Executive Summary
In the legal review below, we examine a scenario in which the owner of a specific unit asserts claims regarding additional building rights granted to residents pursuant to an urban renewal project, and we analyze how such claims may affect the advancement of the project.
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Urban Renewal Projects
There are various statutory and planning frameworks through which urban renewal projects may be implemented. These include evacuation and reconstruction projects, projects under National Outline Plan 38, as well as projects advanced pursuant to municipal urban plans.
In all such frameworks, a development company typically engages with the existing property owners. In consideration for receiving additional building rights allocated to the original owners of the building, the developer demolishes or renovates the existing structure and, in most cases, delivers to the original residents new units for residential, commercial, or other uses, in lieu of their former units.
Specifically, within the framework of National Outline Plan 38, two principal tracks evolved, directly affecting the allocation of building rights:
- Strengthening and Expansion Track, NOP 38/3
Under this track, new residential units are constructed by virtue of newly granted building rights, typically on the roof and at the ground floor level, alongside the expansion of the existing apartments. - Demolition and Reconstruction Track, NOP 38/2
Under this track, the original building is demolished and a new building is constructed in its place, based on the additional building rights that constitute the economic foundation of the project.
It should be noted that National Outline Plan 38 has expired. However, in certain municipalities, local urban plans have been adopted granting broad authority to determine the scope of building rights and the manner of their implementation.
In practice, the developer relies on a variety of additional building rights. In most cases, a planning procedure is required in order to obtain additional rights necessary for advancing the project. In other cases, such rights may already exist pursuant to NOP 38/2 or a comparable municipal plan.
In certain circumstances, the owner of an original unit may also own the roof attached to that unit and may hold unused building rights that were not exploited at the time of the original construction. This raises the question of the legal status of the new building rights forming the basis of an urban renewal project.
The Status of the Condominium Bylaws
As a general rule, additional building rights are vested in all property owners in accordance with their respective shares in the common property.
In certain cases, specific building rights may have been attached to a particular unit in the condominium bylaws.
While this article does not elaborate extensively on the importance of properly anchoring ownership of such additional building rights, it is essential to emphasize that such allocation must be clearly and unequivocally stipulated in the condominium bylaws, as well as in the sale agreements between the developer and the purchasers of the units. A waiver by unit owners of building rights is not a matter undertaken casually. Courts examining such cases require clear and specific evidence regarding the waiver, its scope, and the circumstances in which it was made.
For example, where specific building rights were historically granted to the owner of a particular unit, but many years later additional building rights were granted within the framework of an urban renewal project, such newly granted rights do not belong to the owner of the original unit, but rather to all residents of the building.
The rationale underlying this distinction is evident. New building rights, without which the urban renewal project could not be realized, belong to all unit owners, since absent such rights the project could not proceed. When the condominium bylaws were drafted, often decades earlier, the scope of future building rights and the need to promote an urban renewal project were not contemplated. Accordingly, it cannot be argued that the drafters of the original bylaws intended to address such future rights.
It should be emphasized that the courts have repeatedly held that the consent of unit owners to waive building rights extends only to historical building rights and not to rights derived from new and future planning schemes[1].
Moreover, even in cases where the roof of the building was attached to a specific unit, it has been held that newly granted building rights do not automatically belong to the owner of that unit, but rather are allocated among all residents in accordance with their proportional shares in the common property.
Conclusion
Residents seeking to advance an urban renewal project must be attentive to potential disputes concerning ownership of newly granted building rights and should address this issue at the project formulation stage.
It is essential that the developer conduct a thorough legal and valuation review of the matter and provide clear solutions capable of withstanding external scrutiny. Proper and early handling of this issue may save all parties involved substantial resources and valuable time .
For Further Information
Hanan Ephraim, Adv.
Tel: +972-3-691-6600
Email: Hanan@ekw.co.il
Amit Kovos, Adv.
Tel: +972-3-691-6600
Email: Amit@ekw.co.il
[1] In this context, reference may be made to the judgment of the Supreme Court in Civil Appeal 7808/21, Achuzat Chelka 180/8 Block 6940 Ltd. et al. v. Gag Beit Hadar Ltd., delivered in July 2023