This time, in a nutshell: the material clauses that deserve your full attention when negotiating the agreement with the developer — your chance, the owners, to know what to look for before you sign. The compensation, who bears the costs, the mandatory guarantees, the conditions precedent — and the rights of the elderly and special populations.
Compensation and costs
This clause details what owners receive for granting the developer the building rights: a new apartment or alternative housing solution (in TAMA 38/1 — what area is added: safe room, parking, balcony, storage, laundry alcove and more), rent funding through the interim period, funding the move, the owners' attorney's fee, a maintenance fund helping with the new building's committee fees for a limited period, and the taxes, payments and levies arising after the engagement. A specification is attached completing the compensation clause — the technical spec of the apartments (the owners' and the developer's alike). Crucially, the contract must state that all the project's ancillary costs fall on the developer alone.
The guarantees
- Pinui-binui and TAMA 38/2 (demolish-rebuild): an enhanced Sale-Law guarantee, at the value of the new apartment.
- TAMA 38/1 (reinforcement): an autonomous (unconditional) bank guarantee for the project's execution.
- A rent guarantee: an autonomous bank guarantee securing the rent payments until the new apartment is delivered;
- A taxes-and-levies guarantee: an autonomous bank guarantee securing every tax and levy the agreement imposes on the owners;
- A defects (warranty-period) guarantee: an autonomous bank guarantee securing the repair of construction defects as the agreement and the law require;
- A registration guarantee: a bank guarantee covering the costs of registration at the Land Registry — canceling the existing condominium order, registering the new subdivision plan, registering the new condominium, and registering the owners' rights in the new apartments.
- A legal-costs guarantee: a bank guarantee securing legal costs.
- A second registration guarantee: an autonomous bank guarantee securing the cancellation of the caution note (the registry's protective notation) recorded in the developer's favor if the agreement is canceled.
Conditions precedent
Realizing a renewal deal depends on several factors, so the agreement's entry into force is conditioned on cumulative conditions precedent — miss one within its timeframe, and the agreement is treated as never having come into force. The common ones:
- Consent of the required majority for the project;
- A new zoning plan for the complex, approved and published for validity, with rights sufficient to build the new buildings (in pinui-binui);
- Designation as a 'pinui-binui complex' — the gateway to the tax benefits (in pinui-binui);
- The building permit for the project;
- A financial-accompaniment agreement signed with the project's financier.
Honoring our elders — והדרת פני זקן
The law lets the developer offer elderly owners dedicated compensation alternatives for their existing apartment — and if the developer failed to present the alternatives the elder is entitled to, the elder may refuse to join the project, and the refusal is deemed reasonable. Who qualifies? Two age categories — 70+ and 75+ — for an owner who lived in the apartment for at least two years at the signing of the building's first renewal deal. Two further categories may refuse if not offered similar alternatives: the terminally ill, and those entitled to nursing benefits at levels 5–6 who lived in the apartment at the first signing.
What is the elder entitled to?
At 70+/75+, the developer must offer the 'compensation apartment' — a home in the renewed building. Beyond it: for a 70+ owner, the developer must offer at least one of the following (developer's choice); for a 75+ owner, the developer MUST offer the choice among Alternative 1's options (and may add 2–3):
- Alternative 1.1 — moving to a retirement residence, with the difference to the compensation apartment's value paid in cash;
- Alternative 1.2 — purchase of an equivalent alternative apartment, located as near as possible to the elder's home if so requested;
- Alternative 1.3 — a cash amount at the compensation apartment's value, for the owner to buy an alternative apartment with all or most of it.
- Alternative 2 — two smaller apartments in the project, with a combined value equal to the compensation apartment's;
- Alternative 3 — a compensation apartment smaller in area than the standard compensation apartment, with the difference paid in cash up to the compensation apartment's value.
Special populations
Where an owner — or someone living with them — has a disability, the developer must offer an apartment adapted to their needs for the construction period, and a new apartment adapted for safe, independent access to the apartment and the common property serving it. It is recommended the developer also assist with packing, unloading and assembly costs, and where needed with locating the interim apartment.
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The above is initial information only and does not constitute legal advice or a substitute for it. Consult an attorney who practices in the field before taking any action.
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General information — not legal advice.