Pinui-binui (evacuate and rebuild): the guide for apartment owners

What pinui-binui is

In pinui-binui one or more buildings are demolished, and a new compound is built in their place, usually under a new town building plan (TABA). The plan adds building rights, so the new compound usually has three to four times as many apartments as it had before. The developer builds, at its own expense, the new apartments for the owners of the existing apartments, and sells the remaining apartments on the open market.

The main law is the Pinui-Binui Law (Encouragement of Pinui-Binui Projects), 5766-2006 (חוק פינוי ובינוי (עידוד מיזמי פינוי ובינוי), התשס״ו-2006). Until 2018 the law was called the "Pinui-Binui (Compensation) Law" (חוק פינוי ובינוי (פיצויים)). It was extensively amended in 2018 (Amendment 6), in 2021 and in 2023.

This is a summary only. Every case should be reviewed individually with a lawyer who specialises in the field.

The majority required by law

The law defines a "special majority of the apartment owners" section 1. Since the 2021 amendment, three conditions are required together:

• Owners of at least two thirds of the apartments in the compound;
• In each building in the compound, owners of at least three fifths of the apartments. In a building of four or five apartments, three apartments are enough, if it has more than two owners;
• In each building, more than half of the common property is attached to the apartments of these owners.

Before 2021, four fifths of the apartments in the compound were required. An owner who holds more than 30% of the apartments in a building of six or more apartments is counted as holding 30% only, plus one third of the excess section 4.

What the apartment owners receive

The consideration is set in negotiations with the developer, and depends on the rights the plan grants, apartment prices in the area and construction costs. The usual consideration includes:

• A new, larger apartment. The size of the addition is set according to the project's economic feasibility and the municipality's policy, and varies greatly between cities. Check whether the addition includes the safe room (mamad) or comes on top of it, and demand a uniform mechanism for all the owners.
• A safe room, balcony, parking space and storage room, according to the agreed specification.
• Rent from the day of evacuation until handover, and moving both ways.
• Guarantees that secure the new apartment, the rent, the taxes and the registration.
• Exemption from land appreciation tax (mas shevach) and purchase tax under the conditions in the law, and a municipal property tax (arnona) discount on the additional area for a limited period.

The Government Authority for Urban Renewal recommends equal consideration and a uniform mechanism for calculating the addition, so that owners of similar apartments receive similar consideration. To check whether the consideration is fair, you can use an appraiser acting for the residents, who reviews the project's economic report (Standard 21).

Guarantees and security

Years pass between signing and handover, and during this time the apartment owners have already handed over the old apartment. That is why the guarantees are the heart of the agreement. According to the Authority's model agreement, the agreement should include the guarantees below. A detailed explanation of each guarantee, including the enhanced guarantee and the guarantee for legal proceedings, is on the Standard guarantees page.

This is a summary only. Every case should be reviewed individually with a lawyer who specialises in the field.

The guarantees are delivered before the evacuation, and the residents' lawyer holds them in trust and makes sure they remain valid throughout the project. Also important alongside the guarantees are the project's closed bank financing, which protects the apartment owners if the developer runs into difficulties, and the insurance policies: contractor's works insurance and third-party insurance.

Protections at the signing stage

The law protects you from being pressured into signing without full information:

• Meeting and key terms document. Before the first transaction, the developer must convene the apartment owners, and give them, at least two weeks before signing, a document setting out the main terms of the offer, the security and its experience section 1A.
• Cancelling an early transaction. A transaction signed before the meeting or before the document was delivered can be cancelled by a decision of a majority of the apartment owners, as long as 40% of them have not signed section 1C.
• Disclosure. Anyone acting on behalf of the developer or receiving payment from it must say so clearly in the very first approach. If they did not, the apartment owner may withdraw their consent section 6.
• Abusive signing. The Tenants' Ombudsman at the Government Authority may determine that a transaction is void, for example when the apartment owner signed a document in a language they do not understand, or was given misleading information about the number of signatories section 5B.
• Stalled project. The owners of a majority of the apartments may decide at a general meeting to cancel the transactions if, within two years of the first transaction, the developer has not contracted with half of the owners, if within four years it has not contracted with three fifths of them, or if within four and a half years no detailed plan has been submitted. In a compound of 120 housing units or more, each deadline is extended by one year section 1D. Such a cancellation may require a payment to the developer, under the regulations published in 2025.

A commitment in the agreement that takes away these rights is void section 6A.

Older apartment owners and owners with disabilities

An apartment owner who had reached the age of 70 on the day the first transaction in the project was signed, and has lived in the apartment for at least two years, must receive from the developer, in addition to the apartment in the project, an offer of alternatives: moving to assisted living with balancing payments, purchase of an alternative apartment, a sum of money to buy an apartment, two small apartments whose combined value is similar to that of the consideration apartment, or a smaller apartment with a payment section 2(b)(6). For an apartment owner aged 75 or over and for a terminally ill person, the developer must offer the move to assisted living or the purchase of the alternative apartment section 2(b)(7). If the alternatives were not offered, the apartment owner's refusal to sign will be considered reasonable, and it will not be possible to sue them.

An apartment owner with a disability, or with a family member with a disability living with them, must be offered adapted alternative housing for the construction period.

Holdout owners

When the special majority has agreed to the transaction and an apartment owner refuses without a reasonable reason, the court may order them to pay compensation to the other apartment owners, or approve the transaction and appoint a lawyer or accountant to sign on their behalf section 2(a).

The law sets out when a refusal is not unreasonable section 2(b): when a pinui-binui appraiser has determined that the transaction is not economically viable, when no alternative housing or adequate security was offered, when there are special personal circumstances, and when the alternatives for older apartment owners or the adjustments for owners with disabilities were not offered.

To decide whether the transaction is viable, owners of at least 40% of the apartments (under the 2023 amendment) may ask the director of the Government Authority to appoint a pinui-binui appraiser section 2A. A determination by the appraiser that the transaction is viable creates a presumption to that effect.

Stages of the project

1. Feasibility check and choosing a residents' committee

   Contact the urban renewal administration at the local authority, and choose a residents' committee to represent the apartment owners.

2. Choosing professionals

   A lawyer, a supervisor, and as needed an appraiser and a social consultant acting for the residents.

3. A competitive process for choosing a developer

   Developers submit offers based on the same requirements. Their experience, financial strength and security are examined, alongside the size of the addition. Developers directory.

4. Negotiation and signatures

   Until the required majority is reached, and then on to the remaining owners.

5. Town building plan and declaration

   Preparation and approval of a new plan. A compound can be declared a pinui-binui compound, under the local authority track or the tax track.

6. Permit, bank financing and guarantees

   The developer obtains a building permit and bank financing, and delivers the guarantees.

7. Evacuation, construction and handover

   Advance notice of evacuation, rent, supervised construction, and handover and registration of the apartments.

Taxes

• Land appreciation tax: the Real Estate Taxation Law (חוק מיסוי מקרקעין) exempts the apartment owner from land appreciation tax on the sale of their rights to the developer, up to a ceiling: the highest of 150% of the value of the old apartment, the value of a 120 sq m apartment in the compound, or the value of an apartment with an area of 150% of the old one and up to 200 sq m Real Estate Taxation Law, section 49כב.
• Rent: Whether the rent is taxable has not yet been settled, although there is a position that the rent is exempt from tax as part of the consideration in the transaction with the owners. In any case, consult a professional, as each case is examined on its own facts.
• Betterment levy: in pinui-binui the base rate is one quarter of the betterment, instead of one half. The local authority may set one half, one quarter or an exemption for each area of the city, for a period of five years. Under the law the levy is imposed on the apartment owner, so the agreement must state explicitly that the developer bears it, and secure this with a guarantee.
• Reporting: every transaction is reported to the Tax Authority (Real Estate Taxation) within 30 days, even when it is exempt. The lawyer usually handles this.

This is a summary only. Every case should be reviewed individually with a lawyer who specialises in the field.

Frequently asked questions

This is a summary only. Every case should be reviewed individually with a lawyer who specialises in the field.