The comprehensive guide to urban renewal insurance - Magdlim

In February 2022, the Supreme Court issued an interesting ruling regarding the relationship between protected residential areas (MAMID), taxation, and urban renewal. An in-depth study of the content and the words of the judges constitutes an important starting point for us to discuss urban renewal as an engine for security protection and increasing national resilience.

"A close and standard MAMD improves the protection of those who reside in it until the wrath passes," the Honorable Judge wrote in the ruling, adding, "This important purpose is fulfilled by encouraging apartment owners to add a MAMD of a minimal area to their apartment, by granting an exemption from the improvement levy, which results in financial savings" (Baram 21/6874). The ruling dealt with common cases in which developers want to receive an exemption from the improvement levy under TAMA 38 even though the MAMD was planned outside the building lines. The Supreme Court upheld in its ruling the security value of the MAMD, alongside the purpose of TAMA 38 against earthquakes, and determined that an expansive interpretation should be followed in order to encourage urban renewal.

2021 was a record year for the mortgage market, reaching about 130 billion shekels per year. However, interest rates and tightening of conditions led to the collapse of the mortgage market to only about 6 billion last October. March 2022 was the last peak month for mortgages, with 13.4 billion in just one month and an annual average of about 150 billion. However, the Bank of Israel's interest rate increases since then, along with the tightening of the conditions for receiving mortgages imposed by the governor on commercial banks, as well as the fact that today someone who takes out a million shekels in a mortgage repays another 900 shekels per month - all of these caused the mortgage market to collapse to only about 6 billion last October, i.e. 60 percent less than in March.

One issue has been ignored by all parties so far and is critical to the fate of the State of Israel – how we prepare for the coming earthquake.

Over the next few days, the masses of Beit Yisrael will turn out at thousands of polling stations and decide, one way or another, what kind of government we will have after November 1. One issue has been ignored by all the parties so far, and it is, in my opinion, critical to the fate of the State of Israel: how we prepare for the earthquake that is on the way.

Have we forgotten to learn from history?
The statistics, unfortunately, say it all: Over the past 2,000 years, a fatal earthquake has occurred in our country every 100 years, give or take.

The last of these was in 1927, 95 years ago, in which about 400 people were killed and thousands were injured. However, and this is a big fact, at that time the population of the Land of Israel numbered about 100,000 people in total, compared to about 10 million today, that is, 100 times (!)

In other words, and assuming that sooner or later an earthquake of a similar magnitude will occur here, the losses could, God forbid, reach tens of thousands of people, not to mention damage that could set Israel's economy back decades...

Senior real estate industry figures, including developers, lawyers, economists and appraisers, analyze the implications of the fifth consecutive interest rate hike to 2.75% - all the hot predictions in a special guide.

Assaf Kahner, CEO of Ewave Nadlan: "A tremendous battle is taking place before our eyes"
"There are two forces currently operating on the real estate market. One is population growth and a lack of sufficient housing supply, which have caused the wave of increases in housing prices that we have witnessed in the past two years. The second force is the rise in the price of money, which is reflected in interest rate increases. The rise in the price of money is a moderating factor for price increases in general, including increases in housing prices. So we are witnessing a tremendous battle, similar to a showdown, between two opposing forces that affect the real estate market.

In the last two years, we have witnessed changes in the construction insurance market in Israel, which have been dramatically tightened in the past year and are (also) affecting urban renewal projects such as Pinui Binui or TAMA 38.

The phenomenon stems mainly from a change in policy by reinsurers abroad. That is, a change in the rules of the game on the part of international insurance companies that provide Israeli insurance companies with the insurance envelope and financial backing.

The changes are significant for contractors and developers in urban renewal projects and indirectly for homeowners. Experts believe that they have a cross-cutting impact on urban renewal insurance, which, as will be shown below, is at an all-time high. The importance of urban renewal has been emphasized even more in light of cases such as the collapse of the building in Holon, which miraculously ended without casualties, only thanks to the extraordinary vigilance of rescue workers.

The building collapse in Holon a few days before Yom Kippur is – from the perspective of human rights – a miracle. The police receive a complaint about doors that won’t open and an alert engineering team arrives on the scene and realizes that the building is about to collapse. 36 families and residents, including a Holocaust survivor in his 90s, are quickly and carefully evacuated by rescue services.

The miracle is revealed in broad daylight when the building collapses less than two days after the last of the residents left and becomes a mass of ruins. "It's a blessing in disguise that they got them out of there and no disaster happened," said one of the residents who has lived there for almost 25 years.

Many urban renewal projects are based on the demolition of the existing structure and the construction of a new, upgraded, safe, and spacious building. Whether it is evacuation-construction routes or urban renewal according to TAMA 38/2 (demolition and reconstruction), the model follows the same lines.

After signing a contract and "moving on," the tenants vacate their apartments for temporary rental housing. The existing structure is demolished, a new building is built in its place, and the tenants return to their new apartments.

In the following short article, we will address an important aspect of these projects at the insurance level, which is the responsibility for insuring the apartments in the interim period between the eviction of the tenants and the date of demolition. This is a fundamental point since, as we will immediately explain, the main policy of the project – contractor work insurance – protects the property only from the date of demolition. In the interim period between the eviction and the start of the demolition work, the contractor policy does not provide an insurance solution, and this can have dramatic consequences.

In April 2021, a sinkhole opened up in the living room of an apartment in Ramat Gan, and the harrowing images of the disaster made headlines in the media. The reports rightly brought the spotlight to the danger of buildings located near construction sites. This is especially true in urban areas where countless urban renewal projects are taking place at any given moment.

The danger to nearby buildings – an integral part of urban renewal?

Whatever the reason, urban renewal projects under Pinui Binui or TAMA 38 may pose a danger to the buildings adjacent to them. These are projects that are carried out in a dense urban environment and include extensive demolition work. Often these are buildings that are not adjacent but actually share common walls, which further increases the risk of the works....

Many construction projects are carried out on existing buildings and require consideration in terms of the insurance policy purchased for their benefit. Whether it is "point-by-point" work such as adding balconies, renovating facades or adding fire escapes, etc., or whether it is TAMA 38/1 reinforcement or renovation of buildings for preservation.

Whatever the reason, a contractor's work insurance policy in itself does not necessarily provide a proper insurance solution for damage that may be caused to the existing structure.....

To the article on the Magnifier website

TAMA 38 projects are exposed to work accidents (like any other construction project). Data indicates that approximately 26% of fatal accidents in which a worker is killed occur during renovation and/or TAMA 38 work.

At every construction site, there is exposure to harm from a third party/passerby or visitor who is not a worker or employee at the site. The exposure is even more significant and substantial in the TAMA 38/1 project, where the building continues to be active (the residents live there and passersby enter it frequently), and also at the TAMA 38/2 site or in the evacuation-construction project, which is indeed a construction site only ("apparently sterile"), but one that is located in the heart of an urban space.