Because Israeli standard for endurance of buildings against earthquakes (Standard 413) was applied only as of 1980, a large part of the building which permit was issued prior to 1980 do not comply with such standard. Because strengthening the building to make it comply with the standard involves high costs Israel enacted the National Master Plan 38 (also known as "TAMA 38") that comes to solve this issue by enabling the financing of the strengthening of the building against earthquakes by certain incentives (mostly financial). Indeed, many land developers/contractors deal today with strengthening existing buildings against such incentives. We will note at the outset that due to the complexity of the contracting between the apartment owners and the developers within a TAMA 38 project it is vital that the owners will be represented by an attorney specializing in this area to ensure their rights and the promoting of their interests.
Tama 38 comes to promote owners to strengthen their building and achieves this by granting additional building rights in the building to enable the contracting of additional apartments and enlarging the existing apartments, tax benefits and shortening of statutory processes.
In practice, the owners contract a developer who performs the contraction works that usually include strengthening the building against earthquakes, addition of security rooms, enlarging of the apartments, addition of an elevator, refurbishing of the staircase and building lobby, refurbishing the exterior of the building, replacing old infrastructures with new ones, developing the surrounding grounds and public areas, and addition of balconies and parking places (note that such actions is dependent on compliance with zoning, engineering and financial issues and negotiation with the developer). In return for the construction works the developer receives the additional building rights using which it builds and sells the new apartments.
Theoretically the owners can finance the building strengthening by themselves but most will prefer contracting with a developer who will do this for them. It is customary that in TAMA 38 projects the owners are not required to bear any costs and all costs of the project are borne by the developer, including attorney fees of the owners (chosen by the owners) who is entrusted with keeping the rights and interests of the owners (and not of the developer who is represented by a different attorney).
In some cases, subject to economic viability, rather than strengthening the existing building one will prefer to demolish and rebuild a new one with a larger number of apartments. This will most often be the case with buildings with a low number of apartments but a large unused plot and in areas with high real estate prices.
The National Master Plan provides that the Local Committee for Planning and Construction is empowered, but not obligated, to approve requests submitted to it but states the Committee need base any refusal on special reasons arising out of planning, architectural or landscape consideration or issues related to the carrying capacity of the infrastructure. In a recent case the Committee refused to approve all of the requests and the Court held that the law indeed allows economic incentives to developers as a means to promote the objectives of the TAMA 38, but does not derogate from the powers of the Committee to apply planning considerations and does not give preference to providing incentives on other considerations, even if it means that the strengthening of the building will not take place due to lack of economic viability.
This article does not purport to address all the many issues that arise within TAMA 38 projects, which vary from project to project. Thus, it is crucial that before any negotiation with a developer the owners will hire the services of an attorney experienced in this area. Only a knowledgeable lawyer can get the owners the optimal commercial and legal terms, while receiving appropriate bank guarantees required to ensure compliance by the developer with all terms.