The legislator has provided an incentive kit to citizens living in old buildings, namely ones for which building permits were issued before 1981. This law has a dual aim: first and foremost, to strengthen structures and ensure that they meet earthquake resistance standards; but second, and no less important, to promote urban renewal processes by rejuvenating old buildings in various cities.
Tama (National Outline Plan) 38 grants construction rights to tenants whose buildings undergo strengthening. The tenants transfer these rights to a real-estate developer in exchange for the strengthening, renovation and upgrading of their homes, which, at times, are also expanded. The State also foregoes the tenants’ purchase tax and capital gain tax, and the local municipality pitches in by foregoing the betterment levy it is entitled to charge when tenants obtain additional construction rights.
And so, homeowners get to expand their property, wherever possible, and have their building, along with all joint property and public areas, strengthened and improved. In many cases, an elevator is also added, since the developer builds extra floors on the rooftop. Moreover, it is not uncommon for storerooms to be built, as well as parking solutions, all according to the physical and economic conditions of each project.
Did you get all that you deserve?
The advantage for homeowners is obvious, but it is often accompanied by a range of concerns: How will tenants know they have gotten all that they deserve as part of the project? Can they get any collateral to ensure the project doesn’t get “stuck” along the way? How will construction impact their everyday life? And let’s backtrack a little – how do they even obtain consent from all the neighbors to promote this project, and how are developers contacted?
To answer these questions, I chose one of the projects I am most familiar with in Jerusalem, the one on 40 Palmah St, and met with the homeowners, their legal representatives, and the real-estate developer.
Attorneys Amir Kadari and Amir Adika of Gilead Sher, Kadari & Co. represent the tenants in this project, and have vast experience representing homeowners in urban renewal projects across Jerusalem.
Real-estate developer Moti Ankari, CEO of Keshet Nadlan, says urban renewal processes are certainly important for both tenants and authorities: “A successful Tama 38 project is one in which all parties involved stand to gain: the tenants get a strengthened building that is more resistant to earthquakes, overall renovation including both the building’s interior and exterior, and, of course, significant expansion of each apartment. All in all a clear betterment of the property; the authority gets urban renewal and new areas liable to monthly municipal property tax (Arnona); and the developers get the construction rights due to them under the Tama 38 law and by virtue of the agreement they sign with the homeowners”.
According to attorney Amir Kadari: “First of all you need to wisely select a team of project consultants. The team needs to be professional enough to have a single interest, and that is to represent the homeowners. The lawyers need to help tenants understand what is possible in each project, and hone their desires. They help homeowners reach their own decisions, and negotiate legally with the developer on their behalf”.
Attorney Amir Adika adds: “A fundamental component of a successful project is organized and united homeowners. In order to promote the project, the tenants should have a representation that has ample time to devote to this issue, and ensures that tenants are fully updated on the developments, negotiation specifics, and most of all – exactly what each tenant stands to gain from the agreement”.
The economic potential of Tama 38
Each project is examined individually: its economic potential must be well explored in order to ensure, on the one hand, that the developer stands to gain rather than lose from it, and, on the other hand, that homeowners get as much as they can out of it too.
My years in the real-estate industry have taught me that chemistry between people is a dealmaker or breaker. Most tenants regard Tama 38 as a mission impossible, but where there’s chemistry, and the team selected is right, it all flows well, making the entire adventure both possible, and more importantly, profitable.
Attorney Ephrat Chinitz, manager and consultant for Tama 38 projects in both Jerusalem and Tel Aviv, also engages in representing tenants in their agreements with real-estate developers. She believes that alongside a team of professional, leading consultants, that helps promote the entire process in a focused and efficient way, it is vital that the tenants themselves be aware of all that they stand to gain from this project, and the advantages for the building itself.
It is important to understand that such a project requires the consent of two thirds of the homeowners in the building, and in many cases, it will not allow all the tenants to receive the exact same benefits. For instance, an elevator is more beneficial to upper floor tenants than lower floor ones, and in some cases an apartment shelter can be built in some apartments, whereas others can have a balcony added to them.
In such instances, when homeowners conduct themselves with openness and transparency, trust their leading professionals, and acknowledge the greater good provided by this project rather than focusing on what each individual tenant stands to gain from it, they can overcome their differences and make this project a success. The economic potential of each project must be well explored in order to ensure, on the one hand, that the developer stands to gain rather than lose from it, and, on the other hand, that homeowners get as much as they can out of it too.