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...