Building Addition in Evacuation-Reconstruction — How to Calculate Your Share?

What is Building Addition in Evacuation-Reconstruction?

Evacuation-reconstruction is a legal and execution process that allows residents of an old building to vacate their homes so that the building can be demolished and rebuilt with new construction, typically at greater height and density. As part of this process, residents are entitled to a building addition — this is additional space in the new building allocated to them in exchange for vacating their old home and investing in the project.

Building addition is one of the most important rights of residents in urban renewal projects. It reflects their value as "property rights holders" in the original real estate, and additionally serves as a significant economic discount for purchasing the new apartment in the project. However, calculating this building addition is not simple and involves mathematical formulas, various assumptions, and legal determinations that often constitute a matter of dispute between residents and developers.

On this page, we will explain in detail how building addition is calculated, what factors affect the calculation, what rights you have, and how we at Mandelboim, Gor, Witzman-Gor and Partners law firm help residents protect their rights in this process.

Legal and Statutory Definition of Building Addition

Building addition is defined in urban renewal laws and in the "Real Estate Law (Amendment No. 62) (Urban Renewal) 5760-2000" and its related regulations. In essence, building addition is additional built-up space allocated to residents in the new building, within the framework of their rights in the project.

This right is not automatic — it depends on several important factors:

• Area of the original apartment — how many square meters your apartment is in the old building;
• Building coefficient in the project — how much total built-up space is permitted by law in the new building;
• Number of residents — how many rights holders participate in the project;
• Building plan provisions — the specific limitations and guidelines for this project;
• Agreement between residents and developer — special conditions agreed upon in the contract.

How Building Addition is Calculated — The Basic Formula

The general formula for calculating building addition is:

Building Addition = (Total permitted built-up space in project − Existing built-up space in project) ÷ Number of residential units / residents

That is, first calculate how much total built-up space is permitted by law (according to the building coefficient and land size). Then subtract the existing space in the old building. The remainder is the "total building addition" in the project. This addition is divided among all residents, typically equally or according to the size of their original apartment.

However, this formula is only a general framework. In practice, each project is different, and the actual calculation depends on the specific data of the land, the plan, the agreement, and the legal provisions applicable to that location and date.

Factors Affecting the Calculation of Building Addition

To understand in depth how your building addition is calculated, it is important to familiarize yourself with the main factors that influence the final result:

1. Building Density Ratio

The building density ratio is the number that multiplies the land area to determine the maximum built-up area permitted in the project. For example, if the land is 1,000 m² and the building density ratio is 2.5, then the maximum permitted built-up area is 2,500 m². This ratio is determined by the city's building plan or by instructions from the Ministry of Defense / Public Property, depending on the property's location.

2. Original Apartment Area

The size of your apartment in the old building affects your rights in several ways. In some projects, the building addition is divided according to the size of the original apartment (larger apartment = larger addition). In other projects, the division is equal for all residents, regardless of apartment size. This depends on the project agreement.

3. Number of Residents and Units

The more residents in the project, the smaller the share each resident will receive from the total building addition (if the division is equal). This is called a "pro-rata share" (proportional share). For example, if there are 10 residents and a total building addition of 500 m², each resident will receive approximately 50 m² under equal conditions.

4. Building Plan and Local Conditions

Each building plan is different. Some plans allow for higher construction (high building density ratio), while others are more restricted. Additionally, some plans include requirements for public areas, parking spaces, or green spaces, which reduce the built-up area available to residents.

5. Agreement Between Residents and Developer

Often, residents and the project developer sign an agreement (called a "renovation agreement" or "evacuation and reconstruction agreement") that defines the precise conditions of the project, including how the building addition is calculated. The agreement may include special conditions, such as a discount in exchange for additional space granted to the developer, or shared costs deducted from the addition.

6. Construction Costs and Investment

In some cases, part of the building addition may be reserved to cover shared costs in the project (such as public areas, parking spaces, elevator, etc.). This means that your actual addition may be smaller than the initial theoretical calculation.

Practical Example: Calculating Building Additions in a Demolition and Reconstruction Project

To better understand how this works in practice, let's walk through a practical example:

Project Data:

• Land area: 2,000 m²
• Permitted building coefficient: 3.0
• Number of residents: 8
• Existing built area in the old building: 4,000 m² (including apartments, stairwells, storage units)
• Public/shared area in the new project: 600 m² (stairwells, elevator, shared parking)

Step-by-Step Calculation:

Step 1: Calculate total permitted built area
2,000 m² (land) × 3.0 (coefficient) = 6,000 m²

Step 2: Calculate total building addition
6,000 m² (permitted) − 4,000 m² (existing) = 2,000 m²

Step 3: Deduct shared areas
2,000 m² − 600 m² (shared areas) = 1,400 m² available for distribution among residents

Step 4: Equal distribution among residents
1,400 m² ÷ 8 residents = 175 m² per apartment (average)

In this example, each resident will receive a building addition of approximately 175 m² in their new apartment in the project (or may use this as a discount on the price of the new apartment, according to the agreement).

Important Notes on the Example:

• This is a simplified example. In practice, there may be additional provisions, such as discounts for residents who support the project early, or discounts for those waiting a long time for completion.
• The original apartment area may affect the addition (larger apartment = larger addition), if agreed upon in the contract.
• Construction costs, property appreciation tax, and management fees may be deducted from the addition or its value.
• In some projects, the building addition is converted to monetary value rather than actual space in the new apartment.

Resident Rights and Compensation in Demolition and Reconstruction Projects

In addition to building additions, residents in a demolition and reconstruction project are entitled to additional rights that must be protected carefully:

Right to a New Apartment in the Project

Each resident is entitled to a new apartment in the new project, with an area no smaller than their original apartment (typically). The agreement defines the specific requirements for quality, location, and size of the new apartment.

Building Addition as Economic Value

The building addition is a significant economic right. It can be converted to:

• Additional built-up space in the new apartment;
• A discount on the price of the new apartment;
• Monetary payment from the developer (under certain conditions);
• Office or commercial space in the project.

Right to Retain the Apartment Until Project Completion

Typically, residents are entitled to remain in their old apartment until the new apartment is ready (or until temporary relocation), and are entitled to compensation for any delay in project completion (such as alternative housing rent).

Compensation for Disruption to Living Conditions

During the project, residents may suffer disruptions as a result of construction work, noise, dust, and so on. In some projects, residents are entitled to compensation for these disruptions.

Right to Legal Representation

Residents in a demolition and reconstruction project are entitled to legal representation in any proceeding related to the project, including negotiations on terms, verification of calculations, and dispute resolution. This is a vital part of protecting your rights.

Common Mistakes in Building Surplus Calculation — How to Avoid Them

At Mandelbaum, Gor, Witzman-Gor & Co., we have seen many residents encounter errors in building surplus calculation that cost them significant money. Here are the most common mistakes:

1. Failure to Verify Basic Data

Some residents rely on the developer's calculations without independent verification. This is a critical mistake. You must verify yourself (or with an attorney) that the basic data is correct: land area, building coefficient, number of residents, and size of each apartment. If a basic figure is wrong, the entire calculation is built on sand.

2. Failure to Account for Common Area Costs

Some residents forget that part of the building surplus may be reserved for common areas (stairwells, elevators, parking spaces, shared garden). This can significantly reduce your actual surplus.

3. Misunderstanding the Agreement

The agreement between residents and the developer is the most important legal document. If you do not read it carefully, or if you do not understand the terms in it, you may face unpleasant surprises later. A good agreement should clearly define how the building surplus is calculated, how it is divided, and what happens if the project is delayed.

4. Failure to Account for Capital Gains Tax and National Insurance

Building surplus may be subject to capital gains tax (in certain cases) or national insurance expenses. This can reduce the net value of your surplus.

5. Inaccuracy in Calculating Original Apartment Area

If the original apartment area affects the surplus (i.e., residents with larger apartments receive a larger surplus), it is very important that the area registered in the property registry is correct. An error in area can lead to an incorrect surplus calculation.

6. Failure to Account for Special Conditions in the Agreement

Some agreements include special conditions, such as a discount for residents who joined the project early, or a discount for those who waited a long time. If you do not pay attention to these conditions, you may miss significant discounts.

How Mandelbaum, Gor, Witzman-Gor & Co. Assists Tenants in Evacuation and Reconstruction

At Mandelbaum, Gor, Witzman-Gor & Co., specializing in real estate and property law, we excel in representing tenants in evacuation and reconstruction projects and urban renewal initiatives. We provide comprehensive legal services, supported by more than 18 years of representation experience in Israel, since the firm's establishment in 2008.

Our Services Include:

• In-depth review of construction increment calculations — We examine all underlying data, formulas, and final results to ensure the calculation is correct and in your favor.
• Legal counsel on the agreement — We carefully review the agreement, explain the terms, and identify clauses that may harm your rights.
• Negotiation with the developer — If there is a dispute over the construction increment calculation, or if you wish to improve the terms, we negotiate with the developer or their management company.
• Representation in legal proceedings — If the dispute is not resolved through negotiation, we can represent you in court or arbitration.
• Tax implications counsel — We help you understand the tax implications of the construction increment and can refer you to an experienced CPA if needed.
• Support throughout the project — From the signing of the agreement until receipt of the new apartment, we stand by you to protect your rights at every stage.

Why Choose Us?

• Deep expertise: More than 18 years of representation in real estate and property law in Israel.
• Representation of tenants only: We work exclusively with tenants and claimants, not with developers or development companies. This means we are always on your side.
• Personal and dedicated approach: We understand that every project is different, and every tenant requires customized counsel. We listen to you and help you achieve the best outcome for you.
• Free initial consultation: We believe every tenant should know their rights. Therefore, we offer a free initial legal consultation with no obligation.
• Convenient locations: We have offices in Petah Tikva (Yoni Netanyahu 8) and Ramat Gan (Donesh 1), serving the entire central region.