TAMA 38 Building Permits Delayed, Agreements for Two Tel Aviv Buildings Canceled
A four-year delay in obtaining building permits has led to the cancellation of TAMA 38 agreements for two old residential buildings on Ma'apilei Egoz Street in Tel Aviv's Neve Chen neighborhood. An arbitration proceeding recently ruled that the developers must pay the residents approximately NIS 190,000 in legal expenses.
Each of the two buildings consists of 14 apartments spread across three floors. In 2017, the apartment owners signed agreements with real estate developers for structural reinforcement under the TAMA 38 urban renewal program. The contractual deadline for obtaining the building permit was December 2019.
The developers claimed the permit was not obtained due to reasons beyond their control, including opposition from some residents and the COVID-19 pandemic. In June 2021, the local planning committee determined the permit request could not be approved due to various deficiencies, a stance upheld by the appeals committee, which ordered the plan's revision.
However, some residents refused to sign the revised plan. In July 2023, the residents' representative informed the developers that due to "prolonged proceedings, plan changes, and submissions without representative approval," 22 apartment owners were canceling the agreement. The developers sued to enforce the agreement, but the residents argued the permit deadline had passed and the delays were due to the developers' "foot-dragging."
The arbitrator ruled that the agreement was lawfully canceled due to the failure to meet a condition precedent. He stated the developers were obligated to obtain the permit by December 2019, or June 2020 at the latest, and rejected their claim that time should be frozen due to uncontrollable factors like the pandemic or resident opposition. The arbitrator criticized the developers' argument, stating that if any informal resident objection could halt the process, the permit deadline would be meaningless. He emphasized that a developer's basic duty is to build legal apartments, and blaming residents for delays due to illegal designs is absurd.
Consequently, the residents' cancellation notice was deemed valid, rendering the agreement legally void. The basis for the developers' cautionary notes registered with the Land Registry was also nullified, leading to the residents' successful claim for their removal.
