Construction Loans in Israel: Bank's Liability Towards Third Parties

תקציר

Recently several judgments have been entered in Israel, extending the liability of banks providing construction loans to building constructors. According to this position, the banks are liable towards various third parties which are bound by a contractual relationship with the constructor, although the bank itself has no direct contractual link vis-à-vis such parties. Such liability has already been recognized by the courts in Israel thus far with respect to purchasers of apartments or other units in a project, as well as towards sub-contractors performing various works on behalf of the constructor, when the constructor has received finance from the bank. However, according to this approach, liability towards additional third parties may be recognized as well. The article reviews the bank's liability toward third parties in cases of construction loans.