An Israeli court ruled that the occupation of a real estate broker requires skill and professionalism. In this case, the broker provided inaccurate information regarding the status of the plans of the property and the court issued that they fully reimburse the brokerage commission received and pay punitive damages.
One of the most significant transactions people will make during their lifetime, and some would say the most significant, is purchasing a property.
In the context of the acquisition, the buyer signs a purchase agreement, which is meant to regulate all the details in the real-estate transaction; the payment schedule, the date of receipt of the apartment, and the various legal aspects, to name a few.
In Israel, when purchasing a property second-hand, it is standard to include a clause that the buyer is purchasing the apartment in its current condition, “as is”, and that prior to signing the agreement the buyer examined the property and found that it was satisfactory and suitable to the buyer’s needs.
“Present condition clause”
Notwithstanding the “present condition clause”, however, the seller is still obligated to disclose to the buyer in detail all of the existing defects in the apartment and any relevant information that may be important to the buyer prior to purchasing the property. Failure to disclose relevant facts before signing the contract may constitute ‘intentional misrepresentation’ on the part of the seller. With real-estate transactions in general, the seller is considered to have the upper hand, with easier and more convenient access to obtaining information on the property. Thus, the onus of disclosure is placed on the seller, and any physical defects that may exist in the property must be brought to the attention of the buyer.
Recently, an interesting case was brought before the court in Haifa. Modi and Hila Fluman bought an apartment together as a couple, in Giv’at Downs St. in the Carmel region of Haifa for more than 2 million NIS.
The sellers instilled within the buyers the belief that it would be possible to make use of the roof and that there are additional building rights that can be utilized that would allow them to undertake additional construction on the roof.
The sellers did not reveal, however, that currently there were legal proceedings underway regarding the building permit to allow the use of the roof and that similar plans and requests had been submitted in the past and consistently rejected by the local planning and construction committee. They also concealed the fact that a court order had been placed on the property preventing any possibility of using or building on the roof.
The buyers sued the sellers for misrepresentation, intentional concealment and the resulting damages. In addition, the buyers also filed a lawsuit against the real estate brokers, who, they claimed, were in violation of their fiduciary duty by misrepresenting the facts, and by not upholding a moral standard of conduct.