Alon coordinates the urban renewal sector at Barnea. In this framework, he represents developers, apartment owners, and condominium representatives in urban renewal projects throughout the country.
Alon advises parties throughout the process, from the initial stages to the completion of the project.
Alon specializes in providing comprehensive advice on real estate transactions in a variety of areas, including sales and combination transactions; real estate options; contracts with consultants, contractors, and planners; leasing; real estate taxation; and registration of rights. He also accompanies entrepreneurs, construction companies, and purchasing groups through the various stages of a transaction.
Alon performed his internship at Barnea.
Interdisciplinary Center Herzliya (L.L.B, B.A. Business - property), 2012
Member of Israel Bar Association since 2013
News and updates - Alon Wolner:
Buying an Apartment in an NOP 38/1 Urban Renewal Project? - These New Regulations Are for You
The Ministry of Construction and Housing recently published a memorandum of law that prescribes a payment schedule for the first time that is specifically defined for urban renewal projects involving the addition of new apartments to existing buildings.
May It Be Renewed – Amendment to the Evacuation and Construction Law
The residential real estate market in Israel has been subject to drastic changes for some months. After years of a steady sharp uptrend in apartment prices, the number of real estate transactions has diminished, and apartment prices in most regions in Israel have either stabilized or dipped slightly.
There are many reasons for this trend reversal, including: the high purchase tax imposed on purchases of a second apartment (third apartment, etc.) and on apartments purchased by foreign residents; the stringent regulations imposed on banks in Israel when receiving funds related to real estate transactions (as part of the global war against money laundering); insufficient land allocations for residential construction by the Israel Land Authority; restrictions and delays in issuing building permits for residential projects, and so forth.
Nevertheless, residential apartments in the high-demand regions of this small and attractive country will likely continue to remain highly coveted. This is certainly true as long as the alternative of rental apartments stays rather limited, public transportation remains spotty and inefficient, and the economy's interest rate holds at its current level.
In order to supply the aforesaid demand, real estate developers have been pouncing on the urban renewal alternative, and for good reason. Considering the lack of any extensive supply of land in general, and land that is economically feasible for construction in particular, developers are targeting another player who can supply them with the goods—current apartment owners.
Superficially, the idea of urban renewal looks promising. Developers construct new buildings or renovate existing ones, execute seismic retrofitting, and build new apartments for apartment owners or expand their existing ones—all in exchange for apartments the developers can sell on the open market and against the receipt of various types of tax benefits from the State.
But in Israel, as the local axiom goes, "nothing is easy,” to put it mildly. For years, developers have been encountering numerous difficulties and obstacles when attempting to carry out urban renewal projects. The main obstacles are contending with the apartment owners, on the one hand, and with the authorities, on the other.
Just before the Knesset's most recent recess, it approved the Evacuation and Construction (Compensation) Law (Amendment No. 6), 5778 – 2018. The main objectives of this law are to protect apartment owners’ rights and to resolve the issue of “recalcitrant tenants”—all for the purpose of encouraging urban renewal projects.
The majority rules:
In order to promote and implement a plan for an urban renewal project, a developer must obtain the apartment owners’ consent to carry out the project by the majority required by law. However, even after this task has been accomplished, it often becomes necessary to contend with a “recalcitrant tenant”— an apartment owner who refuses to cooperate with the urban renewal project for various reasons.
Inter alia, the amendment to the law prescribes that if the court finds that the recalcitrant tenant’s refusal to cooperate with the project is unreasonable, the court can take number of steps. It may approve the transaction for the execution of the project, appoint an external attorney or accountant to engage in the transaction on behalf of the recalcitrant tenant, or even rule that the recalcitrant tenant is liable for damages caused to the rest of the apartment owners who consented to the project as a result of his or her refusal.
In many instances, the recalcitrant tenant is an elderly person who is naturally concerned about participating in an urban renewal process at this stage of his or her life. The amendment to the Law attempts to resolve this obstacle while also ensuring that the elderly tenant’s rights are protected, inter alia, by imposing an obligation on the developer to offer the elderly tenant the following alternatives (and the elderly tenant will receive tax benefits in respect of these alternatives): moving to protected housing, buying an alternative apartment outside of the project (either by the elderly person or for him or her), providing two small apartments within the project instead of one large apartment, or providing a small apartment with differential payments. These alternatives are designed to ensure that the total consideration is equivalent to the value of the apartment that the elderly tenant would have received in the project had he or she consented. If a developer does not offer the aforesaid alternatives to the recalcitrant elderly tenant, his refusal to the project will be considered reasonable.
Although the legislative amendment addresses the issue of recalcitrant tenants, and provides protection to apartment owners as stated above, the amendment to the law completely disregards the “elephant in the room”—shortening and streamlining the planning proceedings so that urban renewal projects can be efficiently and speedily executed.
In terms of both "the authorities’ route” and “the developers’ route”, the approval proceedings for an “evacuate and build” plan take several years. The proceedings to obtain approval of a building permit application, whether for an “evacuate and build” project or for an NOP 38 project, take another year or two.
At issue is a timeframe that is too long and not known in advance, particularly when it comes to “evacuate and build” projects, since there is no certainty the project will eventually be carried out. The many years devoted to the planning proceedings expose the intended project to the risk of various unforeseen problems arising. These problems may delay the project for several years, in the best-case scenario, or may result in absolute failure, in the worst-case scenario.
For example, the “evacuate and build” project at the Andreas site in Netanya was finally launched by Africa-Israel Residences only this year, after about 16 years of deliberations in the planning and building committees. Undoubtedly, delays such as these are the main reason why very few “evacuate and build” projects have been completed to date in Israel.
The process of obtaining a building permit by virtue of NOP 38 is also no quick or simple task. Due to the frequent policy changes by the local authorities regarding the exercise and mode of exercise of building rights, uncertainty often arises with regard to the building permit that will eventually be issued. This uncertainty sometimes causes developers to rethink the economic feasibility of a project and drop it.
In summary, the amendment to the law is commendable, since it is warranted and can be expected to provide much needed assistance to both developers and apartment owners. It will also provide some impetus to urban renewal projects, while still protecting apartment owners’ rights and interests, including the elderly among them.
However, if the legislative authority or the government, through the government’s Urban Renewal Authority, were to raise the gauntlet, by significantly streamlining planning proceedings and issuing clear guidelines to the authorities with regard to the mode of calculation of the additional building rights and the additional housing units for the developer, then they would pave the way for urban renewal in Israel at the needed and correct volume.
National Outline Plan (NOP) 38 - Recommendations to Tenants
Urban renewal construction projects, known in Israel either as an NOP 38/1 project (retrofit and renovate), or as an NOP 38/2 project (demolish and reconstruct) began in Israel as a result of the realization that residential buildings whose building permits predate 1.1.1980 must undergo earthquake retrofitting.
The mechanism that was devised provides various incentives, both to interested apartment-owners in relevant buildings and to various developers, to engage in an agreement for an NOP project.
However, ever since these national outline plans were approved, apartment-owners and developers have been encountering numerous internal and external obstacles that are preventing these projects from being carried out. There are numerous reasons why many projects are not even reaching the performance stage, despite the investment of considerable time and resources and despite the fact that the relevant agreements were signed.
Many times, apartment-owners find themselves unable to extricate themselves from the agreements they signed with the developer, and end up wasting years trying to make some progress on the project, without success.
Therefore, we’ve selected five important tips when engaging in an NOP 38 project:
- Exclusivity agreement with the developer
As a rule, you should avoid giving exclusivity to any particular developer and should negotiate with a number of prospective developers, although there are circumstances where a developer will insist on exclusivity before it expends substantial amounts of money and time in carrying out certain pre-project operations.
If you sign an exclusivity agreement, it is very important to limit it to a defined date, after which, the exclusivity agreement will be nullified.
To learn more, read the important provisions in the Urban Renewal Law, which came into effect recently.
- Suspensive conditions
The question of whether an NOP project will reach the performance stages depends, to a great extent, on the suspensive conditions in the agreement. The most prevalent suspensive conditions are: obtaining the signatures of the requisite majority of the apartment-owners on the NOP agreement, and obtaining a building permit at the volume of building rights that are needed for the project.
It is extremely important to set detailed timetables for the fulfillment of the suspensive conditions. The objective is to avoid unreasonable delays or a total freeze on the project without any ability to terminate the NOP agreement.
- The consideration to the apartment-owners
Due to the nature of this type of transaction, and in order to avoid future disputes, you should be especially careful during the stage of your commercial negotiations with the developer in relation to the precise consideration that the developer and each of the apartment-owners in the building expect to receive, and you should explicitly specify the consideration to each of the parties, to the extent possible, in the agreement between the parties. You should specify the floor and the directions of the new apartments to be built for the apartment-owners, carefully prepare the apartment specifications, define the order of selecting the new parking spaces and storage rooms, and stipulate the precise distribution of the existing and future building rights between the developer and any or all of the apartment-owners.
Another important, fundamental rule in an NOP project is the absence of discrimination between one apartment-owner and another; therefore, if the consideration is not being equally divided, the division should be balanced, and it is possible and recommended to hire a real-estate appraiser for this purpose.
The guarantees are the main securities to apartment-owners in NOP 38 projects:
- Sale Law guarantees (for a demolish and reconstruct project) – make sure that you receive guarantees pursuant to the Sale Law, according to the value of the apartments as finished, with the value being determined according to the project’s zero report (financial feasibility report), while enabling the tenants to appoint an appraiser on their behalf, at the developer’s expense, to determine the value, and whose determination will be final and binding.
- Performance guarantee (for a retrofit and renovate project) – which is an autonomous bank guarantee. If at issue is a project with bank financing, the guarantee should cover the entire value of all works, with the sum to be determined according to the inspector, which is usually issued shortly before receiving a building permit for the project. It is important to note that the apartment-owners can use this guarantee for any purpose, without limitation and at their sole discretion, due to the very wide variety of payments that will be required in the event of a need to exercise the performance guarantee.
It is also important to demand a guarantee from the developer to cover repairs during the warranty period, a guarantee to ensure the registration or amended registration of the condominium building, as well as a guarantee for tax payments and a guarantee for rent payments (mainly in a demolish and reconstruct project).
For an NOP demolish and reconstruct project, the rent payments are a compulsory, integral part of the consideration being paid to the apartment-owners, since they are vacating their apartments for the purpose of carrying out the project. It is important to obligate the developer to give sufficient notice about vacating of the apartments, after a lien has been registered in favor of the project’s lending bank. You should demand to receive a guarantee for the payment of rent, at the full extent of the rent for each of the apartment-owners for the entire duration of the construction period and, parallel to this, to demand that the moving costs from the existing apartment and the costs for moving back in to the new apartment once construction has been completed (moving and packing expenses, etc.) will apply to the developer.
For the most part, apartment-owners who continue to reside in their apartments during the performance of an NOP retrofit and renovate project suffer considerably during the construction, inter alia, from noise and dirt nuisances, from the blocking of sunlight, from the blocking of access paths to the building and to their apartments, etc. It is important to take this into account, and to retain your option to vacate your apartment at any time should you decide to do so, by obligating the developer to pay your rent and issue you a guarantee to cover these rent payments.
In closing, it is important to add that you should make sure that you select suitable consultants on your behalf for the project – architect, inspector, real-estate appraiser and an attorney, who are tasked with pushing the project forward, each within his purview, while representing you, protecting your interests, ensuring your rights and avoiding any undesirable complications.
One last thing – demand that the developer pay the aforesaid consultants’ fees.