Summary
Last June, the District Court in Jerusalem overturned the decision of the Land Registry Supervisor in a dispute between apartment owners in the Waldorf Astoria project in Jerusalem[1]. Judge Tamar Bar-Asher ruled that the articles of the condominium prohibit short-term Airbnb-style apartment rentals. This decision emphasizes the complexity of the interpretation of the term “Residence” in condominium articles and its implications for the rights of apartment owners.
Background and the Legal Dispute
The Waldorf Astoria project was established as a combined residential and hotel project. The idea was to create a prestigious and unique project that combines the comfort and services of the Waldorf Astoria Hotel with the privacy of the residential apartments in the adjacent building.
The conflict arose between a group of apartment owners who rented their apartments for short periods and other apartment owners who were represented by the condominium’s representation (the house committee) who claimed that this harms the prestigious character of the building, is contrary to the provisions of the condominium’s regulations and therefore this rental constitutes a prohibited use.
The dispute revolved around the interpretation of clause 18.1 of the condominium regulations, which states: “The residential apartments will be used for residential purposes only, they will not be used for commercial purposes or any other non-residential purpose.”
The main questions that came up: Is a short-term rental considered “Residence” according to the articles? Is it significant that the management company previously knew and approved such rentals?
The Land Registry Supervisor, Avital Schreiber, stated in her ruling that the articles does not prevent the apartment owners from renting out their apartments short term. She interpreted the term ‘Residence’ broadly, including vacation residences and temporary stays. The Supervisor relied on evidence that indicated the intention of the management company to allow short-term rentals, and on the fact that most of the apartments are actually used for vacation residences and not for permanent residences. She stated that there is no express restriction on short-term rental in the articles and that the ban on commercial use refers only to the physical use of the apartments and not to the method of renting.
When coming to decide the issue in the appeal of the above ruling, Judge Bar-Asher from the District Court examined previous laws that dealt with the interpretation of the term “Residence” in different contexts. The judge reviewed the previous ruling and noted that in some cases the term “Residence” referred to permanent residence only and not to a temporary tourist stay.
Unlike many controversies regarding the interpretation of condominium articles, where there is no evidence of the drafter’s intent, in this case evidence was discovered indicating the circumstances of the drafting and registration of the articles. In particular, it turned out that in some of the sales agreements that preceded the registration of the agreed articles, the parties referred to the possibility of flexible uses of the apartments (such as short-term rentals), beyond permanent residences, but at the end of the day the issue was not expressed within the condominium articles.
Despite this, Judge Bar-Asher stated that the articles must be interpreted according to its objective purpose and not according to the interpretation in the narrow sense of the parties. She justified this by saying that the articles of a condominium are a unique document with different characteristics from a normal contract: it also binds future apartment owners, is valid for a very long time, and is very difficult to change. In addition, in this case there was no shared interpretation in the narrow sense of the parties, as some wanted to allow short-term rental and some strongly opposed it. Therefore, the judge interpreted the articles according to what reasonable parties would have sought to achieve through it, taking into account the prestigious nature of the condominium and preventing it from becoming a ‘Private Hotel’.
(Possible) Broader Implications
The ruling may affect the interpretation of articles in other luxury condominiums, especially those that combine residences and hotels. It limits short-term rental options, which may affect the income potential of apartment owners.
On the other hand, the ruling strengthens the interests of tenants seeking a quieter and more private environment. It illustrates the delicate balance between private property rights and the community interest in shared homes.
The aforementioned decision may create friction with tenants who are interested in a quieter and more private nature and demonstrates the inherent tension between private property rights and the community interest in shared houses, which will likely continue to be clarified in future rulings.
It should be noted that in light of the ruling, those apartment owners whose sales agreements for the purchase of their apartments were presented with the possibility of renting their apartments short-term by the project’s entrepreneurial company, can now estimate their damages and exercise their right within the framework of a trivial contractual claim.
Conclusions
Judge Bar-Asher’s ruling regarding the prohibition of short-term apartment rentals in the Waldorf Astoria project demonstrates the developing trend of adopting a narrow interpretation of the term “Residence” in the context of luxury condominiums.
In our opinion, it seems that in the appropriate cases, and in particular when it comes to unique projects that combine residences and hotels, the court will adopt an approach that limits temporary and more flexible uses of apartments, while balancing the interests of tenants who are interested in quieter and more private residences.
It will be interesting to see the extent of the impact on similar conflicts in other projects and on the entire apartment rental industry.
[1] To read the article published on our site in February ’24: https://ekw.co.il/%d7%94%d7%a9%d7%9b%d7%a8%d7%aa-%d7%93%d7%99%d7%a8%d7%95%d7%aa-%d7%9e%d7%92%d7%95%d7%a8%d7%99%d7%9d-%d7%9c%d7%98%d7%95%d7%95%d7%97-%d7%a7%d7%a6%d7%a8-%d7%a4%d7%a8%d7%a9%d7%aa-%d7%95%d7%95/
For further information please contact:
Hanan Efraim, Adv. Ofer Inbar, Adv.
Office: 03-691-6600 Office: 03-691-6600
Email: hanan@ekw.co.il Email: ofer@ekw.co.il