of set-off for the period after the receiver's appointment. The respondents were ordered to pay costs of ₪25,000.
Deputy President Sohlberg expressed reservations about a remark by Justice Ronen on whether buyers may agree with the lender to waive rights under the Sale (Apartments) Law. Justice Willner left the question open, so in practice it was not decided.
What is new here?
The rule that buyers cannot set off delay compensation against payments to the accompaniment account has not changed, and it remains in force for the period before the receiver's appointment. The novelty is the period after it: once the lender chooses to complete the project through a receiver, the delay is the responsibility of the proceeding itself.
| Period of delay | Classification and result |
|---|---|
| Before the receiver's appointment | Pre-proceeding debt. The lender's floating charge prevails. No set-off against the price, unless the lender agreed. |
| From the receiver's appointment until delivery | Proceeding expense. Ranks ahead of the floating charge. Set-off against the balance of the price is allowed. |
What does this mean for buyers?
Check the contract for the delay compensation clause and the set-off prohibition, document the dates, and once a receiver is appointed, file the claim within the receivership proceedings. Before paying the balance of the price, calculate the compensation from the date of the receiver's appointment and consider set-off, by a proper written notice.
- Check the sale contract for the delay compensation clause, the subordination clause in favour of the accompanying bank and the set-off prohibition, and check the release letter you received.
- Document the dates: the building permit, the contractual delivery date, the receiver's appointment and actual delivery. They determine which part of the compensation is a proceeding expense.
- Once a receiver is appointed, file the claim within the receivership proceedings, not only a letter to the contractor.
- Before paying the balance of the price, calculate the compensation for the period from the receiver's appointment and consider set-off, by a proper written notice. To calculate the compensation: late delivery compensation calculator.
- Remember that the guarantee under the Sale (Apartments) (Assurance of Investments) Law secures the money you paid, not the compensation for delay.
Sources
- Civil Appeal 3301/23 Midili v. Ibuy Binuy Project - HaNevi'im 63, Bat Yam Ltd. et al. (7.10.2026).
- Civil Appeal 2457/24 Rachamim v. Bomgarten, insolvency trustee (14.10.2024).
- section 4 of the Insolvency and Economic Rehabilitation Law, 5778-2018 (definition of "pre-proceeding debt").
- Sale (Apartments) Law, 5733-1973; Sale (Apartments) (Assurance of Investments of Purchasers of Apartments) Law, 5735-1974.
Checked on 24 October 2026.
When to contact a lawyer?
The developer collapsed, a receiver was appointed, and your apartment is late? Send us the sale contract, the release letter and the notices you received, and we will check what you are owed, from which date, and whether you can set it off.
To schedule a call: 052-5927592, or WhatsApp from the button on the site.
About the author
Amos Ilan is an advocate (licence no. 35320) and notary (licence no. 214444). The office, at 17 Tzahal Street, Ness Ziona, handles real estate transactions, construction defects, condominium disputes and civil litigation.
Disclaimer. This article is for general information only and is not legal advice. Every case depends on its own facts and documents, and nothing in it guarantees any outcome.
Questions and answers
Must the accompanying bank pay me compensation from its own pocket?
Can I set off all the compensation against the last payment?
Only the compensation for the period from the receiver's appointment. For compensation accrued before that, and absent the lender's consent, there is no right of set-off.
Does this also apply to someone who bought an apartment from the receiver?
Yes. According to the judgment, obligations the receiver itself undertook within the proceeding are proceeding expenses from the outset.
What if the receiver sold the project instead of completing it?
The judgment dealt with a lender that chose to complete construction under the existing contracts. A different case may be examined differently, so the circumstances should be checked.
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