- October 10, 2021
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Tenants opposing the national urban renewal project are perceived as extortionist and greedy, but many stand to lose millions and even their livelihood
“When people talk about recalcitrant tenants the connotation is always negative. Everyone imagines a cranky old man who wants to take advantage of everyone. But that’s not true in my case,” says Doron, who is defined by law as an uncooperative tenant. “I wanted the Tama [national urban renewal] project to go ahead, and I’d obviously be happy with a new building and new apartment – who wouldn’t be? But whereas the other tenants will enjoy and profit from the renewal project the city is promoting, and are not losing anything, I stand to lose a lot,” he claims.
“I inherited this apartment from my grandfather and parents,” Doron explains. “It’s on the ground floor of a building in the center of Tel Aviv, a Bauhaus-style building slated for conservation. It’s 85 square meters [915 square feet]. Originally it was smaller, with a large balcony, but more than 60 years ago, my grandfather broke down the wall between the living room and the balcony and merged them. I was born in this apartment and lived there most of my life, until I moved out of the city a few years ago.”
“In the course of the Tama project for the building, they’re talking about reopening the balcony, shrinking the apartment by at least 15 square meters, which is equivalent to the size of one room,” continues Doron. “An appraiser I hired estimated that the apartment will lose 1 million shekels (around $312,000) in value. Furthermore, due to engineering considerations I know nothing about, I was told I wouldn’t be getting a fortified safe room. The elevator that will added to the building won’t benefit me either. The other apartments in the building, meanwhile, will enjoy expanded areas or a new balcony, a new safe room, an elevator and parking spaces.
“All I’m asking for is appropriate compensation. I’m in my late 60s, and for me this apartment is my pension and security. Meanwhile, the developer is exploiting the market panic ahead of the suspension of the Tama program, inciting all the tenants against me. Even neighbors who were my friends, whom I’ve known my entire life, are now cursing and maligning me. Not one of them cares that my apartment will shrink by almost 20%. I’m completely alone in this saga.”
Doron is not alone in his experience. In recent years, with the increase in urban renewal projects in many cities, either through the government-sponsored program Tama 38 to fortify buildings against earthquakes, or through projects that involve tearing down old buildings and building new ones, there is a growing number of tenants and owners who find themselves categorized as recalcitrant tenants. These are people who own properties slated for renewal, who for their own reasons and considerations oppose the project or the terms they are being offered. Frequently, this leads to significant delays in the process, or even to the project’s cancellation. Developers say that many people exploit their power, trying to extort other benefits and maximize their profits. But there are others who see themselves as victims of urban renewal, and see their refusal as a struggle for their basic rights.
“Even though this is about my property rights, and about the fact that my claims are pertinent, the feeling I have is that no one is really concerned about this,” says Noam, a Tel Aviv property owner who opposes a renewal project planned for her building. “At first I supported the project. I live in an apartment I own on Moshe Sharett Street in Tel Aviv. It’s a two-room apartment on the ground floor, all four sides with windows. It’s my financial security. When we began this project, we were shown a plan that everyone agreed upon. But the plan subsequently changed in a way that completely changed the apartment I was to receive in exchange.
“Instead of the one promised, I was going to get a hemmed-in apartment with only one side of windows, a fortified room that didn’t meet safety codes and a bathroom with a shower and no window. This was not what the developer promised. When I approached him, he said I could sue him. Later, he sent the other tenants an email, writing that I was trying to prevent the project from moving forward, inciting them against me. Along with some other tenants, I filed an objection, which cost a lot of time and money, forcing me to take out loans. I feel like David fighting Goliath, while people are only waiting for me to crack.”
Marked by the government
The Economic Arrangements Bill the government approved in August includes clauses intended to accelerate urban renewal projects, stating among others that recalcitrant tenants are one of the major obstacles to implementation of such projects. The government called “extortionist tenants” an issue to address, since their refusal blocks developers from obtaining the necessary majority to carry out a project.
One of the main ways the government has proposed to overcome this hurdle is reducing the necessary majority for demolition or rebuilding projects, down to 66% of all owners, as opposed to the current 80%. When owners have the necessary majority, they, along with the state and the developer, can join forces in taking legal action against uncooperative owners in order to implement the project.
The bill does contain clauses that would protect tenants with justified objections; these issues would be decided in court. However, opponents fear this process will deter objectors, who may forgo their right to try and prevent a project even when their objections are justified.
The reduction in the legal majority needed to approve projects is garnering sweeping support, mainly by developers and professionals in the field and in relevant government ministries. They view this as freeing a significant bottleneck on the way to urban renewal, which will add tens of thousands of apartments to the market. Nevertheless, the mechanism being formulated by the state could infringe on some owners’ property rights, or force them into the unwanted position of having their home destroyed while they move to a temporary new dwelling, in order to accrue benefits they didn’t want in the first place.
“As part of urban renewal [projects], we sometimes need to decide between significant parameters such as the welfare of all residents, such as protecting them from earthquakes, the need to increase the housing supply, and individual autonomy. This is a question we need to ask ourselves as a society,” says attorney Moshe Raz-Cohen from the law firm Raz-Cohen, Prashker & Co., who specializes in urban renewal. “I estimate that 80% of objections are extortionist tenants trying to improve their own payoff,” he says. “But 20% are people facing real crises that need solving. The problem is that in many cases, those 80% spoil it for the 20% who are in real distress.”
However, there are others who say the percentages are reversed, and that extortionist tenants are the minority 20%. “Currently, attempts to address the issue of uncooperative tenants view them as blackmailers trying to squeeze more from developers. But the reality is that objections to urban renewal projects are much more complex,” says Jenny Arabov, a community social worker who accompanies tenants through such projects and a founder of Citywize, a company that specializes in consulting and taking people through the renewal process. Arabov claims that objections for emotional reasons are no less common than objections due to property rights. “When a developer wants tenants to sign up for a renewal project, no one maps things out and looks at the needs of each tenant,” she says.
Some people are afraid to live in a high-rise building, a dramatic change for them that evokes physical and mental anxiety, says Arabov. “For example, when you go to a terminally ill woman and ask her to sign on for a complex process that will take several years and require a lot of resources, she’ll struggle to cope. This is also true for the elderly or for new immigrants, for whom leaving their home, neighborhood or community is a fraught move.”
The death of a business
The housing crisis and the rising home prices over the last decade have led the government to set an ambitious goal for increasing the housing supply. In 2017, it announced its intention to build 1.5 million new apartments by 2040. This includes many urban renewal projects, which are supposed to account for 30% of new homes built by 2003. But urban residential buildings often don’t contain just homes; many also contain small businesses and ground floor storefronts.
Urban renewal impacts commercial space much differently. For most homeowners, the project is an upgrade and an opportunity for financial gain, but for many businesses it is a serious, often fatal blow. Many of these businesses are location-based, and a temporary move to another location will make them lose their customers, who may not return after construction is finished.
This is the case for a small neighborhood hair salon in Tel Aviv’s Old North. For the last 20 years, it has occupied a small, 47-square-meter storefront on the ground floor of an old apartment building on a main street. The owner has built up her base of clients, all of whom live within walking distance, over many years. In recent years, the neighbors have been trying to get signatures for a Tama 38 urban renewal project that would give the homeowners larger, newer apartments. In order for the project to happen, all the tenants would have to move out for approximately two years while the developer covers their rental expenses.
But a temporary move would mean something else entirely for the hair salon. “Demolition of the building will force [the salon] to change its location for the interim, which is expected to cause a loss of clients,” lawyer Raz-Cohen stated in a defensive brief on behalf of the salon owner after she was taken to court by the developer over her objections. The brief argues that what the developer offered the salon owner – a store in the new building that is only 6 square meters larger than the old one – does not take into account the great risk to her life project and income.
“In many projects, the problem with business owners in a building is intrinsic,” says attorney Doron Ariel, a founding partner in the Doron Ariel & Co. law firm. “Many of them have built up a reputation over the years, with a group of customers they’ve accumulated, mostly residents of the neighborhood and adjacent areas. Taking a business like that, whether a beauty salon, a flower shop, a hairdresser or a small grocery store, and moving it elsewhere for five to six years will destroy the business. No one will compensate them for that.”
Apartment with 42 heirs
Along with the conflicts and the difficulties for people who pay the price for urban renewal, there are many other obstacles that make it hard to reach the government target. This includes unregistered properties, heirs who cannot be located and whose signatures are required for proceeding with a project, as well as illegal construction, which characterizes almost every old building in Israel.
“There are many instances, seen in numerous large projects, of lost or missing people with rights to a property,” explains attorney Barak Keinan, a partner in the planning and construction department at the M. Firon & Co. law firm, which represents apartment owners in hundreds of urban renewal projects across the country. Take, for example, an apartment in Tel Aviv worth 3 million shekels that has 42 registered heirs. Some of them are third-generation heirs and many of them live overseas. Some of them don’t even know they have some rights in this property. In order to proceed with the project, the developer needs the consent of all of these people, which translates into months of work.
As part of the campaign the state is waging against recalcitrant tenants, it is drawing up an amendment to the law that determines how consent is calculated in cases where the owners violated building laws, so that their votes are not counted toward the total percentage of those in favor of urban renewal. Until this legislation is passed, developers and apartment owners who want to move forward with projects have to contend with the challenges they present. “Ultimately, even an apartment with illegal construction can veto a project; this includes an apartment that was enlarged or one that was split up, or laundry rooms and storage spaces that were converted into apartments or used for other purposes, or are considered as such when drawing up an agreement,” explains attorney Raz-Cohen.
Along with the problems caused by illegal construction, Doron says that the legislation may have to distinguish between an apartment owner who has broken the law and one who didn’t know there was a problem with his property. “For example, in one Tel Aviv project, a rooftop apartment was bought a few years ago for close to 4 million shekels. It turned out that the 90-square-meter apartment started out as a laundry room that was enlarged a few decades ago. The developer now faces a problem. If he takes this apartment into account, he’ll have to give other tenants the same benefits, which is unfeasible from a planning and financial perspective. If he doesn’t, the owner will oppose the project,” he says.
Doron adds, “In the past, developers solved such problems thanks to the wiggle room they had in ‘compensating’ tenants. But now, municipalities greatly restrict the benefits developers can offer, and mandate that all owners receive equal compensation, so developers have no solutions to offer.” In some cases, Tama 38 developers prefer finding creative solutions such as monetary compensation for owners who demand something that the construction plan can’t provide, just so the project can get underway. “We know how to reach agreements with tenants who live in much larger apartments than the official building permit allowed. Otherwise we couldn’t work at all here,” says one developer who works in an old Tel Aviv neighborhood replete with such violations.
