Who Is Responsible for Municipal Tax When? – part II | Various Rabbis | Beit Midrash

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The plaintiff (=pl) is an organization that rented property from Aug. 2004, with renewed contracts, until July 2010. In July 2008, the defendant (=def), another organization, sublet the property until the end of pl’s contract in 2010. Subsequently, def rented the property from the owner independently without a contract. In July 2011, def signed a contract but the arnona (municipal tax) account was still in pl’s name until Jan. 2012. The entire time, arnona was not paid, which caused a huge debt (974,632 shekels from Jan. 2007-Jan. 2012) which included inflation adjustments and interest. The lawyer pl hired to negotiate a payment plan with reduced penalties and tax breaks for their being NPOs, lowered the debt to 700,000, and arnona going forward was lowered due to def’s NPO work. Pl and def, which both benefitted from his work, disagree how to split up his 60,000 shekel fee. Pl wants it and the balance of the arnona debt to be paid according to the amount of time each used the property, i.e., pl¬ – Jan. 2007-June 2008 (period A) = 30%; def – July 2008-Jan. 2012 = 70%.) They argue that the fact that def preferred to keep things in pl’s name (contract, arnona account) should not harm pl. Def is willing to pay in full from July 2010 to July 2011 (period C) because they were full renters at that point. However, regarding the time they were sub-letters (period B), they should pay only according to the rate they are paying now because it was pl’s obligation to transfer the account to def, who could have received a bargain price. So too, in period D, when there was a contract between def and the owners, pl could have removed themselves without def’s help and the fact that pl was charged at a high rate was their own problem

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Case: The plaintiff (=pl) is an organization that rented property from Aug. 2004, with renewed contracts, until July 2010. In July 2008, the defendant (=def), another organization, sublet the property until the end of pl’s contract in 2010. Subsequently, def rented the property from the owner independently without a contract. In July 2011, def signed a contract but the arnona (municipal tax) account was still in pl’s name until Jan. 2012. The entire time, arnona was not paid, which caused a huge debt (974,632 shekels from Jan. 2007-Jan. 2012) which included inflation adjustments and interest. The lawyer pl hired to negotiate a payment plan with reduced penalties and tax breaks for their being NPOs, lowered the debt to 700,000, and arnona going forward was lowered due to def’s NPO work. Pl and def, which both benefitted from his work, disagree how to split up his 60,000 shekel fee. Pl wants it and the balance of the arnona debt to be paid according to the amount of time each used the property, i.e., pl – Jan. 2007-June 2008 (period A) = 30%; def – July 2008-Jan. 2012 = 70%.) They argue that the fact that def preferred to keep things in pl’s name (contract, arnona account) should not harm pl. Def is willing to pay in full from July 2010 to July 2011 (period C) because they were full renters at that point. However, regarding the time they were sub-letters (period B), they should pay only according to the rate they are paying now because it was pl’s obligation to transfer the account to def, who could have received a bargain price. So too, in period D, when there was a contract between def and the owners, pl could have removed themselves without def’s help and the fact that pl was charged at a high rate was their own problem.

Ruling: Last week we saw that the direct obligation of arnona during the times in question is def’s.
Regarding payment of late penalties, pl was indeed negligent in not paying the bills, and this directly caused the penalties. Even though the principle financial obligation was def’s, responsibility to arrange the payments was pl’s during period B. If there was possible strategic value in delaying payment, pl should have consulted with def. Therefore, pl will pay these penalty payments for period B. Regarding period C-D, pl should have been out of the picture, once their contract was over. Def did not prove that pl asked them not to take over the arnona account, and there was no reason for them to imagine that pl was paying these bills. Therefore, def should have paid themselves and since they did not, the penalty payments are theirs. Since the obligation is def’s, it is not considered as if def is paying pl ribbit.
The penalty payments should be divided according to the time of each obligation. The benefit of the reduction is according to the size of each part of the obligation, except for the final unexplained reduction of 60,000 shekels which should be split evenly by the sides.
The agreement between def and pl and between the lawyer was that they should pay according to the amount of reduction. Therefore, according to the amounts of reduction from which each side benefitted, so too should the lawyer’s fee be levied.