Globes, Eric Mirowski, 06.05.2020

A lawyer representing tenants in an urban renewal project did not represent the developer either, but in some cases. A lawyer who represents tenants in urban renewal projects can simultaneously represent the developer in other projects, provided that the developer is not his regular client and that this is done with the consent of the apartment owners.

These rules and additions are included in a position paper compiled by the Land Forum at the Bar. In doing so, the Bar Association's Land Forum seeks to regulate the ethics issue of its members who operate in the area of ​​urban renewal. One way or another, it should be noted that the ethics committee of the Bar Association may decide on a case-by-case basis.

Breaking the rules is like any ethical offense that can result in suspension or reprimand. But the breach does not apply retroactively. If the project has already begun to be sold, and the lawyer represents both the tenants and the developer, the rules will not apply to him.

Market failure

The field is not new, but as far as lawyers work in such ventures, no agreed ethics rules have yet been established. In light of complaints received by the Municipal Renewal Authority on the matter, four months ago, a letter was sent to the Bureau from the Attorney General's Office, claiming, among other things, that there was a "market failure" regarding ethical issues . "Many times when tenants belong to a weakened population, they are stamped on deals whose conditions are very poor and expose them to significant risks. Does not see in his eyes only the good of the apartment owners, "said the letter, signed by the head of the real estate cluster and legislation in the Ministry of Justice, Attorney Carmit Yuliis and Attorney Estee Verhaftig-Bass.

Carmit Ullis / Photo: Private Photo

Recommendations for changing the existing situation were included in the letter of the two senior executives. For example, it was suggested that a lawyer representing the apartment owners be chosen by the landlords and not by the developer. It was also proposed that the developer not pay the attorney directly his fee, but deposit the amount that should be used to finance the legal representation of the landlords, as agreed with them in advance in a trust account, from which the attorney's fees will be paid. It has also been suggested that until the municipal renewal project is completed, the lawyer will not be able to provide any legal services to the entrepreneur, even in another project.

It also states that "in the case of a lawyer who has represented the developer several times or represented apartment owners several times against the same entrepreneur - as a general rule, the lawyer must disclose to the apartment owners, before accepting their representation, his ongoing relationship with the developer, and also state that in the case Of continuous representation of the same entrepreneur (more than a number of times to be determined after examining the accepted practices in the market), he should avoid the representation of apartment owners in front of the same entrepreneur. "

It was also suggested that "the lawyer representing the apartment owners and also seeking to act as the 'organizer' of the transaction must disclose to the apartment owners prior to assuming their representation, about his dual role, and in advance to disclose the consideration he intends to demand from the developer for his services as organizer."

"Fixed customer" representation

The Bar Association held a number of meetings on the subject, and received only some of the recommendations. "As a general rule, the Land Forum believes that a lawyer representing the landlords cannot represent the developer on the same project as this would be in conflict of interest," the lawyer's position paper reads. "However, this kind of representation can be allowed in relation to a closed and narrow list of issues that are consistent with the protection of the interests of the landlords. These subjects can be found in the listing of condominiums, reporting and handling of taxation and / or planning and construction matters.
" The foregoing and for the avoidance of doubt will be emphasized that the representation of the developer in every aspect relating to the sale of his apartments in the project can in no case be carried out by the tenant lawyer. This will not be included in the closed and limited list of exceptions and will be a conflict of interest in any circumstance. "

Concerning the representation initiated by a tenant's lawyer in another project in the same timeframe, the bureau believes that "such representation restriction should only apply to a lawyer who is a" permanent client "of the lawyer ... This restriction must be applied in the condominium agreement , Stating the actions represented by the lawyer representing the apartment owners, will be an engine to perform for them, as a result of his acquaintance with the developer who is "his permanent client".

The main reason for this decision, according to the bureau's method, is that the urban renewal project takes many years, and if the approach adopted by Ulysses Verhaftig-Bass, who has no connection between the developer and a lawyer, be adopted, it will be devastating, first and foremost, for the tenants, as they are not. Be able to use the services of many lawyers, who have previously represented or represented the developer in other projects.

The bureau is opposed to transferring the attorney's salary payments to a landlord's trust account. "In most cases, there is no chance that the apartment owners will be able to establish, manage and operate through such an escrow account themselves," the position paper reads.

The Bureau also objects to the approach that the lawyer's salary in the urban renewal will be derived solely from the value and scope of the owner's dwellings, and not from the value and volume of sales of the developer's apartments. They claim that this approach, which significantly reduces attorney's fees, could result in losses.

Finally, the Bureau believes that transitional provisions should be set for changes in the ethics rules, "because at least in light of some of the ethics committee's decisions, most lawyers in the field are subject to 'disciplinary offenses' and subject to disciplinary sanction for their actions."

The head of the Bar Association, Adv. Avi Haimi, told "Globes" that "this is a complex and sensitive issue, and I congratulate the members of the Bureau's Land Forum for their thorough work on regulating the field. The position paper forms the basis for discussions with the Ethics Committee and the Ministry of Justice, on which the rules will be applied in the conduct of attorneys on urban renewal.

Chairman of the Israel Bar Association, Adv. Avi Lalum, added: "After many months of internal discussions in the Bar on Urban Renewal Law Ethics, it was decided that the Land Forum should work to advance position paper in order to regulate and prevent it. Internal disputes. The established committee included first-rate lawyers in the State of Israel, with the aim of establishing a clear position after more than a decade. In our opinion, the paper prepared reflects the correct position that will regulate the issue once and for all. "