Deputy Prime Minister and Minister of Justice Yariv Levin published for public comments a draft of regulations in the field of urban renewal concerning a payment to a developer whose deal with him was canceled. The regulations were drawn up by the Counseling and Legislation Division (Civil Law) at the Ministry of Justice, together with the Governmental Authority for Urban Renewal, after consultations with professionals working in the market.
In order to prevent the tying of apartment owners in urban renewal transactions that are not promoted in a reasonable time, legislation was approved within the Settlements Law that allows apartment owners, in the event that the developer delays in promoting a transaction, according to established milestones, to decide by majority vote to cancel the transaction. In this situation, the law states, if the owner of an apartment cancels a transaction, he will not be considered as the one who violated the contract and the developer will be entitled to payment as determined by the regulations.
Elazar Bamberger, CEO of the Governmental Authority for Urban Renewal:
The Governmental Authority for Urban Renewal works with a variety of tools to provide apartment owners carrying out urban renewal with certainty and security at all stages of the process. The regulations will allow a wider use of the legislation that came into effect about a year ago, which allows apartment owners to cancel a contract with a developer who is not making progress in realizing the project.
Despite the arrangement stipulated in the aforementioned law, to this day the option to cancel a transaction has been little used by apartment owners, and this is due, among other things, to the uncertainty regarding the amount of the payment they will have to pay to the developer for the cancellation, and because of this they are subject to pressure from the developer not to cancel the transaction on the grounds that this step will entail high expenses on their part.
The purpose of the regulations is to increase certainty among apartment owners and to reduce their fears of canceling a deal that is not progressing properly, by establishing a uniform and reasonable payment amount to the developer whose deal was canceled; thus making it easier for the apartment owners to make an informed decision regarding the cancellation of a deal signed with a developer, after the developer did not meet the deadlines for promoting the deal as stipulated by law.
The amounts in the regulations were determined taking into account the stage at which the transaction is, and distinguishing between a transaction in a clearing and construction complex and a transaction according to a strengthening plan (TMA 38 and its successors).
Carmit Ulis, Deputy Legal Advisor to the Government (Civil Law):
The proposed regulations are another component in increasing certainty and trust in urban renewal procedures and in the protection of apartment owners. The regulations return the power to the tenants, who will be able to decide whether to move forward with the deal or terminate it, in situations where the project is not progressing.
The draft regulations are published for public comments on the government legislation website. The public is invited to submit their comments until Tuesday 27/8/24.
