Eviction – Construction projects, by their nature, involve a large number of apartment owners who have to agree on the outline of the transaction with the relevant entrepreneur.
In many cases, some apartment owners are elderly people, for whom entry into such a long and massive project such as eviction – construction project is more complex for them for obvious reasons, and therefore the law established specific provisions regarding the compensation that the entrepreneur must offer to these tenants.
In a precedent ruling of the District Court in Haifa (hereinafter: “the Sapir Case“)[1], the court ruled that the refusal of elderly tenants to sign an eviction – construction agreement, even though they do not meet the dry definition of “elderly” in the law, does not constitute an unreasonable refusal and therefore, they cannot be imposed with compensation towards the other apartment owners in the complex.
What is a reasonable refusal?
The Eviction and Construction Law (Encouragement of Eviction and Construction Projects), 5766-2006 (hereinafter: “the Law“) allows a privileged majority of the apartment owners in the complex of an eviction and construction project (which has been declared as such), to file a lawsuit against other apartment owners in the complex, the purpose of which is to declare them “reluctant tenants” and even charge them with damages.
The Law establishes an open-ended list of reasons that constitute a reasonable refusal (see Section 2b), inter alia the lack of economic viability for the project, failure to provide adequate collateral, failure to offer alternative residences, special personal circumstances, etc.
In our case, the Law even determines when a refusal by an “elderly” tenant will constitute a reasonable refusal, and when it will not (see Sections 2b (6) and (7)). We will note that according to the Law, an elderly person is someone who, upon signing the first eviction and construction agreement, is over the age of 70 and has lived in the relevant apartment for at least two years.
The legal arrangement for “elderly” tenants
As mentioned, the Law states that the refusal of elderly apartment owners will be considered reasonable, if the entrepreneur did not offer those owners one of the three options stipulated in the Law, the purpose of which is to make it easier for them to deal with a project of such a large scope, at a late stage of their lives.
The three alternatives that the entrepreneur must offer one of them to elderly tenants are as follows:
1- Alternative consideration for the new apartment in the project, either by moving to a nursing home, purchasing an apartment by the entrepreneur outside the project or paying a sum of money by the entrepreneur in the capitalized value of the exchange apartment;
2- Receiving two apartments whose cumulative value is similar to the value of the exchange apartment in the project;
3- Receiving a smaller value apartment in the project and payment of the difference in cash.
Thus, to the extent that elderly tenants refuse to sign an eviction construction agreement, when the reason for their refusal is not included in the list established by the Law and when they were offered by the entrepreneur at least one of the three options established therein, the chances of them being declared “reluctant tenants” will increase. We make a reservation and say that it is not possible to absolutely determine this, since the list of refusals that will be considered “reasonable” according to the Law is, as mentioned, an open list.
Facts of the judgment in the Sapir Case
A lawsuit was submitted to the District Court in Haifa on behalf of 243 apartment owners in Kiryat Yam, the purpose of which was to declare the defendants, an elderly couple who had passed the age of 70 at the time the lawsuit was filed, as “reluctant tenants” and to appoint a lawyer to sign the project documents in their place that would enable its implementation.
It should be noted that when the plaintiffs (owners of the apartments in the project) signed the eviction and construction agreement, the defendants were not yet 70 years old, and therefore did not fall under the definition of “elderly” according to law, thus were not entitled to receive the benefits granted by Law to the elderly.
The refusal of the defendants to sign the documents was due to their advanced age, their poor health, the fact that they had already carried out renovations to secure their apartment (which also includes a Mamad [Residential secure space], as well as the inconvenience that would be caused to them by such a large-scale project as an eviction and construction project.
As you can see, the refusal of the defendants to sign the agreement is not explicitly included in section 2B of the Law, therefore it could be determined that their refusal was unreasonable.
However, the court ruled in a precedent manner that “all of the circumstances together justify the determination that this is not an unreasonable refusal, and that the defendants’ opposition to the transaction to vacate the building is for genuine, honest and objective reasons, and not for “extortionate reasons” and this in light of the circumstances detailed above.
Just to complete the picture, we note that after the verdict, the plaintiffs and the defendants (along with the entrepreneur) reached a compromise according to which the defendants would receive the benefits stipulated in the Law regarding elderly tenants in exchange for their agreement to sign the project documents, and this despite the fact that at the determining date they did not fall under the definition of “elderly” in the Law. As a result, the plaintiffs turned to the court and requested to cancel the verdict, but the court rejected the request and left the verdict intact.
The future consequences of the verdict in the Sapir Case
The verdict in the Sapir Case can cause uncertainty in eviction – construction projects. On the one hand, the court took into account the subjective circumstances of the defendants and on their basis determined that they justified their refusal to join the project. In doing so, the court showed that it also knows how to be flexible when necessary and it does not look at things only through black and white glasses.
On the other hand, by actually doing so, the court caused greater uncertainty regarding future determinations in lawsuits against reluctant tenants, as it created a certain uncertainty regarding who is eligible to enter the definition of “elderly” under the Law and receive the beneficial alternatives established there.
The fear that has arisen today, after the ruling, is that reluctant tenants will try to receive the benefits in the Law intended for elderly tenants, even if they do not fall under the definition for that, and in doing so will cause delays in the advancement of the project. Moreover, there is also a certain violation of the principle of equality of consideration which should be maintained between all the apartment owners in the project, by the fact that tenants receive benefits that other tenants do not receive, even when they do not comply with the formal provisions of the Law.
Our position in this matter is that although certainty is a very important principle both in the world of law and in the world of business and real estate, sometimes there are subjective circumstances that justify a renewed and more deliberate examination of the legal mechanisms, and that at the end of the day, the courts must be given credit due to the fact that this examination is done sparingly and relying on weighty evidence and reasoning.
[1] Civil case 58035-01-23 Haya Sapir v. Victor Amar (published on Nevo 7.3.24)
Hanan Efraim, Adv. Hadar Yair, Adv.
Office: 03-691-6600 Office: 03-691-6600
E-mail: hanan@ekw.co.il E-mail: hadar@ekw.co.il