A Homeowner Paying for Building Slowly

Case: The defendant (=def) is a company that held the building rights for a neighborhood in which residents build their own houses. The plaintiffs (=pl) bought a lot from def and built a home, after signing a contract that states they must complete building by 09/2011 or pay a $400 a month penalty. It is not stated explicitly what finishing building entails or when they reached this stage. Eventually, def provided pl with an ishur z’chuyot (confirmation of rights) document, but on it was written that pl owes def $8,400 for being late in building and 60,000 NIS for breach of contract. Pl is suing def because the ishur z’chuyot as written prevented pl from being able to refinance their mortgage with better terms and from ending to pay the bank for being a guarantor of their loan. Def is suing pl $8400 for the late fee.

Ruling: In defining what is considered a completed home, it does not seem that a Tofes 4 (municipal permission to inhabit the house) is necessary (ed. note – in some areas, it is illegal and not accepted for people to move in before a Tofes 4 has been given, while in others it is a confirmation that often comes later after occupancy.] However, the house must be nominally ready to be lived in. This can be indicated by some combination of the following factors: actually living in the house, possessing a document from the municipality with only minor requests for repair before receiving a Tofes 4, and pictures from within the house showing it is in its final stage.

Pl claimed to have a document from the municipality with minimal requests, but despite repeated requests by beit din, did not submit the document. The Rosh (accepted by the Shulchan Aruch, Choshen Mishpat 15:4) says that a litigant’s concealing of evidence can be seen as an admission that the evidence is proof against him. Pl sent pictures from the house that they claim, but have not proven, are from Oct. 2011. In these pictures, one does not see everything in the house, but it is at least clear that the kitchen sinks have not been installed. This is reason enough for the house to be deemed not ready for occupancy. Additionally, the low usage of electricity is an indication that pl had not moved in. In Jan. 2012, the electricity usage fits the narrative that they had already moved in. Therefore, while it is not an absolute proof, we will only obligate pl in the penalty, which is the type of obligation that courts traditionally modify from the letter of the contract, from Sept. through Dec. ($1,600).

Regarding the problematic and delayed ishur z’chuyot, the lack of refinancing is not a loss but the withholding of a gain. In such a case, def would be obligated only if the gain was clearly and readily available, which pl have not proved is the case. Also, there were apparently steps that pl could have taken to remove the problem. Regarding the need for continued payment for bank guarantees, that is a clear out-of-pocket payment which pl had to continue due to def’s delay in providing the papers, and therefore def has to compensate pl 1,050 NIS.