Who Owns the Building Rights?
An Israeli Supreme Court ruling has overturned a district court decision and determined that registering a roof under the ownership of a particular apartment (thereby removing it from the common property) and consenting to some construction on that roof, does not constitute consent to waive all of building rights in favor of that apartment.
This ruling comes following an appeal of the district court’s ruling filed by some of the apartment owners in a building in Tel Aviv.
The district court ruled the building rights are common property, which can be the subject of contractual consents, and that these rights were granted to two specific apartments in the building according to agreements signed in the 1950s and 1960s between all of the building’s apartment owners.
According to the aforementioned agreements, the area of the building’s roof would be attached to two apartments, and the owners of both apartments would be entitled to build additional floors on the area of the attached roof. Construction of these floors indeed took place over the years.
The source of the additional Building Rights
In 1994, a local outline plan was published, approving additions to the roof at the inclusive area of 460 m2. In 2008, the building was declared a building for preservation and, as such, restrictions were imposed on it preventing additional construction on the site. In light of this, additional building rights on an area of 1,211 m2 were granted to the building, which are also transferable to other real estate, a portion of which were granted as a direct incentive to rehabilitate the building. Meanwhile, another portion was granted in respect of the remaining building rights in the aforesaid area of 460 m2 that can no longer be utilized in the building (since it was declared for preservation). Against the backdrop of the desire of the building’s apartment owners to sell the building rights to a third party, a dispute arose between the owners of the rooftop apartments and the rest of the apartment owners about who owns these rights.
The apartment owners claimed the building rights and the consideration in respect thereof belong to all of the apartment owners, and filed a lawsuit with the district court. The district court rejected their claim in relation to the building rights in that 460 m2 area and ruled that the aforesaid building rights were granted solely to the owners of the two rooftop apartments. The district court’s position was that the agreements the building’s apartment owners signed and the registration orders clearly indicate their intention to grant all of the building rights to the owners of the two rooftop apartments.
Acquiring building rights – Unambiguously
During the appeal filed with the Supreme Court, the Supreme Court overturned the district court’s decision. It ruled that registering a roof under the ownership of a particular apartment does not constitute consent to grant that apartment an exclusive right to utilize the building rights on the attached roof, even if the roof is the only place where these rights can actually be utilized.
In this case, the agreements signed between the apartment owners did not mention the words “building rights” and the consent to attach the roof and to some construction on it does not include any indication of a total waiver of all building rights. The Supreme Court stated that a waiver of future building rights must be given clearly and explicitly. The Supreme Court also noted this was a municipal plan initiated by the Planning and Building Committee in relation to the entire municipal area, and not a plan promoted by the building’s apartment owners. Therefore, there is no indication the apartment owners anticipated or could have anticipated such an addition of building rights at the time they drew up the agreements, let alone waived them.
The Supreme Court ultimately ruled to allow the appeal and that the unutilized building rights that are transferrable and sellable are owned by all of the rights holders in the building, according to their pro rata of the common property.
The Supreme Court ruling emphasizes the importance of drawing up contractual consents between parties in a clear and explicit manner, both with regard to attaching areas to a particular unit, granting existing or future building rights, and the possibilities of exploiting such rights, in the attached areas and in general.
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Barnea Jaffa Lande’s Real Estate Department is at your service to answer questions about acquiring and utilizing building rights, and any other questions.
Adv. Alon Wolner is a partner in the Real Estate Department.