Urban Renewal Law (Transaction Organization Agreements)

The Urban Renewal Law, which was promulgated at the beginning of April 2017, is attempting to regulate the phenomenon of obtaining apartment-owners’ signatures on undertakings towards developers and/or various entities (organizers) that are supposedly promoting urban renewal projects. The main objective of the law is to protect homeowners who sign pre-engagement agreements (organization agreements) that include a clause that prevents them from engaging with another organizer.

The homeowner protection is reflected in a number of conditions that the organizer must fulfill in its engagement with and between the apartment-owners.

Convening a meeting of the apartment owners:

The organizer must convene a meeting of the apartment-owners in order to present the following:

• the key provisions of the agreement and the key provisions of the law.
• the identity of the developer on whose behalf he is acting (if relevant).
• the fee to be paid to him.
• whether one of the apartment-owners in the condominium building is working with him to promote the project, and he must disclose his identity.
• information about the Urban Renewal Authority and contact details.
• the possibility of translating the agreement into various languages, such as Arabic, Russian, Amharic, etc., if necessary.

The organization agreement must include, inter alia, the following details:

The organizer’s details, the signing date of the agreement, a clause clarifying the matter of the consideration that the apartment-owner will receive (which will be determined only in the project agreement to be signed with the developer), the organizer’s undertaking to act honestly and fairly in the best interests of the apartment-owners and in an acceptable manner, the organizer’s undertaking to take action to find a suitable developer, the details of the developer on whose behalf the organizer is working, any personal interest of the organizer, and provisions pertaining to the validity of the agreement.

The validity of an organization agreement for an urban renewal project

a. Relative to a “vacate and build” project

The agreement is valid for six months and may be extended as specified hereunder:

For a period of 18 months as of the signing date of the first apartment-owner, under the following conditions:

• • The organizer obtained the signatures of 50% of the apartment-owners – in a building of up to 16 apartments.
  • The organizer obtained the signatures of 40% and/or eight of the apartment-owners – in a building of 17 or more apartments.
  • The organizer obtained the signatures of 35% of the apartment-owners – in a building of 36 or more apartments.

For a period of two years as of the signing date of the first apartment-owner, if the organizer engaged in an organization agreement with at least 2/3 of the apartment-owners in the condominium building, or the developer engaged in the project agreement with the apartment-owners, by the requisite majority specified in this law.

Additional extensions of the organization agreement will be possible, subject to the progress being made in the project’s planning proceedings.

b. Relative to an “earthquake retrofit plan” project

The agreement is valid for six months and may be extended as specified hereunder:

For a period of 12 months as of the signing date of the first apartment-owner, under the following conditions:

• • The organizer obtained the signatures of 50% of the apartment-owners – in a building of up to 16 apartments.
  • The organizer obtained the signatures of 40% and/or eight of the apartment-owners – in a building of 17 or more apartments.

For a period of 18 months as of the signing date of the first apartment-owner, if the organizer engaged in an organization agreement with at least 4/5 of the apartment-owners in the condominium building, or the developer engaged in the project agreement with at least one third of the apartment-owners who signed the organization agreement.

For a period of two years as of the signing date of the first apartment-owner, if a building permit application has been submitted to the local committee.

Any person who believes he has been harmed due to a violation of the provisions of the law may apply to the ombudsman at the Urban Renewal Authority, who is in charge of clarifying apartment-owners’ complaints.