An apartment deal can go wrong: a buyer who did not get a mortgage, a seller who changed his mind after a better offer, delays in handover or payments. The law gives the injured party several options, and the contract determines much of what happens in practice.
Fundamental and non-fundamental breach
A fundamental breach is one a reasonable person would not have contracted had he known of it in advance, or one the contract itself defines as fundamental, such as non-payment on time. In a fundamental breach the injured party can usually cancel. In a non-fundamental breach, the breaching party must first be given a reasonable extension to remedy it.
Enforcement or cancellation?
The injured party can demand performance (enforcement) or cancel, and in both cases also claim damages. Cancellation must be made by notice within a reasonable time. Do not rush: an unjustified cancellation notice may make the canceller the one in breach.
Agreed compensation
Most apartment contracts set agreed compensation for a fundamental breach, usually a percentage of the price. The injured party can receive it without proving damage, and the court may reduce it if it bears no reasonable relation to the foreseeable damage. Higher actual damage can also be claimed if proven.
Reducing risk in advance
- A realistic payment schedule that fits the mortgage.
- An early caution note.
- A clear definition of fundamental breach and the cure period.
- Funds held in trust where needed.
The caution note after cancellation
If the deal is cancelled, the caution note must be removed and funds returned under the contract. Disputes over this sometimes reach court, so act in a documented way.
Where do you go from here?
Every deal and every property is different, and a small detail in a contract or registration can be worth a lot of money. At Paz Israel & Co. Law Office we support buyers, sellers, landlords and property owners, from the first check to registration at the Land Registry. For more information see our real estate lawyer page, or contact us to schedule a meeting in Tel Aviv, Jerusalem or Modi’in.
This article provides general information, is correct as of the time of writing, and does not constitute legal or tax advice or a substitute for reviewing your specific circumstances.