The arrangement set out in the Evacuation and Reconstruction Law is intended to enable the execution of evacuation and construction transactions in which most apartment owners want a condominium, and encounter unreasonable opposition from one or more of the apartment owners, by exposing the tenants who refuse to join the project in these circumstances to a sanction in the form of being required to pay compensation to the other tenants for the damage caused to them due to the loss of the transaction."
- In the High Court of Justice case 8958/21 The Institute for Structural Reforms in the Tax Appeal v. Knesset of Israel (Nevo, March 23, 2025) (hereinafter: the "Reform Institute case"), the Honorable Justice Y. Kasher explained that section 2(a) of the Pinui-Binui Law is intended to solve the market failure of the "blackmailer's problem", which arises when a recalcitrant landlord makes improper use of his power and by means of his right of veto to thwart the execution of an evacuation-reconstruction transaction. The solution is by enforcing a Pinui-Binui transaction on the recalcitrant apartment owner, when there is a "privileged majority among the apartment owners" and when the recalcitrant apartment owner refuses for unreasonable reasons or conditions his consent on unreasonable conditions. See paragraph 3 of the judgment of the Honorable Justice Y. Kasher in the matter of the Institute for Reform:
"The starting point, which is rooted in property law, is that the consent of all the apartment owners in the condominium is required in order to demolish the condominium and allow the construction of a new condominium in its place. This point of departure raises, in the context at hand, the market failure of the "extortion problem" (also known as the "holdout problem") – which arises because a single apartment owner is liable to make improper use of his power to thwart the execution of a socially desirable Pinui-Binui transaction by means of his veto power. In order to deal with this problem, the legislature determined, in section 2(a) of the Pinui-Binui Law, that when there is a "privileged majority among the apartment owners" who agree to conclude a Pinui-Binui transaction, and an apartment owner refuses the transaction on unreasonable reasons or conditions his consent on unreasonable conditions, the court is authorized to charge him damages for the other apartment owners who agree to the transaction, for non-execution of the transaction, or to force him to execute the transaction."
- Section 2(b) of the Pinui-Binui Law defines a list – which is not closed – of circumstances in which the refusal of an apartment owner to a Pinui-Binui transaction will not be considered an unreasonable refusal, as follows:
"(b) A refusal to transfer rights as stated in subsection (a) shall not be considered unreasonable, inter alia, in any of the following: