Owning a Rental Apartment Through TAMA 38 or Pinui Binui in Jerusalem

What is the difference between TAMA 38 and Pinui Binui?

Both are forms of urban renewal (in Hebrew, hitchadshut ironit), in which a developer improves an older building, usually in exchange for the right to build additional apartments.

• TAMA 38 works with the existing building. It centers on structural reinforcement and may add floors, apartments, safe rooms, balconies, an elevator or other improvements. The building stays standing, and in many projects residents stay in their apartments while the work goes on.
• Pinui Binui (literally “evacuation and construction”) means the old building is demolished and a new one is built in its place. Owners leave for the construction period and receive an apartment in the new building.

Owners often use these names loosely, so ask exactly which planning track your building’s project is following.

What does the process look like for an owner who rents out?

1. Building meetings and votes. Residents, a developer or an organizing company approach the building, and meetings and votes follow. Decisions are made by the owners, not the tenants, so someone needs to follow them for you.
2. The agreement with the developer. Each owner signs an agreement covering what they will receive, the timetable, the security provided to owners and what happens if the project is delayed or stops. Have it reviewed by your own lawyer, not only by the lawyer representing the building.
3. Planning and permits. There can be a long wait between signing and the start of work, and the tenancy normally continues as usual.
4. Construction. In TAMA 38, expect noise, dust, scaffolding, restricted access and occasional interruptions to services, sometimes for an extended period. In Pinui Binui, the apartment must be vacated before demolition.
5. Handover. At the end, you receive the improved or new apartment, check it against what was agreed and prepare it to rent again.

How does it affect your tenant and the lease?

• Keep the tenant informed. Explain what is planned and update the tenant as dates become firm, so the scaffolding does not come as a surprise.
• Time the lease. Once a start date is realistic, think about lease length, renewals and option periods so the tenancy can end in an orderly way if the apartment has to be vacated. Any notice to a tenant must follow the lease and the law, so speak to your lawyer before you change terms or give notice.
• Disruption during TAMA 38. Whether anything in the tenancy should change during construction is a question for your lease, your developer agreement and your lawyer.
• Relocation during Pinui Binui. Developer agreements commonly include arrangements for temporary housing or rent payments to owners during construction. Understand what applies to you, from what date, and how it fits with the end of your current tenancy, since the apartment will produce no rental income while the building is rebuilt.

What should you ask, and what should you keep?

Questions to ask:

• Which planning track is the project following, and what stage has it reached?
• Who is the developer, and who represents the owners?
• What is the expected timetable, and how firm is it?
• What exactly will you receive, and what is the specification?
• What happens to your tenancy at each stage, and who is responsible for what?

Documents to keep:

• The signed developer agreement with all appendices, including the technical specification.
• Minutes and notices from building meetings.
• Correspondence with the developer and the owners’ representative.
• Your lease and written communication with the tenant about the project.
• A dated record of the apartment’s condition, with photographs, before work begins.

The rules change, so confirm current terms

The rules and incentives for urban renewal in Israel have changed over time, including the planning tracks available and how owners are treated for tax purposes. This guide is not legal or tax advice. Before you sign, vote or change anything in your lease, confirm the current terms with a lawyer who specializes in urban renewal and, where relevant, an accountant.

How JTown Management handles this

We have experience helping owners navigate TAMA 38 and Pinui Binui projects in buildings where they own a rental. We follow the project and keep you informed as it moves forward, and where you wish, we attend building meetings on your behalf and report back to you.

We keep your tenant informed, keep the tenancy on track and coordinate the timing of the lease with the project schedule. We make sure arnona, water, electricity, gas and va’ad bayit (building committee) payments are handled correctly throughout, so debts do not build up on the property. At handover, we document the condition of the new or improved apartment and prepare it to be let again.

We work alongside your lawyer, who advises you on the agreement and your rights. We do not give legal advice.

Next step

Read how our property management service works, or Request a Property Assessment if your building is going through, or considering, a TAMA 38 or Pinui Binui project.