They were friends even before they were partners.
Ronen and Eyal met in the army, served in the same unit, celebrated weddings and circumcisions together. Thirty years of friendship survived crises, distances and changes of direction in life. What did not survive was the real estate deal that was supposed to be “the safest thing we ever did.”
The idea was born by the sea.
In 2021, during a family vacation in Limassol, the two looked at the row of villas that had risen on green hills overlooking the sea and said at the same time: “Why not us?”
There was no lack of apparent logic. Cyprus, a European Union member state that attracts foreign residents with a favorable tax regime, a golden visa and investment programs designed precisely for Israelis like them. Ronen, an experienced real estate developer from Tel Aviv. Eyal, a commercial lawyer who knew deals up close and too many times saw others make the money he helped them generate.
Within three months, they purchased a plot in a quiet rural area about five kilometers from the coast, 8,000 sqm with a zoning plan that apparently allowed the construction of five luxury villas for sale.
They signed a partnership agreement. The lawyer who drafted it was a friend of a friend, who charged a friendly price and did, as turned out afterwards, work to match.
The troubles began not in construction, but in planning.
When they submitted the first application to the local planning authority in Cyprus, they discovered that the plot is defined as “partially protected agricultural,” a definition that significantly limits the scope of permitted construction. Not impossible, but complex. A resubmission with an adapted plan was required, an opinion from a local engineer, and the process might be extended by a year to a year and a half.
The money was already out. The expectations - too high. And now, the pressure.
Eyal, who had come to the deal with expectations of a quick turnover, wanted to make the plan more flexible: reduce to 3 villas, lower the specification a bit, start building what could be built quickly. Ronen, who understood real estate from the development side, wanted to wait, obtain the full permit and sell at a premium. “If we lower the specification,” he said, “we'll also lose the buyers who are willing to pay.”
The first dispute was professional. The second was already personal.
When friends start talking only on WhatsApp, it's a sign.
Within half a year, what had been daily phone calls became short messages. What had been coffee meetings became formal emails opening with “for your attention.” Each hired his own advisors: a local architect for one, a different Cypriot lawyer for the other.
By the time it reached me it was already too late for simple mediation. Ronen turned to me because the partnership agreement did not set a simple mechanism for dissolution. There was an arbitration clause, but it referred to arbitration “under Israeli law,” while the property was registered in a Cypriot company, the plot was in Cyprus, and all the accompanying agreements were signed in English.
A question that sounds technical, but when a property worth millions of euros stands behind it, it becomes a battlefield.
The arbitration took eight months.
We had to choose an arbitrator agreed by both sides, experienced in company law and international real estate, who could act both under Cypriot law and under principles accepted in international commercial arbitration. We chose a British arbitrator with experience in disputes in Mediterranean countries, a step that was not cheap, but saved years of legal proceedings in Cyprus.
He ruled: Eyal would buy Ronen's share according to an independent appraisal conducted for the property in its current condition, without deduction for the planning delays. Ronen was given a small premium for having been the “initiating partner” according to the company's formation documents.
Neither was completely satisfied; that is usually a sign the arbitrator did his job right.
What remained of it, and not only of the deal.
Ronen and Eyal do not speak today. Thirty years of friendship did not survive two years of disorganized business partnership.
This is the story I hear again and again, in different versions, from different countries: Portugal, Greece, Dubai, Cyprus.
Good friends who trust each other too much to draft a proper agreement. Developers who save on a lawyer at the formation stage and pay ten times as much at the dissolution stage. People who bring different knowledge, a different investment horizon and different levels of risk to the table, and don't stop to talk about it before the money is already out.
A good partnership agreement is not meant for the moment when everything works. It is meant precisely for the moment when everything falls apart.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית