Civil Appeal 7/24 Moshe Levy v. Queen of Sheba-Eilat Properties - part 2

In other words, the owners of the housing units in the hotel, including the appellants here, took upon themselves to cover all the management expenses of the hotel in accordance with their relative share calculated according to the area of each unit (pro rata).  As mentioned, the fixed monthly rate of US$3 per square meter expired with Hilton's departure, creating uncertainty about the new tariff, an issue that remains open to litigation.  This issue, as stated, was not discussed by the trial court in view of the appellants' argument in principle that the respondents are not entitled to raise the tariff beyond the sum of USD 3 per square meter.

40. This argument in principle collapses in light of what is stated in clause 4 of the management agreement.
41. The appellants claim that the increase in the rate of management fees works to their detriment with regard to their entitlement to payments received from hotel guests for overnight stays in the housing units they purchased. This is because the agreement to join the database entitles the appellants to 35% of the aforesaid payments, less the management fees (and participation in the fund for the renewal of the hotel's equipment) (see: paragraph 8 of the agreement to join the database).  The appellants therefore request that the hotel owners combine the following: (a) maintaining the monthly management fees at the rate collected from them during the Hilton period: USD 3 per square meter; or (b) increasing the database payments due to them to an amount exceeding 35%.
42. This argument was also doomed to failure. The contractual system between the parties determines that the addition of the housing unit to the hotel's vacation unit database is subject to the decision of the unit owner.  This is clearly evident from the provision of clause 2.2 of the agreement to join the database (which allows the unit owner to remove his unit from the pool according to his wishes) as well as from what is stated in clause 12 of the management agreement, which grants the purchaser of the unit, like the appellants, the option to join the pool of units (the lease-back option), while clarifying that "the management company will not be entitled to refuse to add a purchaser to the pool, subject to the buyer's signature on the agreement to join the database of apartments and the fulfillment of its terms and conditions of this agreement by the purchaser" (see:  Clause 12.3 of the Management Agreement).  This indicates that there is no dependence between the purchase agreement and the management agreement, on the one hand, and the agreement to join the database on the other.  A unit purchaser in a hotel who chooses not to sign the joining agreement and does not attach the unit he purchased to the database must pay the same management fees paid by those who join the database.
43. The appellants place their hope on the ruling of the Tel Aviv-Jaffa Magistrate's Court (Judge Y. Hasdiel) in a civil case in Fast-Track Procedure 30798-04-17 Queen of Sheba Properties - Eilat v. Badosa [Nevo] (March 10, 2019) (hereinafter: the Badosa Case), according to which "management fees ... [In the management agreement identical to the one before us – A.S.] were determined from the outset as a fixed and rigid total sum that is not contingent on any additional calculation" (see ibid., paragraph 4 of the judgment).  However, this determination does not help the appellants in any way since it was determined in relation to a refusal of payments (as defined in that judgment) for the period in which the hotel was managed by the Hilton Company.  As I have already explained, after Hilton left the hotel after 20 years of management, things changed: Clause 4 of the management agreement (which was not relevant and probably did not discuss the Badosa case) canceled the old rate of management fees and transferred the parties to the agreement to a regime of pro rata participation  in the hotel's management expenses, in accordance with the principle set out in clause 8.1 of the agreement.
44. The owners of the hotel are therefore entitled to charge the appellants increased management fees calculated according to the area of each unit (pro rata). In saying this, I am not expressing an opinion on the manner in which the management fees should be calculated.  This issue was not discussed by the trial court, and together with the proprietary issue – the main purpose of registering the appellants' rights in their units – remained open.  Subject to a judicial decision that will fall – as it will – on these two issues, the appellants' claims against the respondents have no basis, and there was no basis.

Conclusion

45. The appeal before us is a futile appeal, and for this reason I will suggest to my colleagues that it be dismissed while charging the appellants significant costs, taking into account their improper conduct after the hearing has ended. The appellants will bear the respondents' expenses in the total sum of ILS 50,000 plus VAT.