From the day the owners vacate the building until they receive their new apartment usually several years pass. During this period the developer pays them rent so they can live in an alternative apartment. This is one of the most important clauses in the agreement.
How is the rent set?
The rent should allow the owners to rent a similar apartment in the area, usually by appraisal or an agreed sum matched to the size of the current apartment. Make sure the amount is realistic on the day of vacating, not only on the day of signing, which may be years earlier.
Indexation and updates
Rents change over time, so the agreement should include indexation, for example to the consumer price index, and possibly a mechanism for updating by appraisal over long periods.
When and how is it paid?
- The developer usually pays in advance for a period, such as a year or six months.
- The first payment should arrive before vacating, so owners can sign a lease.
- Rent continues until the new apartment is actually handed over, sometimes with a short additional period.
Moving and related costs
The developer should fund moving to the alternative apartment and back to the new one, and sometimes other costs such as disconnecting and reconnecting services.
What if construction is delayed?
Rent continues as long as the apartment has not been delivered, and agreed compensation is usually added for each month of delay beyond the agreed date. The compensation should be in addition to the rent, not instead of it.
A guarantee for the rent
If the developer gets into difficulty and stops paying, a bank guarantee securing rent until delivery protects the owners. See guarantees in pinui-binui.
Next steps
Every pinui-binui project is different: the building, the developer, the plan and the owners themselves. At Paz Israel & Co. we represent apartment owners in urban renewal projects, review the offer and the agreement and support the owners’ committee throughout. See our pinui-binui and urban renewal page, or contact us to arrange a meeting in Tel Aviv, Jerusalem or Modi’in.
This article provides general information about Israeli law as of the time of writing and is not legal advice.