How to protect tenants’ rights
One of the most sensitive issues in urban renewal projects is the issue of guarantees and securities that the developer is required to provide for the benefit of the rights holders and existing tenants.
These are vital protection mechanisms, designed to ensure that the project is carried out as planned, and that even if a malfunction or failure occurs, the tenants will remain financially and legally protected.
Professional legal support and a deep understanding of these security mechanisms are the key to ensuring tenants’ rights and completing the project with complete confidence.
Why are guarantees and securities required in urban renewal?
In evacuation–construction or Tama 38, the tenants entrust the developer with their most valuable asset – their apartment.
In return, they are supposed to receive a new, larger, and safer apartment, but during the construction period, they find themselves out of their homes and without a permanent roof over their heads.
To protect them, the legislator has established a series of securities – guarantees and insurances – whose purpose is to ensure that the developer meets his obligations, or alternatively, that the tenants receive appropriate compensation in the event of failure.
The guarantees are intended to prevent situations in which the developer is unable to complete the project due to financial difficulties, bankruptcy, or any other problem.
Bank guarantees – the main protection mechanism for tenants
The most important legal mechanism is the bank guarantee.
The developer is required to deposit guarantees on behalf of the tenants from a lending bank, which guarantee the completion of the construction or the payment of compensation in the event that the project is stopped.
The bank guarantee serves as an economic “safety net” and ensures that the tenants are not left without an apartment and without compensation.
The amount of the guarantee varies according to the scope of the project, the value of the apartments, and the agreements of the parties in the contract. An experienced attorney ensures that the guarantee is correctly worded, meets the requirements of the law, and can be realized if necessary.
Registration of warning notes – a promise to register rights
In addition to the guarantee, a warning note is registered in the Land Registry in favor of each tenant, already at the beginning of the project.
The warning note prevents the developer or any third party from transferring the rights in the land without the consent of the tenants, and ensures that the property remains pledged for their benefit until the end of construction.
In many cases, additional notes are also registered on the rights in the new property, in order to guarantee the rights of the tenants in the new apartments even before the completion of the project.
Compensation and indemnity agreement – financial protection during the transition
An integral part of the agreements is the compensation and indemnity agreement, which details all the rights of the tenants during the evacuation and construction period.
The agreement stipulates the amount of rent to be paid each month, reimbursement of moving expenses, transportation, and even compensation for delays in the schedules.
The more accurate and clear the agreement is worded – the less likely future disputes are.
The developer is required to transfer these amounts on a regular basis, even if the project is delayed, and the lending bank is required to monitor the execution of the payments.
Protected tenants insurance – an additional layer of protection
In complex projects, there is also a requirement forprotected tenants insurance, which is designed to protect the tenants in the event of a financial collapse of the developer or the executing contractor.
This insurance guarantees the tenants a refund or completion of construction through an alternative body, even if the executing company ceases to operate.
This is another mechanism that provides peace of mind and reduces the risk in unforeseen cases.
The importance of professional legal advice
Before signing an urban renewal agreement, it is very important to seek the help of a lawyer specializing in the field.
He examines all the securities and guarantees, ensures that they comply with the law, the requirements of the lending bank, and the needs of the tenants.
- An experienced lawyer will check, among other things:
- The financial strength of the developer.
- The type and scope of guarantees.
- The dates of payment of compensation.
- The schedules and sanctions for delay.
Without legal advice, tenants may be exposed to unnecessary risks and contracts that do not adequately protect them.
Common types of guarantees in evacuation-construction and Tama 38
- Sale Law (Apartments) Guarantee – guarantees the delivery of the new apartment according to the terms of the contract.
- Rent Guarantee – guarantees the payment of rent to the tenants during the construction period.
- Compensation Guarantee – guarantees the payment of compensation in the event of a delay in delivery or breach of obligations.
- Taxes and Payments to Authorities Guarantee – ensures that the tenants will not be charged unexpected charges or debts.
- Registration Guarantee in the Land Registry – guarantees the registration of rights in the name of the tenants upon completion of construction.
Each guarantee fulfills a unique role, and together they create an overall security envelope that protects the rights holders all along the way.
How to make sure that the guarantees really protect the tenants
It is not enough for the guarantees to appear in the contract – it is important to ensure that they can be genuinely realized.
You should check who is the body issuing the guarantee, what are the conditions for its realization, and what is its financial scope in relation to the value of the apartment.
An experienced lawyer will ensure that the guarantee can be collected without complicated conditions and that it is valid until after receiving Form 4 and registering the new tenants’ rights.
In addition, it is important to monitor the date of actual deposit of the guarantees and ensure that they are delivered to each tenant in accordance with the agreement.
Important tips for tenants before signing an agreement
- Do not sign an agreement without professional legal advice.
- Check the financial reliability of the developer and the lending bank.
- Make sure that all the promises are recorded in writing in the agreement.
- Make sure to register a warning note in the Land Registry on time.
- Request an official copy of each guarantee and check its validity.
- These simple steps can prevent heavy financial damages and ensure that the project is conducted with full security and transparency.
Summary – Guarantees and securities are the key to peace of mind
The success of an urban renewal project depends not only on the developer or the contractor, but also on the structure of the legal protections that are determined in advance.
Strong guarantees and securities give the tenants real security throughout all stages of evacuation, construction, and occupancy.
With the right legal advice and control over the fulfillment of obligations, it is possible to ensure that each party receives what it deserves – and the project will end successfully, safely, and with complete peace of mind.
The above is general information only and does not constitute legal advice.
