Repair or monetary compensation for construction defects: when the contractor loses the right to repair

The rule: an opportunity to repair comes first

Where a repairable defect is discovered, the buyer must give the contractor a reasonable opportunity to repair it, and the contractor must carry out the repair within a reasonable time. Going straight to a monetary claim, without allowing a repair, is a mistake that may cost you in legal costs and in a reduction of the compensation.

A reasonable opportunity means written notice, a detailed list of the defects, and willingness to arrange a date for the works. Not every delay by the contractor extends its right. It must carry out the repair within a reasonable time.

The two situations in which you may repair at the contractor's expense

1. The defect has recurred. The non-conformity recurred and was discovered after the contractor had repaired it once or more, within two years beginning on the date of the buyer's notice.
2. An urgent repair was not carried out. The repair is urgent, and the contractor did not carry it out within a reasonable time from the date of the notice. For example, an active leak, or a defect that endangers safety.

In both situations the buyer may carry out the repair, and the contractor will bear the cost of the repair. For the expense to be recognised, document the defect before the repair, obtain an expert opinion and quotations, and keep the invoices.

When monetary compensation is preferable to a repair

• When the contractor has already tried and failed, and confidence in its ability to repair has been lost.
• When the defects are extensive, and another contractor, under supervision, will do a better job.
• In the common property, when the house committee wishes to choose a contractor and manage the works itself.
• When the contractor is in financial difficulty, and the likelihood that it will carry out a thorough repair is low.

Two examples from cases we have handled, one in each direction. In a case on behalf of the house committee of three buildings in Rehovot, with some 100 buyers, the proceedings ended in a settlement under which the developer paid NIS 2,978,750 and the committee carried out the repairs itself (case details). In a damp case in a TAMA 38 project, an actual repair was chosen instead, under the supervision of a court-appointed expert and with a guarantee covering three winters, alongside compensation of NIS 20,000 (case details).

What does monetary compensation consist of?

• The cost of repair according to the expert opinion, including VAT, since the buyer will actually pay it.
• Engineering supervision of the repair works.
• Mental distress, according to the extent of the defects, their duration and their effect on life in the apartment.
• Loss of value, where a defect remains that cannot be fully repaired.
• Ancillary expenses, such as alternative accommodation during extensive repairs, and expert fees.

Every component requires proof: an expert opinion, quotations and receipts. A component that has not been proven will not be awarded.

Waivers and "completion of repairs" confirmations

Contractors often ask buyers to sign a confirmation that the repairs have been completed, or a waiver in return for a repair or a payment. Under Section 7A(a) of the Law, the provisions of the Law may not be contracted out of except in the buyer's favour. Even so, such a signature can complicate proof later on. Before signing, check exactly what has been repaired and what remains open.

About the author

Amos Ilan, Advocate, is a lawyer (Bar No. 35320) and a notary (licence 214444). The office is at 17 Tzahal Street, Nes Ziona, and handles real estate transactions, construction defects, condominium disputes and civil litigation. Alongside his legal work he has practical knowledge, not based on formal training, of engineering, appraisal and electrical and building systems, and he personally conducts the cross-examination of experts in construction defects cases.