Globes, Guy Nardi, 28.07.2021

The recently drafted Arrangements Act presents urban renewal in city centers as a “necessity” and an “acute matter” for increasing the supply of housing. The relatively long introduction written by the Ministry of Finance to the bill seeks to convince the economics of the move and details the various benefits for the old cities and their residents: improving old textures, helping new populations and more and more. The improved mechanisms proposed by the new law, worded in legal parlance that is incomprehensible to every person, are intended to address some of the barriers that currently make it difficult to implement urban renewal projects quickly. Along the way, the new law makes it harder for those who refuse, encourages entrepreneurs and gives local authorities a new responsibility.

1. Determining the rate of the improvement levy

The improvement levy has a very significant role in the economics of the project. In the current situation, the amount of the improvement levy (a mandatory payment required from a landowner by the local committee which approved a plan and thereby an increase in the value of his land) is subject to the absolute discretion of the local authorities. The amount of the levy is determined only close to the issuance of the building permit, prior to the eviction of the tenants.

The new Arrangements Law stipulates that each municipal authority may divide its area of ​​jurisdiction into different areas and determine that the rate of the improvement levy will be either 50% or 25%.
According to real estate appraiser Aryeh Kamil, from the Kamil-Treshansky-Rafael firm: "The law offers a significant change in the rate of improvement levies for a single building undergoing urban renewal, whether in the evacuation-construction route or in strengthening and adding floors. % Surcharge for the third floor and 50% surcharge for the fourth floor and onwards, if the master plan allows it.

"The proposed change maintains the full exemption from the improvement levy for the additional 2.5 floors in a given building and the 25% levy for the third floor, but if more than 3.5 floors are added, all floors beyond the first 2.5 floors will be charged a full 50% improvement levy. "The proposed mechanism creates planning and economic certainty, along with increasing the revenues of the authorities in the face of the resulting public tasks."

Arieh Kamil / Photo: Shlomi Yosef

Adv. Yishai Itzkovich from the firm of Adv. Agmon & Co. believes that the new law did not cover all the problems in the improvement levies mechanism. According to his view, the amount of the improvement levy should have been determined in advance at the time the plan was submitted: "The amount of the levy should be determined in advance at the beginning of the road. "For the tenants, according to some economic calculation, when there is a very big question mark about the improvement. It is necessary to determine how the value is determined and when."

Advocate Adam Tsaswan, Head of Urban Renewal at Gindi Caspi, believes that the improvement levy should be determined as a function of the profitability of the deal: "The amendment is that 25% of an assessment that is too high may significantly impair the viability of the project. I think the improvement levy should be determined as a function of the profitability of the transaction. Also at the permit stage."

2. Reduction of the majority required for the claim of a refusing tenant

Entrepreneurs and tenants often tell of reluctant, and sometimes extortionate, tenants who delay a project for years. Today the majority needed for a tenant refusal to sue (who opposes eviction-construction) will be four-fifths of all tenants. The new law changes the ratio to two-thirds. It is also proposed that apartment owners who have committed construction offenses, will not be able to be included in the majority count required for a tenant refusal claim - there is an attempt here to prevent tenants who have expanded their apartments without a permit to thwart urban renewal.

Advocate Itzkovich clarifies: “The law is structured in such a way that those who are suing are the tenants, whose damage was caused, and not the developer. The unreasonable refusal of the same tenant who refrained from signing allegedly deprives them of the possibility of obtaining a new apartment, including a security guard. This is tort, the purpose is to force the agreement.

"Two years ago, they added another clause, according to which tenants can go to court on the grounds that the refusing tenant prevents the other tenants from evacuating the building, and it is already in the public interest. In a claim for enforcement. Understanding that there is a situation where tenants do not want to sue, the latest arrangement law also allows the developer, for the first time, to file a lawsuit against the refusing tenant under an enforcement clause. "

Advocate Tsaswan thinks the amendment is necessary: ​​“The rule where you need 100% consent in real estate to build does not change. When 15 years have passed since the reduction of the majority was born there is another move. Understand that even the reduced majority can produce a veto of that refusing minority that should not be held accountable for my very refusal. The very fact that the required majority is reduced to 66% leads to the result that the tenant's refusal will be accepted in court. "

Conditions for terminating a contract between tenants and the developer

The Arrangements Act re-states that if a tenant's engagement agreement with a developer does not precede a detailed plan within a period of four years, or the developer has not contracted with at least half of the apartment owners within two years, then the tenants can cancel the deal. Advocate Itzkovich explains: “The first rule regarding the promotion of the detailed plan is problematic in my eyes, because it does not always depend on the entrepreneur. Sometimes it also depends on the cooperation of the local authority, which sometimes puts sticks in the wheels of the developer. The new amendment can create a situation where the developer is lost. It gives the local authority the ability to intervene in the relationship between a tenant and an entrepreneur. "

4. Encouraging the municipality to issue building permits quickly

The new Arrangements Act presents a series of innovations whose purpose is to incentivize the local authority to act to promote urban renewal. Among other things, this involves the signing of a "framework agreement" between the Urban Renewal Authority and the local authority, with the latter's commitment to issue building permits for 3,500 housing units and at a rate of 600 housing units per year.

The law also provides for a sanction under which the state will be entitled to revoke the framework agreement if the local authority fails to meet the target of issuing a building permit for a year.
In exchange for signing the framework agreement, the local authority receives a budget of up to NIS 30,000 for the purpose of establishing supporting infrastructure for projects (water and sewage, educational institutions, electrical infrastructure and more).

According to Advocate Adam Tsaswan: “Local authorities are a super key player in the world of urban renewal. Eventually, a mayor who does not want to, or whose system does not work, actually plugs the urban renewal. The way to deal with the authorities is to give them their centrality and at the same time, responsibility for the realization and acceleration of the renewal processes. "That is, a local authority that takes it forward will receive incentives and relief. On the other hand, a local authority that does not advance with the field - powers will be taken away from it."

Adv. Adam Tsaswan, Partner Gindi Caspi & Co.

According to real estate appraiser Arieh Kamil, "The proposed changes to the evacuation-construction complexes, including the levels of the improvement levy from full exemption up to a rate of 50%, are positive steps, which will lead, among other things, to increasing the economic certainty of project developers.

"However, these measures are empty as long as the state does not find a solution to the needs of local authorities, especially in areas of demand. The same authorities have local urban renewal programs, which are supposed to provide them with the revenue to develop ancillary municipal services, such as educational institutions, public areas and infrastructure.

"In addition, there are national programs that make it difficult for the authorities to promote renewal programs due to the limitations of the provisions and the inability to reach the full potential of rights and benefits. Therefore, the government must create a necessary balance Country.

"Without this balance, the current situation will continue to exist, so that despite the expected extension of the NOP on the evacuation-construction route, the local committees will continue to trick developers into the actual implementation of the plans."

5. An appeals committee designated for urban renewal

The new Arrangements Act proposes that in each district where there are three appeal committees, one of them be designated as an "Appeals Committee for Permit Matters in Urban Renewal Projects."

Amit Gottlieb, chairman of the Urban Renewal Committee of the Builders of the Land Contractors Association, welcomes the idea: “One of the biggest obstacles in issuing building permits in recent years stems from the appeals committees. There is a very long queue for the appeals committees.

"A person who has a villa and wants to increase it by a meter, or one who wants to close a balcony, and basically anyone who feels that the local committee did not give him the permit as he requested, goes to appeal committees. An absurd situation has arisen. His basement by the meter.

"We think changing the law that talks about professional appeals committees, only for urban renewal, will make that judge very professional and his decisions will be specific. Urban renewal needs someone whose area of ​​expertise it is."