The Right to Fair Contracts in Evacuation-Construction Projects / TheMarker
Published on October 7th, 2015 / Ohad Shpak
(For the Hebrew version – TheMarker newspaper – click here)
Holiday season is over, and the Knesset will return from its summer recess next Sunday, and will apparently approve the bill for Urban Renewal (Arrangements for the Organizers), 5777-2017 – a bill which aims to assist tenants in urban renewal projects in Israel.The bill intends 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. Those urban renewal projects, known in Hebrew as Pinui-Binui – which demolish old residential buildings and build new ones in their place – has become common in Israel’s main cities.
It seems like there is not a single tenant in Israel’s main citiesthat have not encountered an organizer who tried to persuade him to sign an evacuation-construction project agreement. In most cases, the organizers are not the entrepreneurs who will demolish and build – they are mediators whose aim is to obtain the tenant’s basic agreement, and who then search for the appropriate entrepreneur-contractor. The law does not define who can be an “organizer,” and many times the organizer is not a professional. In many cases, the “organizer” signs the tenants on an agreement the contents of which the tenants do not fully understand, and makes false promises. Unrealistic obligations sometimes lead to significant delays in the evacuation-construction projects, and the tenants, tied to the agreement, cannot engage with another real estate entrepreneur or a contractor.
The law is meant to allow tenants to cancel the agreement with the organizer in accordance with the latter’s degree of seriousness in promoting the project. The law will also allow apartment owners to cancel a pre-contractual agreement if this is agreed by a two-third majority of the residents who signed the agreement, and after each apartment owner wishing to cancel the agreement, has paid NIS 5,000 to the organizer.
However, the bill does not stipulate clear definitions or provisions regarding the organizers’ occupation arrangement, and does not deal directly with the organizers. Several provisions that must be included in the agreement were also determined, such as payment to each tenant and the expected date for completion of construction; however, what has not been solved is the problem of many residents, including the elderly and new immigrants, who do not clearly understand what kind of new apartment they will receive, and what will happen in the period between the demolition of their home and the time they will be moving in to their new apartment.
It was determined that a lawyer would verify the tenants’ signatures and explain them the nature of the transaction, but there is no one to make sure this is implemented and that they do not sign under pressure.
The bill is a step in the right direction, and tends more towards the right to a fair agreement rather than the right to freedom of agreement, where the strong man usually has the upper hand. At the same time, there is a need for a government agency to publish a model agreement for the evacuation-construction project, or publish more information on such projects. The Israeli Authority for Urban Renewal, whose task it is to act to break barriers and bridge information gaps, is also the appropriate authority to do so; and not only for evacuation-construction projects, but also for TAMA 38 projects and other urban renewal projects.