Calcalist, Dov Cohen, 09.06.20

A precedent ruling given last week by the Haifa District Compensation Appeals Committee and Reconciliation Fees states that a local authority's demand for projects to allocate and establish public land under construction plans - also requires the authority to bear half of the construction costs. Therefore, it has been determined that the improvement consideration should be offset by both the cost of construction of the public areas and the building rights taken from the developer for this purpose.

This decision, which concerns one of the most difficult points of dispute between entrepreneurs and local authorities, was given regarding a dispute between the local Pardes Hanna Planning and Building Committee and the Pardes Hanna Tabori Center Company. The entrepreneurial company has sought to build 65 residential units in two buildings on the local council, above an existing commercial and office floor. As part of a building permit issued by the local authority, the developer was required to allocate 500 square meters of the project as a designated area for public use.

However, after the building permit was issued, the local committee demanded an improvement of NIS 3.6 million from the developer, and the levy would also include the building rights of the public areas in the complex. In addition, the Authority's payment requirement did not include reference to the construction costs of the public areas, all of which the developer carried.

The developer, for his part, argued that the building rights that had been expropriated should be reduced, and that the authority should fully absorb the construction costs of the public areas. He appealed the appraisal, and the crucial appraiser determined that the levy would be reduced by about 50% to about NIS 1.8 million. The local committee appealed to the Haifa District Appeals Committee for compensation and improvements.

The District Appeals Committee rejected the appeal and ordered the local authority to collect from the developer the reduced gratuity payment that had been stopped by the crucial appraiser. Furthermore, the Commission has also determined that the construction costs of the public area should also be offset. "Construction costs are part of the expenses incurred by the developer to realize the improvement in the plan. Therefore, these costs should be offset from the tax base - that is, from the improvement itself - and not from the amount of tax the developer has to pay for the improvement," the decision states.

Behind the decision of the committee, headed by Attorney Maya Ashkenazi, was the conclusion that the developer did not enjoy the rights to be taken from him or the public buildings that were set up for use by the local authority - but the authority itself, which for the most part even required to register these areas for its name at the end of the project.

Equal voucher measures

The decision of the Haifa Appeals Committee caused many echoes, among other things, among entrepreneurs in the urban renewal industry. It is estimated that the committee's decision is expected to dramatically affect many ventures and could result in considerable savings for entrepreneurs, of up to NIS millions per project. "This is an important step that may herald the coming of the spring for urban renewal," states Israel Abramov, CEO of the Ald Psagot Group , which initiates and executes urban renewal projects.

However, he emphasizes, "This step alone does not make urban renewal a key factor in the startle of the faltering housing market. Public financing and supplementary infrastructure have always been a significant Achilles cause in promoting urban renewal projects. Three times more housing starts are being built on urban renewal units, which means tens of thousands of apartments every year, which would have been a 'critical' breakthrough in increasing housing supply. "

Abramov knows the issue closely. Alad Psagot is currently planning the largest evacuation-construction project in Israel - Sea Peaks in Hadera, which is expected to include the construction of 10,000 housing units. "Why do I, as an entrepreneur, pay twice as much - for the land as well, the project levies and the public institutions and complementary infrastructures, whose ultimate benefit is the municipality or the local authority?", Abramov wonders.

Israel Abramov. Possibility of a new era in urban renewal 

An eye to the periphery

In light of all this, Abramov recommends a series of complementary steps to the Haifa Commission's decision: "First, local government funding for the establishment of supplementary public institutions and infrastructures should be examined to 70%, compared to 30% for entrepreneurs; secondly, the issue of improvement levies - a mine that becomes Today, many urban regeneration projects are clearly financially unprofitable;

"In addition, it would be better to increase the ratio of apartments in the periphery to 10 versus 1, in order to finally stimulate urban renewal in these areas as well. As far as possible, the tedious bureaucratic procedures should be reduced. If all these measures are fulfilled," Abramov concludes, "We may see the decision of the Haifa District Compensation Appeals Board in examining the first swallow for a new era in urban renewal."

Haim Feiglin, CEO of Zemerman Plant and Vice President of the Israel Builders Association, also expressed reservations about the Haifa Commission's decision this week: "If a public task is imposed on an entrepreneur, it should be reduced from the improvement levy and not the improvement consideration, which means that the local authority will cover all costs."

He said, "If for that matter, the authority wanted to build a school or kindergarten in a public space it owns - there was no question about it being the one to pay the costs. In this case, the developer also pushes a function he doesn't want for the project and tells him to pay for it." .