Tel Aviv Tama 38 Project Canceled After Four-Year Permit Delay
A four-year delay in securing a building permit led to the cancellation of a Tama 38 urban renewal project in Tel Aviv. An arbitrator ruled that developers must pay NIS 190,000 in legal fees to the tenants.
A four-year delay in obtaining a building permit has led to the cancellation of a Tama 38 urban renewal agreement for two old residential buildings on Ma'apilim Egoz Street in the Neve Chen neighborhood of Tel Aviv. In a recent arbitration ruling, it was ordered that the developers pay the tenants NIS 190,000 in legal expenses.
Background of the Cancelled Project
Each of the two buildings comprises 14 apartments across three floors. In 2017, the apartment owners signed an agreement with real estate developers to strengthen the structures under the Tama 38 framework. The contractual deadline for securing the building permit was set for December 2019.
However, the permit was never issued. The developers argued that the delays stemmed from various factors beyond their control, including objections from certain apartment owners and the outbreak of the COVID-19 pandemic. In June 2021, the local planning committee ruled that the permit application could not be approved due to various defects, a stance upheld by the appeals committee, which ordered a revision of the plan.
Arbitration Decision and Legal Rationale
When some apartment owners refused to sign the revised plan, the tenants' legal counsel notified the developers in July 2023 that 22 apartment owners were canceling the contract due to protracted proceedings and plan modifications. The developers filed a lawsuit seeking to enforce the agreement, while the tenants argued that the final deadline had passed due to developer delays.
Arbitrator Vardi ruled that the agreement was lawfully canceled due to the failure to fulfill a condition precedent. He stated that the developers were required to obtain a permit by December 2019, or June 2020 at the latest, rejecting claims that timelines should be frozen due to the pandemic or tenant objections.
"One of the fundamental obligations imposed on developers is to build legal apartments for their owners," the arbitrator wrote. "If they planned illegal apartments, they have only themselves to blame."
Consequently, the contract was declared void, and the court ordered the removal of caution notices previously registered in favor of the developers in the Land Registry (Tabu).
