Drafting of a Clearance and Construction (“Pinuy Binuy”) Agreement between a Building Maintenance Committee (“Vaʻad Bayit”) and an Entrepreneur
What is the proper way to draft a Pinuy Binuy agreement between a building maintenance committee and an entrepreneur in a clearance and construction project in Israel under national outline plan #38 (the national plan for strengthening buildings against earthquakes, abbreviated tama 38 in Hebrew)? Clearance and construction projects by national outline plan #38 are complex. Accordingly, it is necessary to take many factors into consideration even before beginning the project. One important step is to obtain the full profile of potential entrepreneurs, review the offered specifications of the project, and ensure that the entrepreneur has the required ability and knowledge to take on the project from the bureaucratic and legal aspects. In this article, lawyer Meir Shua, a partner of our firm who specializes in real-estate and urban-renewal law, explains about this issue.
PINUY BINUY ACCORDING TO NATIONAL OUTLINE PLAN #38—OVERVIEW
Pinuy Binuy, which is the term for clearance and construction projects in Israel, has become a commonly used phrase over the past decades. The term refers to projects in which an old building is completely destroyed up to its foundations and a new improved building is constructed in its place. This type of project is usually very hard to carry out, since just receiving approval to begin it takes five years on average. It is not widely known that, due to an amendment to the regulations in national outline plan #38 (which grants significant construction permits), an expedited clearance and construction procedure has been made possible. It is now possible to receive approval for Pinuy Binuy projects under national outline plan #38 within a year or two on average. However, in both the previous long procedure (which is still available) and (especially) the new expedited procedure, it is extremely important to draft an agreement that protects the rights and interests of the apartment owners to the greatest degree. To accomplish this, it is important for the tenants to work together to locate a lawyer who specializes in Pinuy Binuy projects and to find the best entrepreneur for the specific project in question. Below we explain about this in detail.
PRELIMINARY STEPS BEFORE DRAFTING A PINUY BINUY AGREEMENT BETWEEN AN ENTREPRENEUR AND BETWEEN APARTMENT OWNERS IN A NATIONAL OUTLINE PLAN #38 PROJECT
Many people believe that they must first locate an entrepreneur to get the project under way. However, before doing this, the apartment owners should meet and reach common decisions concerning the project. During this meeting, or at an adjacent time, a representative team of tenants is usually appointed that acts on behalf of all the tenants throughout the project, including finding the right entrepreneur for a project as complex as theirs. After this first important step, a lawyer may be located who specializes in real estate and urban renewal and who is experienced in Pinuy Binuy projects by national outline plan #38. Just as entrepreneurs are always aided by the legal representation of lawyers throughout the process, the apartment owners should also seek the aid of a lawyer and should do so starting from the very beginning.
IMPORTANT POINTS TO CONSIDER WHEN LOCATING THE RIGHT ENTREPRENEUR
After completing the first steps as described above, it is time to search for potential entrepreneurs and choose the best one among them for your project. In most cases, this is done with the help of a lawyer who has been chosen to represent the apartment owners. The reason for this is that there are many legal and economic issues that must be examined with regard to the potential entrepreneurs even before beginning the actual sale negotiations. These issues include, inter alia, providing guarantees and sureties to the apartment owners by the entrepreneur (such as guarantees under the Sale [Housing] Law) to ensure that the owners’ rights in the project are protected. In addition, it is necessary to obtain a full profile of the entrepreneurs, including their financial stability, their experience with other projects in the same region, and their ability to complete the project on time with the least possible legal conflicts which may delay the completion of the job.
THE IMPORTANCE OF HIRING AN ENGINEERING SUPERVISOR FOR THE NEGOTIATIONS WITH THE ENTREPRENEUR OR WITH THE CONTRACTING COMPANY
After the above steps have been completed, an entrepreneur has been located, and the apartment owners have begun negotiations with the entrepreneur, the parties discuss the specifications of the project. Naturally, the apartment owners (as opposed to the entrepreneurs) usually do not have the required technical background to thoroughly understand the specifications. As a result, power gaps may emerge between the parties, leading the entrepreneurs to attempt to save on the expenses of the specifications and create a plan that includes lower-quality materials.
The specifications may also often include various defects that are not detectable without the proper technical background. Just as apartment owners should hire legal representation to protect their rights and interests, they should also hire a supervisor who has the required engineering background to ensure that the final project specifications will match the wishes of the apartment owners and will be of the highest quality.
DRAFTING AN AGREEMENT BETWEEN APARTMENT OWNERS AND AN ENTREPRENEUR IN A PINUY BINUY PROJECT—CONTACT OUR REAL-ESTATE AND URBAN-RENEWAL EXPERTS
In summary, it is very important to employ the initial steps described above when drafting an agreement between an entrepreneur and apartment owners in a Pinuy Binuy project by national outline plan #38 and to locate an engineering supervisor who will be responsible for ensuring that the agreement specifications will be acceptable to the apartment owners. If you need personal advice on the matter, we will be happy to help. Our firm, which has branches in Jerusalem and Tel Aviv, specializes in land law and represents apartment owners in urban renewal projects such as national outline plan #38 and Pinuy Binuy. You can contact us via the phone numbers or email address listed below.
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