And in section 13 it is written: "Regarding the maintenance of the leased property, Ofer informed us that you have cleaned the leased property. And it's good that we remind you to be careful about maintaining and preserving the property."
And in paragraph 14 of the letter, all the claims regarding the fundamental breaches of the agreement are preserved: "In conclusion, it is clarified that our company maintains all its claims regarding the fundamental breaches of the agreement, starting with the failure to carry out the adjustment work, the failure to open the leased property to the general public, and therefore your inability to meet your obligation to make profits..., your breach of your obligation to pay rent, and more. It should be clarified that what is stated in this letter does not exhaust the company's arguments and they are reserved with it."
- On November 15, 2020, an email was sent again from the company's attorney to the defendant: "In the meantime, please arrange debts and payments urgently" (page 143 of the company's attorney's affidavit).
- On December 20, 2020, an email was sent by the defendants' attorney, Adv. Orit Gruber, entitled "Outline for the Settlement of a Rent Debt at Ahad Ha'am 20" (page 86 of the defendant's affidavit), in which an arrangement was proposed for the immediate payment of ILS 130,000 and the balance until January 21, 2021, after receiving the money of a new investor who is about to enter the venture. He also announced in the email: "My clients would like to inform you that they have completed the issue of replacing one of the investors in the venture at Ahad Ha'am 20." She concludes as follows: "My clients would like to point out to you that Emanuel Dayan is working intensively and continuously, in order to minimize the damages caused by all parties, caused by the 'Corona crisis' that has hit the restaurant industry in Israel and abroad, and it is all in the hope that by doing so, he will be able to return to regular conduct starting in 2021, in accordance with the lease agreement that was signed, and to avoid unnecessary lawsuits against my client."
- On December 24, 2020, the company's attorney replied to the defendants' counsel that the defendants were in breach of the agreement and were not complying with the payment arrangement that was set (the Corona arrangement) and therefore the arrangement was canceled. "Therefore, in this state of affairs, withdrawing proceedings/postponing all payments now against a payment of ILS 130,000 including VAT is unacceptable." It also states that the checks for the remainder of the lease period have not been deposited since August, and this indicates an intention not to pay since August. It was also written that as another investor enters, it is necessary to obtain the plaintiff's consent to identify him (page 86 of the defendant's affidavit).
- On January 3, 2021, the company's attorney writes a letter of cancellation of the 2018 agreement, referring to previous inquiries to correct the violations that were not answered. In paragraph 5 of the letter, it is stated that "beyond the letter of the law" there is a possibility of 7 days to correct the fundamental violations, i.e., until January 9, 2021, otherwise the cancellation notice will take effect (hereinafter: the cancellation letter, page 89 of the defendant's affidavit).
- 00On January 7, 2021, counsel for the defendants sent a letter of response to the cancellation letter in which she admits to not paying the rent as detailed in the cancellation letter, but requests an "additional and final" extension until the end of January 2021 to complete negotiations with another investor, noting the difficulties during the COVID-19 period and the sending of the cancellation letter at the end of the year (pages 91-92 of the defendant's affidavit).
- 0On January 11, 2021, another letter was sent from the company's attorney, stating, inter alia, the following:
"The words of your clients in their letter only make it clear that they are unable to comply with the provisions of the agreement not only at the establishment/execution level but also on the economic level, as well as their request to forfeit the bank guarantee, the long search for an investor, the breach of their fundamental commitment to carry out the works, the admission that the flow of funds to the project has been stopped, and the negative cash flow. In practice, your client does not have the resources/ability to pay the minimum rent, let alone renovate the rented property and open it to the public...". It further notes that the search for an investor does not constitute a substitute for compliance with the provisions of the agreement, and that the violations are accumulating and causing damage to the plaintiff. Beyond the letter of the law, the defendants are given an additional 48 hours to correct all the violations (page 95 of the defendant's affidavit), i.e., until January 13, 2021.
- When the violations were not corrected, the agreement was finally canceled. On January 14, 2021, the agreement with the new tenant was signed, and on January 17, 2021, the holders of the Tel Aviv Municipality were replaced by the new tenant, who entered the property.
- After the details of the correspondence have been brought, which shed light on the conduct of the parties in the relevant months, I will examine the various issues that arise from the parties' arguments.
Did the tenant breach the agreement and the plaintiff was entitled to cancel the agreement
- As stated, according to the agreement, the tenant was obligated to begin the execution of the finishing work in the restaurant ("the original leased property", as it was called in the agreement, clause 3.3 of the 2018 agreement) within six months of the signing of the agreement. At the same time, the tenant was exempt from rent for one year for all the rented property and even received from the plaintiff the sum of ILS 350,000 and was supposed to receive an additional sum of ILS 350,000 against a signed agreement with a contractor to carry out the renovation of the restaurant. Despite all of the above, the work did not begin on the date set out in the agreement, and in fact this is sufficient to constitute a significant breach of the agreement. The entire purpose of the agreement is to rent and improve the property so that it will reach the level of a luxury restaurant and hotel. When there was no significant progress on the issue of construction until the date set in the agreement (January 10, 2019) and even long afterwards, the plaintiff was right to terminate the contract.
- The tenant claims that the coronavirus, which began in March 2020, disrupted the events. But the coronavirus began a year and eight months after the signing of the agreement, and a year and two months from the date set for the start of execution according to the agreement, and the tenant was still not close to execution and even an agreement with a contractor was not presented. In court, no contracts were presented, no invoices were presented, and no agreements with architects/consultants/suppliers/contractors were presented. Attaching plans for kitchens, air conditioners, plumbing, as appendices 25 to 28 to the defendant's affidavit, without bringing the professionals who carried them out to testify about their work and the sums they received for execution - is not convincing. The list of things that have been done detailed in the email describing the situation for March 2020 (!) does not meet the clear terms of the agreement at all and shows very little work for a year and a half. The issue of the hood and the shaft had already been settled in the framework of the agreement and all that was required to be carried out was not a great deal (paragraphs 1-3 of the email describing the situation). All the consultants were still waiting with their plans for the approval of the Conservation Committee, meaning that even if we assume that it takes six months to prepare plans, it is unlikely that more than a year has not yet received approval for even a single plan. The Ministry of Tourism and the Ministry of Health did not give any written approval, and there is no dispute about this. The defendants' claim that they presented permits or that there were oral approvals, does not confront the reality according to which, as the defendant himself testified, when asked why he did not present work diaries, he explained that they had not yet advanced to such a stage, since there were still no permits: "When it is not under your control, a diary does not provide you with this, first of all, you have to get all the permits, and then you have to get a diary with the obligations of all the contractors" (page 136, lines 20-22, Minutes of June 17, 2024, emphasis added - p. R).
- The defendants further argued that there is no need for the written approval of the authorities and that oral approval is sufficient for the commencement of work. This claim was rejected by the company's attorney, whose testimony I gave great confidence and was convinced of its professionalism and experience in the field. The company's attorney notes that according to the agreement, the defendants were required to present the plans for approval before they were taken for approval by the authorities, and such plans were never submitted to the plaintiff and therefore were not approved by the plaintiff, and hence it is clear that the plans approved by the plaintiff did not receive the approval of the authorities (see the testimony of the defendant's attorney, page 30, lines 15-26, page 30, lines 31-32). Hence, there has been no real progress in obtaining permits for a year and a half. It appears that in these circumstances, and when the parties, including the defendants, saw 6 months from the date of signing the agreement, as a reasonable time frame for signing plans with a contractor, since this is the time that the parties set in the agreement for the commencement of the contractor's work, it is clear that this is a material breach that entitles the plaintiff to cancel the agreement.
- To this must be added the most significant and obvious violation, which is the non-payment of rent. Violation of non-payment for three consecutive months (October, November, December 2020) and payment of a breach of an additional obligation to pay in the amount of ILS 58,000 for October 2020 and ILS 56,000 for November 2020 and December 2020, which are rent for the COVID-19 months that were supposed to be paid late as part of the arrangement. All these payments were not paid at all by the time of the evacuation. The argument that the plaintiff should have waited for the investor, with whom the tenant allegedly created a connection and it was claimed that he was supposed to invest at the end of January 2021, and therefore her right to cancel the agreement did not arise, is an argument that cannot be heard. Timely payment of rent is the initial and basic duty of a tenant. To the extent that three consecutive months were not paid and even a debt of three additional and previous months was dragged (the rent that was given to them was extended within the scope of the Corona arrangement, which was also not paid), the plaintiff certainly has the right to cancel the agreement.
- For the avoidance of doubt, I will note that I am not convinced that there was a real connection between the coronavirus and the violations of the agreement. First, as for the start of construction, it is enough to show that there was in fact no real progress for a year and a half before the pandemic, to understand that it was not the months of the coronavirus that brought about a halt in the work. Moreover, as for the conduct of the authorities during the Corona months themselves, I gave confidence to the words of the company's attorney, that during this period it was possible to promote real estate projects, and the authorities, including the municipality, worked on Zoom, and there were projects that the company's attorney testified that it successfully promoted during the Corona period as well (page 35, lines 17-31).
- In this regard, the testimony of Ido Porat, the CEO of the new tenant, who was brought to testify by the defendants and testified that made a credible and reliable impression. He describes the property he enters as a completely empty property that has stood desolate for many years, not as it was supposed to happen to a property of this quality:
"We saw from the outside the windows that the property was empty, a property like this in Tel Aviv is usually not empty, it was just completely abandoned..." (page 116, lines 3-4 of the minutes of June 17, 2024).