More and more Israelis understand that when purchasing an apartment, it is a good idea to find out not only who the developer is who bought the land and is marketing the renderings and prospectuses for the new apartment to them, but also who the company is whose employees are standing on the scaffolding and are responsible for the construction itself.
After a balcony built by Ortam Sahar collapsed in a Gindi Investments project in Hadera; in the face of the alarming losses of Dori Bani (which were updated last Thursday from 250-350 million shekels to 445 million shekels, and even that is not final); and in light of the freeze in proceedings entered into by the C. Landau company - the obvious question arose as to when the consumer should feel safer - whether in purchasing an apartment from a venture that is also the project's contractor, or rather a venture that is not the contractor.
""The story of Z. Landau illustrates well why a developer always loses by not being a construction contractor," says a developer who carries out his own projects. "The board of directors of Shikun & Binui, for example, met one day in the past and approved the construction services of Z. Landau. Did they know what would happen to the costs a year later? When construction costs rose, Z. Landau was already tied to Shikun & Binui in an agreement and lost money on the construction.
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"How many projects can you lose on at the same time? There is a limit to that. When the entrepreneur is also an execution contractor, he can manipulate between the profits of the enterprise and the execution. In the end, there will be no choice and all the entrepreneurs will execute for themselves. When an execution contractor goes bankrupt, the entrepreneur is screwed. That's more costs and a delay in delivery.".
""Interest in saving""
On the other hand, CEO and owner of Aura Israel, Yaakov Atrakchi, claims the opposite: "There is clearly an advantage in buying a project that is not a construction contractor. Even according to the Sales Law, the only address of an apartment buyer is the developer, and he is legally responsible for the guarantees, the quality, the delivery of the apartments, and compensation for delays.
When the developer is also the execution contractor, a serious situation is created for the apartment buyer, and there is no conflict of interest between the developer and the contractor. The developer and the execution contractor have conflicting interests. When I am a developer and there are problems with an execution contractor, I can replace him. I will not take a bad execution contractor. On the other hand, a developer who is a contractor is not necessarily the highest quality.
""Another point: the contractor will only receive money according to the progress of the execution, and thus the project budget is maintained. My interest is that the client be satisfied and buy from me. My view is not in the best interest of the execution contractor, but in the best interest of the apartment buyer. When problems arise, I will always be on the side of the client and not the contractor.
""A developer looks at the apartment buyer in the same light as the one who expects to receive a quality product, compared to a contractor who is also a developer who also profits from the execution, and therefore will have an interest in saving. In other words, a developer who is a contractor always has a conflict between taking care of himself or the apartment buyer. Therefore, in terms of product quality and type, an apartment buyer will always receive a better product from a developer who is not the contractor.
An entrepreneur who is a contractor is affected by the fact that the construction industry is currently in difficulties, and I am not. Even during the inspection period, if a construction contractor goes bankrupt, I hold his guarantees for the inspection period as well, and if necessary I will replace him. What will a buyer of an apartment from a venture that is a construction contractor and goes bankrupt do?
""All the entrepreneurs who have encountered financial difficulties and some have gone bankrupt over the years - whether it's Baranovich, Rubenenko, Amram Azoulay, or C. Landau, they have one thing in common - they were all also construction contractors.".
""The tenant benefits""
One of the entrepreneurial companies that also implements is Guy and Doron Levy. "The entrepreneur who is also the contractor has an advantage, given the fact that control over all stages and processes of the project - its planning and execution - are under him," says Doron Levy, one of the company's owners. "This leads to greater efficiency in the execution process, and the biggest beneficiary at the end of the day is the tenant. Let's start with the fact that for the tenant there is only one address and there is only one entity that provides him with service from the purchase stage, through the changes to the apartment, the delivery stage and even the inspection year.".
And what does the legal system have to say about the two alternatives? According to Attorney Ziv Caspi, from the Gindi Caspi Law Firm, which assists contractors' projects, there is no rule of thumb on the matter, "However, since the margins in execution are small, an executing contractor who runs into difficulties can disappear, and then the lending bank has to find another contractor to step into his shoes, and that will take time. An entrepreneur, on the other hand, will be able to replace the executing contractor before a crisis situation arises.".
Supreme Court: Responsibility for construction defects lies with the developer
Last February, the Supreme Court rejected an appeal filed by Peretz Diamond Company against the Beersheba District Court's decision to compensate eight families who purchased an apartment from the company in a project in the city, where serious construction defects were discovered. The ruling indicates that the only address for apartment buyers in Israel for failures is the developer company, which cannot impose responsibility on other parties for failures for which it is obligated under the Sales Law guarantee.
In the project, which was built in the Ramot Shalom neighborhood, cracks were discovered in the walls and the building itself sank, to the point that one of the wings was prohibited from being used and occupied due to concerns about its stability. Peretz Diamond tried to repair the construction defects, but without success.
The company claimed in court that responsibility falls on the engineers it hired and also on the Ministry of Housing and the Israel Land Authority, who did not provide all the information about the condition of the land.
The Supreme Court rejected the company's appeal and upheld the district court's decision for compensation in a total amount of 460,000 shekels, reflecting the cost of the repairs, and an additional amount of 65,000 shekels for the family (as well as legal costs).
