Delay in Delivery of Apartment – Waiver of Claims Clauses
Under the Sale Law (Apartments), the purchaser of an apartment has a legal right to receive compensation from the contractor or developer in the event of a delay in delivery of the property. This right is a cogent provision, meaning it cannot be waived or altered by an agreement between the parties. Therefore, any contractual clause that seeks to exempt the contractor from paying compensation for late delivery may be deemed invalid.
However, in many cases, contractors or developers require purchasers to sign agreements that include clauses waiving their rights to make claims for breach of the sales agreement and for compensation due to late delivery, as a condition for receiving ownership of the apartment.
Sub: Power Disparities between Contractor and Buyer
The exchange of an apartment highlights the power imbalance between contractor and buyer. The contractor may condition delivery upon signing a list of claims, while the buyer must wait to obtain keys from the contractor to enter the apartment. As a result, the contractor may condition delivery of the apartment on the buyer waiving claims, including for late delivery. Such a waiver is disadvantageous to the buyer and reduces its rights, contrary to the law. To even the power imbalance, Israeli courts have ruled such agreements legally void.
Letters of Waiver Reflecting the Desires of Both Parties
Notwithstanding, there are situations wherein courts will give effect to such disclaimers, provided they are convinced the disclaimers manifest the mutual intention of the buyer and seller to resolve any claims or disputes pertaining to compensation for delay in delivery without resorting to litigation. The court retains the power to invalidate such clauses. However, if the courts were to overlook such agreements in a sweeping and principled way, parties would have little incentive to reach amicable settlements. Moreover, the buyer would be forced to initiate legal proceedings, incurring both time and financial costs, before engaging in negotiations with the seller regarding the amount of compensation.
Encouraging conflicting parties to settle disputes without recourse to legal proceedings can result in savings for both parties and the public at large. Therefore, it is crucial to draft such agreements in a clear and informed manner, to prevent their rejection by the courts.
To ensure the agreed arrangement is sufficient and does not entail a waiver of the buyer’s essential rights under the law, certain criteria must be taken into account. Given the power imbalances between the parties, it is typically the seller’s responsibility to demonstrate that these criteria have been satisfied.
Three Main Criteria
To ensure an agreed settlement regarding compensation for delay in delivery is fair and does not waive the buyer’s legal rights, three main criteria must be considered:
- Does the agreement reflect a reasonable assessment of the risks involved in potential disputes between the parties?
- Is the reached settlement within the logical range between the different parties’ positions?
- Was the buyer adequately informed of its rights, such as through legal representation?
Ideally, such agreements should be made after the apartment has been delivered, so that the buyer is not under pressure to accept the property and can fully assess the time and financial value of any delay before reaching an informed decision on the settlement.
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The real estate litigation team at Barna Jaffa Lande would be happy to assist you with any questions related to the Sales Law or other issues.
Adv. Daphna Klein is a partner in Barnea Jaffa Lande’s Litigation Department.