The comprehensive guide to urban renewal insurance - Magdlim

TAMA 38 projects that take place in the heart of the urban space also include fencing functions. Whether to prevent entry to the entire site (in TAMA 38/2, demolition and construction and renovation), or to provide a clear separation between ongoing building activity and contractor work (in TAMA 38/1, expansion and renovation). Often, the fence is even erected some time before the main work begins.

Many are unaware that even the above-mentioned fencing work can cause damage, and this is at a stage where there is not necessarily a valid contractor policy that can provide a solution......

To the article on the Magnifier website

TAMA 38/1 (reinforcement and expansion) projects still account for about 50% of urban renewal in Israel, which is carried out according to the plan to strengthen buildings against earthquakes. Since these are unique construction sites that differ in that they are carried out simultaneously with the tenants continuing to live there, apartment owners must pay attention to a number of points in terms of insurance and in general. In the following short list, I will discuss some of the most important ones.

Private apartment renovations

A TAMA 38/1 project, unlike TAMA 38/2 (evacuation and demolition), does not reach the finish line with a "new apartment from the contractor." The existing apartment will be expanded, the building will be renovated and upgraded, but it is still the same property. It is not surprising, then, that many apartment owners "jump" on the opportunity, and at the same time also conduct private renovations.

Often, because these are old apartments, the renovation is a "complete renovation" (including flooring, plumbing, doors, breaking down walls, replacing the kitchen, aluminum work, and more).

Private renovations are an insurance challenge, and homeowners are responsible for bodily and property damage that results from them. This is no small matter. According to an official survey by the Renovation Workers Association published in 2019, about 10% of renovation contractors experience a work accident every year.

The apartment owner who contracts with the renovation contractor is considered by law to be the "client of the work," and is liable for damages. To the extent that he contracts with several "renovators" at the same time, and does not work with a "single renovation contractor," he can also be considered the "construction operator," and his liability is even higher. A contractor's work policy purchased for the project does not cover the private renovation work that the tenants perform through private contractors, and in the absence of adequate insurance, the apartment owner is exposed to risks and claims.

The fencing function accompanies almost every construction site, and is often done before work begins. The construction site is fenced in advance, and sometimes even months before the arrival of the contractor and his team. Starting with fencing vacant lots that have been accepted for the developer's possession (to determine "facts on the ground" and prevent encroachments), and ending with fencing done near the start of construction.

In many cases, the fencing is used in the interim period as a platform for placing signage. Whether it is informative signage ("This will be built here," "Urban renewal work will be carried out here"), or for promotional advertising and marketing purposes.

Fencing work and fence maintenance are not necessarily covered by the contractor's insurance policy, for the simple reason that in most cases the insurance policy for the project has not yet been purchased. If the developer fails to provide adequate insurance for the fencing (and its construction), and if any damage is caused to the person or property, he may find himself facing a broken trough....

A couple inherited an old three-room apartment in a building in Ramat Gan that was built sometime in the 1960s. They didn't think they would live there and designated it as an investment property for young tenants and students. Just a few years later, the property owners in the building agreed to carry out urban renewal according to the TAMA 38/1 plan. That is, to renovate and expand the building, as part of strengthening it against earthquakes.
The couple immediately realized that this was a real potential to upgrade the property and began receiving proposals from architects, interior designers, and renovation contractors, based on the assumption that the building would be a construction site anyway, and therefore it would be worth taking advantage of the situation to upgrade and improve the apartment.

Incidentally, in many cases the need to renovate does not necessarily stem from a desire to upgrade, but rather the end result of the TAMA project requires the interior renovation of the apartments. This includes cases where inconsistencies arise between the new addition and the old apartment.

Whatever the reason, this story is familiar to many Israelis who own apartments in buildings designated for TAMA 38/1. However, at the same time, there is an issue that is less familiar to those same Israelis:
The aspects involved in private renovation in terms of insurance and safety.

When it comes to insurance, it is very important to make sure that the private renovation contractor's work is properly insured, and that there is insurance against damage that may be caused by the renovation to the building itself or to third parties. Second, from a safety perspective, it is necessary to understand the issue of liability for third-party damages and to the renovation contractor's employees if they are injured during their work.

Mr. Minister, while the coronavirus pandemic erupted around the world "out of nowhere," there is another, future pandemic that we all know could arise. I am referring, of course, to the danger of damage from an earthquake.

The current trend in the field of urban renewal seeks to lead more and more projects towards evacuation and construction, replacing the specific (and effective) solutions of TAMA 38 with its various versions.

We hear quite a bit about the abandonment/leaving of TAMA 38 projects while work is in progress. More than once, developers and contractors who started a project with great promises "smashed" to the ground of reality due to various problems, and are forced to leave. This leaves the apartment owners with a broken trough, and sometimes even without proper insurance. This phenomenon is more common during the Corona period than usual, unfortunately.

Is there insurance for damages caused to the TAMA 38/1 project as a result of the Corona crisis?
Is it worth moving forward with the project?
What are the highlights for hiring employees and what do you do in the event of a tenant or employee who is infected with the virus?

All this and more in the complete guide for entrepreneurs and contractors that I wrote and published on the "Magdilim" website.

Contractors and developers are exposed to criminal proceedings, and enforcement in this area is only increasing. Official data published in the State Comptroller's report shows that each year the police forward dozens of cases against contractors and developers to the Attorney General's Office with a recommendation to file an indictment.

Furthermore, it is known that a criminal indictment for a work accident, which ends in conviction, may result in actual imprisonment behind bars. This, of course, alongside the fatal harm to the contractor, the developer, his family members, his employees, and the name and reputation that have been earned through much hard work.

More and more buildings that have undergone urban renewal according to TAMA 38 are appearing in the urban space in Israel. Between the years 2005-2018, 17,907 housing units were occupied in TAMA 38 projects, which were carried out in 955 buildings. Therefore, it would be appropriate to address in a short article an issue that receives less attention from contractors and developers involved in the field, which is the responsibility for "the day after delivery."

A TAMA 38 project, like any construction project, requires recognition of the need to purchase insurance after delivery, including partial delivery. This is because the contract work insurance policy, as its name suggests, insures the developer/contractor only during the performance of the contract work (and in the case of maintenance work, during a maintenance period, defined in time).

After full or partial delivery, the contractor's policy "expires", and with it the insurance solution for risks that existed at the time of delivery, and which will cause damage to the body or property of a third party as a result of a defect in construction, expires.

For example, we are handling an incident that recently occurred in a TAMA 38 project in the north. About three years after the renovated building was delivered, a fire broke out in the main electrical panel. The fire ignited from the bottom up, climbed the electrical shaft and along all floors of the building. The residents, including adults and small children, ran outside in a panic and escaped the flames. Some were injured as a result of the rapid descent of the stairs, some from smoke inhalation, and of course there was extensive damage to the property itself. Only by a miracle did the incident end without any fatal consequences or injuries.

This type of accident does not fall under the scope of the contractor's policy...