The Builders of the Land Contractors Association, in cooperation with the Foundation for the Encouragement and Development of the Construction Industry, implemented its threats from the beginning of the month and filed a petition in the High Court against Amendment 9 to the Sale (Dwellings) Law, which entered into force recently. To the index of construction inputs, and imposing most of the responsibility when it is late in delivering an apartment to the contractor.
The association attacks the amendment to the law from several directions, claims that its sections are clearly unreasonable, and demands that the court repeal or repeal specific sections in it, and at least determine that the section that changes the way of indexation does not apply to “discounted apartment” tenders. Association president Raul Srugo said: “The High Court is not about the actual change of the Sale Law, but about a fatal violation of freedom of occupation and freedom of contract.” But in practice the petition includes several other main arguments. Globes breaks it down into sections.
The general argument: a flawed legislative procedure
In the petition, filed through Adv. Aya Reich-Mina, a partner in the Fischer Law Firm (FBC & Co) and by Adv. Yinon Chimi, from the firm’s litigation department, the association argues on several occasions against the legislative process itself and the path it took in the Knesset until it was approved. “The amendment to the law was enacted on the eve of the dissolution of the Knesset, for reasons that are clearly unreasonable for the election economy,” it said. The petitioners even define the legislation as predatory and populist, “under the guise of a government ‘struggle’ over housing prices,” as they put it. “Between it and the ability to determine certainty and cool the boiling housing market there is nothing and half a thing.”
Recall in this context that the day before the law was officially approved by the Finance Committee, the two main sections were changed: the linkage to the index – which was originally supposed to be linked to the construction costs component, and was ultimately set at 40% of the entire apartment price; And the issue of late delivery – to which a new outline has been attached regarding the compensation to be paid by the late contractor.
MK Bezalel Smutrich, one of the initiators of the original bill and whose name is often mentioned in the petition, responded to the petition: “Legal chance. There is no reason for judicial intervention in Knesset legislation, certainly not justified and correct civil legislation of this kind. This is a just and moral law that corrects long-standing injustice.”
The controversial issue: the question of retroactivity
One of the key issues discussed throughout the formulation of the amendment to the law is the question of retroactivity: Can the amendment be applied to contracts that have already been signed? The final wording explicitly states – a move that in itself drew many reactions – that the law will not apply retroactively, but the petitioners state otherwise.
“The amendment has a clear element of retroactive legislation,” it noted. “Provisions also apply to apartments in the framework of ‘discounted price’ projects, the agreements for which were signed with Rami passes to the entry into force of the amendment to the law, but the agreements with the buyers of these apartments have not yet been signed. The business analysis conducted by the contractors in order to offer the sale price, relied on the possibility of attaching the full price of the apartment to the construction input index, but the amendment to the law prevents them from doing so and changes the terms of the contract for them retrospectively. “
The petition also includes a sample tender as part of a price per occupant in the south of the country, which a contractor won in 2016 according to the price per square meter of an apartment of NIS 6,980. Construction of the Ministry of Construction and Housing) – a gap of 126% between construction costs and the amount that can be attached to the contract.
The most significant rage: the change in the linkage composition to the index
The contractors also have complaints about the change in the linkage itself, and especially about the fact that they can not link a significant part of the price of the apartment to any index: “This arrangement violates the property rights of the contractors, The principle of linkage is in doubt, certainly not at a time when inflation prevails, since the linkage mechanism has the function (among other things) of preserving the value of money. “
In this context, the petition presents the words of Dr. Efi Tzemach, from the Department of Counseling and Legislation at the Ministry of Justice, who represented the ministry in discussions in the Finance Committee. “That way, it is not possible for a party to a contract to assert legitimate rights.”
“Clearly Unreasonable”: Delay in Delivery
Another argument raised in the petition concerns, of course, the very imposition of responsibility on the contractor almost exclusively, in the event of a delay in the delivery of a new apartment. “This is a manifestly unreasonable arrangement because it requires compensation for late delivery even if the delay was caused through no fault of the contractor or his control, and even if he did everything reasonably possible to offset such a delay,” it noted.
Here we will mention that one of the main reasons for the delay in receiving a Form 4 (Occupancy Form, which should be given when the apartment can be handed over to the buyer) is the various authorities. In the past, we have already mentioned here the significant delay, of many months, caused by a slow response from the Electric Company, and the Fire and Rescue Authority and the local authorities themselves often delay the population.
The heart of the petition: freedom of contract
Further to this, another major contention of the contractors is for improper legislative intervention. The petition states that this is a “blatant and unprecedented intervention by the chief legislature in the freedom of contracts and the freedom of contract of contractors and apartment buyers.” The petitioners further added: “This is a violation of the property right and freedom of occupation of contractors, in their engagement with buyers of apartments and offices, while causing enormous damage to contractors. The amendment to the law disproportionately and unnecessarily tightens the existing provisions in existing legislation.”
Embarrassment: the harm to buyers
All of this ultimately drains into one central claim, which “winks” at the entire public – the amendment to the law harms not only the contractors, but the buyers of the apartments themselves. “In the long run, in order to maintain their profit margins and the value of money, the contractors will be forced to estimate the expected rise in the index and thus the buyers’ wages will come out at a loss,” the petition said. “It is even possible that the amendment in pricing will hurt the purchasers’ market even more than the harm alleged by the legislature is being amended by law.”
Here it is worth mentioning that around these things, which have often been published in the media around the amendment to the law, the Competition Authority examines whether the contractors have adjusted prices in order to compensate themselves for the damage to profitability following the new regulations included in the Sale Law.