Pinui-binui (evacuation-construction) is an urban renewal program in which older, lower-density buildings are demolished and replaced with new, larger modern buildings. Apartment owners receive new, larger apartments in exchange for cooperating with the demolition and reconstruction process.
The Basics of Pinui-Binui
In a pinui-binui project, a developer approaches the owners of an existing building with an offer. The developer acquires the right to demolish the existing building and construct a larger building in its place. In exchange, each existing apartment owner receives a new, larger apartment in the completed building, plus various additional benefits.
The appeal to apartment owners is receiving a modern, larger apartment with no cash outlay. The appeal to developers is the profit from selling additional apartments that the expanded building permits.
What Apartment Owners Typically Receive
In a typical pinui-binui transaction, apartment owners receive: a new apartment that is significantly larger than their current one, temporary housing during construction, moving expenses, and various additional benefits negotiated with the developer.
The specific terms vary between projects and are the subject of negotiation – this is where the attorney’s role is critical.
The Legal Process
A pinui-binui project requires agreement from a supermajority (typically 80%) of apartment owners in the building. Once this threshold is reached, the holdouts can be overridden by court order in appropriate circumstances.
The transaction is documented in a comprehensive agreement that must address all aspects of the arrangement, including protections against the developer’s failure to complete.
Key Protections for Apartment Owners
The most important protections to negotiate include: bank guarantees for the developer’s obligations, clear specifications for the new apartment, penalties for construction delays, protection against developer insolvency, and dispute resolution mechanisms.
Tax Benefits of Pinui-Binui
Israeli law provides significant tax benefits for apartment owners in pinui-binui transactions, including exemptions from certain capital gains taxes that would otherwise apply. An attorney working with a tax advisor will structure the transaction to maximize these benefits.
