Court Awards 250,000 Shekels to Butcher Shop Misled by Hidden Lease Clause

A meat sales company that rented a store in Rishon LeZion to operate a butcher shop without knowing there was a prohibition on selling food on the premises will receive compensation and expenses totaling about a quarter of a million shekels, the Rishon LeZion Magistrate's Court ruled recently. Judge Rafi Arnia determined that the lessor — a company holding significant real estate assets — breached its duty of disclosure regarding a critical detail.

The lease agreement for the property on HaHagana Street in Rishon LeZion was signed in 2020 for a four-year term with an option for four additional years, at a rate of 26,000 shekels per month plus VAT. The plan attached to the building permit stated that it was a "store without food," but these words were written in an extremely tiny font that, according to the judge, required a magnifying glass to read.

In June 2021, the tenant discovered the restriction and notified the property owner of the lease cancellation, requesting the return of payments. After receiving no response, the tenant filed a lawsuit seeking one million shekels, covering rent, brokerage fees, and municipal property tax (Arnona), claiming the food sales restriction was intentionally concealed. The property owner countered with a 390,000-shekel lawsuit, alleging breach of contract and damages, claiming the tenant was merely dissatisfied with parking and accessibility.

Judge Arnia rejected the owner's claims and partially accepted the butcher shop's lawsuit. He ruled that the owner knew about the restriction and failed to disclose it, which constitutes bad faith in negotiations and deception under the Contracts Law. The verdict stated that the tiny text in the building permit did not fulfill the lessor's obligation: "Since it was proven that the defendant knew about the restriction, and given that there is no reference to it in the lease agreement itself, the attachment of the plan cannot be seen as fulfilling the duty of disclosure... all in view of its tiny dimensions."

The judge emphasized that the defendant is a long-standing company with an experienced manager, rejecting the notion that the restriction could have been missed. The court concluded that the defendant failed to disclose a material fact at the pre-contractual stage, entitling the tenant to cancel the lease. The owner was ordered to return 198,353 shekels in rent and other costs, plus 45,000 shekels in attorney's fees, along with court and witness costs.