Court Ruling on Equal Compensation Has Not Changed the Market Rules

The ruling did not cancel the equal compensation model / Reuven Castro

The wave of articles in recent days paints a frightening picture: the equal compensation model is dead, and the entire industry is heading toward a standstill. But before rushing into unnecessary defensiveness, it is important to understand the facts.

The storm began after a Tel Aviv District Court ruling dealing with an evacuation-reconstruction project in Ramat Gan. In that building, the apartments range in size from 35 square meters to 105 square meters. The court ruled that an identical addition of 12 square meters for everyone was discriminatory against the owners of the larger apartments and ordered compensation of about 141,000 shekels in favor of one of them.

The court did not cancel the project, but rather resolved the edge case through a one-off monetary compensation for that apartment owner alone. The distance between this exceptional case and a market shutdown, as reported in the media through cheap clickbait, is enormous.

It is important to understand, the court did not change the market rules. This is a ruling that is not yet final, and the appeal window to the Supreme Court is still open. Yet in the wake of the ruling, voices have been heard proposing a shift to an addition calculated by percentage, for example 15% of the original apartment size. That is a mistake that could destroy entire projects.

The reason is simple, planning authorities require a minimum of 65 square meters for a new apartment. A 40 square meter apartment must grow by 25 square meters just to meet the standard. If the same percentage is applied to a 100 square meter apartment, the result will be a giant apartment of more than 160 square meters, a demand that would collapse any economic feasibility. On the other hand, a low percentage would leave the small apartments below the legal minimum. The result, envy between neighbors, resentment, and projects stopping already at the signing stage.

Evacuation-reconstruction requires social consent, not an internal class war.

If the apartments in a building are similar in size, for example all of them are 50 to 90 square meters, the ruling is irrelevant. Equal compensation is still the fair and correct mechanism. Only in buildings with extreme gaps, and only if a contract has not yet been signed, should a real estate appraiser be brought in to propose softer balancing mechanisms, such as a higher floor, an attached parking space and storage room, or a richer technical specification. All of these are solutions that will compensate the injured side without igniting internal wars.

As the recent war showed, urban renewal is a life-saving security necessity. Do not let frightening headlines dictate the steps, successful projects are built on common sense and domestic peace between neighbors.