Tama 38 Guide — Tenant Rights, Contract, and Risks

What is Tama 38 and how does it affect your rights as a tenant?

Tama 38 is the government's urban renewal and building evacuation program, which allows households and contractors to upgrade old buildings while constructing new apartments in exchange for increased construction rights. As a tenant in a building selected for this program, you face a significant legal decision: whether to agree to temporary evacuation, participate in the project, and receive a new apartment under the program.

However, the matter is not as simple as it may appear in the contractor's or developer's initial proposal. Tama 38 involves significant legal and financial risks, and your rights as a tenant can be protected or exposed depending on the terms of the contract you sign. This guide is intended to explain your main rights, what you should know about the contract, and what risks may come back to you.

What are the basic rights of tenants under Tama 38?

As a tenant in a building included in the Tama 38 program, you have legal rights arising from the Property Law and legislation relating to urban renewal:

• Right to participate in the program: You are not required to agree to evacuation. As a tenant, you have the legal right to demand compensation in order to agree to leave your apartment, and a contractor cannot force you to participate without your consent.
• Right to a new apartment or financial compensation: If you participate in the program, you are entitled to a new apartment in return or financial compensation determined by law or agreement. The new apartment must be no smaller and of no lower quality than the original apartment, subject to various conditions.
• Right to temporary housing: During the project, the contractor must provide you with temporary housing (an alternative apartment or housing allowance) until the new apartment is ready.
• Right to protection from eviction: You cannot be evicted from your apartment by force without your consent or a court order, even if you do not participate in the program.
• Right to fair conditions: Any agreement you sign must be fair and free of conditions that substantially undermine your rights.

However, in practice, many of these rights are protected only if you are aware of them and if you defend them during the contract negotiation stage.

Contract structure in Tama 38 — what should appear in the agreement?

The Tama 38 contract you will sign as a tenant must include several essential legal elements. Each element is important for protecting your rights:

1. Description of the original apartment

The contract must precisely define your current apartment: its area, number of rooms, condition, shared rights (roof, storage, parking), and any other relevant feature. This is very important, as it will be the basis for comparison with the new apartment.

2. Description of the new apartment

The contract must detail the new apartment you will receive: area, location in the building, number of rooms, type of windows, direction of view, new shared rights (parking, storage, roof), and other conditions. If the new apartment is smaller or has a less favorable orientation than the original, this should be expressly stated in the contract, and you may be entitled to additional financial compensation.

3. Temporary housing allowance

During the project (which may last for years), you need housing. The contract must clearly state: who pays for the temporary housing (the contractor, usually), how much you will receive each month, whether this is updated according to the Consumer Price Index, and under what conditions the contractor can stop paying. This is a critical issue, as temporary housing allowance that is too low may lead to financial difficulties.

4. Milestone completion dates

The project is usually divided into phases: evacuation, demolition, construction, finishing. The contract should specify estimated dates for each phase, although these dates are often delayed. It is important that the contract defines what happens if there are significant delays (for example, if the project stops for years).

5. Conditions regarding delivery of the new apartment

The contract must specify when and how you will receive the new apartment: will it be supplied furnished or empty? What are the acceptance conditions (independent apartment inspection)? Is there a contractor warranty period after delivery? What happens if there are defects in the new apartment?

6. Payment terms and amounts

If you are paying additional money as part of the transaction (for example, to upgrade the new apartment), the contract must clearly state how much you are paying, in how many installments, and under what conditions. It is important that you know whether you are paying a fixed price or whether it may change.

7. Insurance and liability

Who is responsible if the new apartment is damaged during construction? Who insures the construction? The contract should clearly define the division of responsibility between the contractor and you.

Legal and Financial Risks in TAMA 38 — What Can Go Wrong?

Although TAMA 38 can be a good opportunity to upgrade your housing, it involves substantial risks. Here are the main risks that residents face:

Risk 1: Project Delays

TAMA 38 projects are subject to frequent delays. Construction may take considerably longer than planned due to planning issues, soil conditions, legal problems, or issues with subcontractors. During the delay, you must remain in temporary housing, and your rental allowance may be insufficient. If the project stalls for years, it can be extremely burdensome both financially and in terms of quality of life.

Risk 2: Insufficient Temporary Rental Allowance

Typically, the contractor pays you a monthly rental allowance during the project. However, these payments are often lower than actual market rent, especially if your original apartment was in a good neighborhood. If the rental allowance does not cover your actual expenses, you will have to pay the difference out of your own pocket. Additionally, if the rental allowance is not adjusted for the consumer price index, its real value decreases over time.

Risk 3: New Apartment of Lower Value

By law, the new apartment should be no smaller and no lower in quality than the original. However, in practice, new apartments in TAMA 38 projects are often smaller, have poorer orientation (for example, a single small window in the bedroom), or are located on lower floors. If the new apartment is inferior to the original, you are entitled to financial compensation, but receiving such compensation requires negotiation or legal action.

Risk 4: Undetected Contract Issues

A TAMA 38 contract may contain conditions that significantly infringe upon your rights, or it may simply not clearly state what happens in certain situations. For example, the contract may not specify what happens if the new apartment is not ready on time, or if there are defects in it. If you sign such a contract, you may be exposed to risks you have not considered.

Risk 5: Contractor's Financial Difficulties

If the contractor or developer encounters financial difficulties (for example, problems with the bank, bankruptcy), the project may be significantly delayed, or even halted entirely. In such a case, you may remain in temporary housing for years, without certainty of when you will receive your new apartment. The contractor may also stop paying the rental allowance, leading to severe financial hardship.

Risk 6: Unclear or Misleading Legal Documents

Sometimes, contractors present documents that appear legal but are not entirely clear. For example, they may present an "agreement" that is actually just an initial proposal, or they may omit important terms. If you sign documents without professional legal review, you may find yourself in a contract whose implications you do not understand.

Comparison: Different Scenarios in Tama 38

To better understand your situation, here is a comparison of three different scenarios that tenants may face in Tama 38:

As can be seen, the outcome for you as a tenant largely depends on your contract terms, the contractor's financial status, and the pace of project progress. However, even in a "positive" scenario, you may face significant challenges.

How Mendelboim, Gor and Yitzman-Gor & Co. Can Help You

In TAMA 38 projects, correct legal determinations at the early stages of the project can save you thousands of shekels and legal complications later on. Our firm, Mendelboim, Gor and Yitzman-Gor & Co., Attorneys at Law, specializes in real estate and property law, including TAMA 38 and urban renewal.

We offer:

• In-depth legal review of the contract: We examine all terms of your contract, identify risks, and recommend modifications or additions.
• Negotiations with the contractor: If the contract terms are unfair, we negotiate on your behalf to achieve better terms.
• Project guidance throughout: We will accompany you throughout the project, reviewing housing payments, new apartment handover, and handling any legal issues.
• Legal action if necessary: If the contractor fails to meet its obligations, we can file a legal claim on your behalf.

Our firm is located in Ramat Gan, and we offer a complimentary initial consultation to discuss your matter in confidence and without obligation. We are built on over 18 years of experience representing clients in real estate and property law, and we are committed to protecting your interests at every stage of the process.