Shabbat Parashat Yitro 5780

P'ninat Mishpat: Bad Advice Causing Loss of Mortgage Rights – part I

Case: The defendants are an organization formed to build a real estate development (=def1) as a kevutzat rechisha (a group of purchasers = kr) and the company that supervises the project (=def2). The plaintiffs (=pl1 and pl2) signed up to join def1 and become owners of apartments with only one spouse signed (for technical reasons), which def1 and def2’s employees said was fine. It turns out that this caused pl1 and pl2 to be ineligible for special government mortgage arrangements, and they are demanded payment of the estimated 42,000 shekels apiece over the life of the mortgage this is worth. The defendants argue that they were not obligated to arrange mortgages, that at the time of the advice given, it was not expected that buyers would benefit from government mortgages or that it made a difference if both spouses were listed as owners. Later on, switching the registry of ownership could have held up the whole group.      

Ruling: The potential grounds for defs’ obligations are the pl1 and pl2’s reliance on them in a damaging manner (this is included in the obligation of garmi, which is semi-direct damage). The gemara (Bava Kama 99b) rules that if a moneychanger gave bad advice to a customer about coins, he is exempt if he is an expert, and obligated if he is not an expert. Even if he is an expert, if he was paid for the appraisal, he is obligated to pay for the mistake. The condition for obligation is that the advice-giver was aware that the customer was relying upon him (ibid.). The Netivot Hamishpat (306:11) says that if he is paid, we will assume that he is aware he is being relied upon.

Pl1 said that a representative of def2, who was in charge of the signing up and claimed to be a mortgage advisor, had him sign without his wife and said it was not a problem. At that point, def2 was not being paid, and it is likely that they did not realize that pl1 and pl2 were relying on them regarding the specific point of the impact on government mortgages. Because pl1 and pl2 are trying to extract money, they need to bring proof that there was reliance, which they did not do. To the contrary, the candidates to join the group were told to research the matter of financing themselves. Also, it seems that def2 were indeed experts in the field.

Furthermore, at the time that pls signed, it was not yet a mistake to have only one sign because the government had not yet changed the rules, which made it beneficial to use their financing, as opposed to those of banks. The gemara (ibid.) says that if there is a new situation, even in the period of time right after the change goes into effect, the advice-giver is not considered negligent in making a mistake.

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