Lawyer in Israël

Kaufman 6
Tel Aviv, ISRAEL

Pinuy Binuy

In Israel urban renewal is most important given the state of the buildings in the entire country. In fact, most if not all buildings built before 1980 will not hold up if there is an earthquake. And there will be one, the only question is when and what will be its magnitude. Several laws have been established to deal with this problem. One of them is the Tama 38 program that has been in effect since 2005. Its aim is to strengthen and bring old buildings up to current safety standards. However, the problem remains unresolved for buildings in poor condition. The cost for a renovation would be more expensive than for a reconstruction.

That is why another law was approved in 2016 to address this problem. Its purpose is to replace buildings that have been badly damaged by new ones. This law is called pinuy/binuy in Hebrew, or Destruction / Reconstruction in English. It does not affect only buildings but urban areas where all old residential buildings will be demolished. New residential buildings with modernized and improved infrastructure will be built in their place. These new neighborhoods will be populated much more densely than before.

How is it working

As with any other project, a meeting of stakeholders is required first. Landlords, inhabitants and / or sponsors meet to prepare the plan. The contract signed by all will contain all the necessary conditions for the owners, inhabitants and promoters.

Important points of the contract

Urban renewal projects are reviewed and authorized by the Ministry of Construction and Housing. It is the local authorities who will plan and approve the projects submitted by the inhabitants and promoters. Once a project is accepted for pinuy/binuy, the government will offer benefits to the residents and entrepreneurs. This means that they will be exempt from the purchase tax, the improvement tax and VAT for construction services.

Problems and risks

The first big problem is to get permission from all or most inhabitants of the building. This is not such a simple thing. For one or more years, the inhabitants will not be able to live in their home. This means extra costs, and big changes in the daily lives of parents and children. This is especially true if their temporary housing is away from their usual neighborhood. Fees will also be higher in the new building following negotiations. For old people, the changes are difficult, and they are very reluctant to give permission.

For entrepreneurs and / or sponsors such a project involves a lot of risks. Their fees are heavy and multiple. They must not only demolish the building but rebuild it bigger and better than before. They must pay the rents of the inhabitants up to a certain sum for the duration of the works. Nevertheless, they will be able to sell the additional housing they will have built. They will not have to pay the land nor several taxes including that of the improvement. They will also receive increased construction rights, which will allow them to make more profits.

The risk for homeowners in destruction/reconstruction projects is when the work is suspended. Whatever the reason for the suspension, it can be financial difficulties of the promoters, bankruptcy etc. But it can also be if they do not find enough buyers for their new homes. In this case the dislodged inhabitants find themselves in a difficult situation. They have no apartment since it was destroyed, but do not have their new home either. To counter this risk, it is imperative to obtain a full-proof guarantee from the sponsor/entrepreneurs.