The High Price of Preservation

Owners of historic properties in Tel Aviv claim that preserving the special nature of their buildings will decrease their value. The city begs to differ.

The city of Tel Aviv has declared 1,000 buildings as heritage sites that are in need of preservation. The owners of the properties have until the end of August to file compensation claims. So far 14 claims worth more than NIS 100 million have been filed for compensation, but that figure is likely to increase.

tel aviv - Ofer Vaknin - June 13 2011
Ofer Vaknin

Compensation for what? The property owners argue that the preservation plans significantly depress the value of their dwellings because they can't exercise construction and development rights there - they can't add extra stories, for instance, as the master plan for the area would have allowed. Also, complying with the preservation plan dictated by City Hall is hideously expensive, they charge.

The city of Tel Aviv's aim is to maintain buildings with unique architectural character as they are, unchanged as much as possible. One impetus is the traumatic memory of how the Herzliya Gymnasia school was demolished in central Tel Aviv: A symbol of the return of Hebrews to the land, it was razed to the ground and replaced by the Shalom Tower.

The Tel Aviv municipality began working on preservation plans in 1991. The moving spirit behind the move was architect Nitza Metzger Szmuk. After many objections and appeals to the National Building and Planning Council, the great preservation plan came into force in 2008.

Alon Samuel, a lawyer representing owners of properties marked for preservation who are suing for compensation, explains that the moment the plan took shape, the value of the properties it listed dropped, because of development restrictions.

"Many of these properties sold for lower prices than buildings on the same streets that had not been marked for preservation," he says.

"The city argues that preservation creates a 'brand' that increases the value of the asset. But we have an expert opinion explicitly showing that isn't true," Samuel adds.

Property owners can't exercise the building rights stipulated in regional plans, and they have to bear the costs of fixing up the property as the city has directed, which can cost up to NIS 3,000 per square meter more than fixing up a building in a regular way, he notes. The city disputes that figure, he adds, claiming the difference between the types of renovations is NIS 800-900 per square meter.

Sometimes the preservation masters at City Hall make the property owners destroy areas that have already been built with permits, he says, giving examples of stores on Allenby and Dizengoff Streets.

"Also, the maintenance costs of a preserved building are higher," Samuel adds.

"Preservation requires use of materials that had been used in the past, mainly from northern Europe. They don't necessarily suit the Israeli climate."

tel aviv - Ofer Vaknin - June 13 2011
Ofer Vaknin

Another opponent of the city's scheme is Eli Yahal, a property assessor. He notes that the city's plan divides historical buildings into two categories: strict and ordinary preservation. In the case of strict preservation, the city allows the owner to develop elsewhere - his rights are transferred elsewhere, in which case the owner may not be adversely affected.

"The problem is with buildings categorized as requiring ordinary preservation," Yahal explains. "I have examined hundreds of these buildings and have yet to find one single case in which there isn't cause for a claim. These include three-story buildings erected before the state was founded, in the city center. None are earthquake-resistant" - yet the owners can't take advantage of National Master Plan 38 (to strengthen buildings against temblors ). NMP-38 came into force in 2005, while the city of Tel Aviv's preservation plan took effect in 2008, Yahal points out: The owners of these dilapidated buildings are being deprived of their rights under the NMP.

Concerning the dispute over how much it costs to preserve and fix up a historical building in an ordinary way, as per the regulations, Yahal has his own figure, as well: Not the NIS 900 the city cites, but rather NIS 2,000 per square meter.

Another sore point is that preservation plans often call to reopen porches that have been closed off in the past. Such extra spaces have long since become part of the living room or kitchen, Yahal explains, so that rebuilding the porch ruins the whole design of the apartment.

Take the case of 26 buildings marked for preservation along Hayarkon, Nordau, Nahum and Ben Yehuda Streets: No fewer than 142 of the 148 dwelling involved are supposed to reopen porches that became part of their interiors decades ago.

"In the next few weeks we'll be making huge claims for compensation," Yahal says.

Nehama Bugin, also a land assessor, notes in addition that many of the people living in the apartments marked for preservation are elderly, who can't bear the costs of renovation as the city demands.

Fined for having taste

However, Dana Shichor, a property assessor working on behalf of the Tel Aviv local planning and building committee, claims the restrictions the preservation plan imposes aren't that tough, and says there are also plenty of incentives. For instance, property owners can get extra building rights to enable them to finance the preservation. They may, for example, be allowed to convert cellars into ground-floor apartments, or build more apartments on the roof. They receive other exemptions regarding receipt of new parking spaces, and may be allowed to split large apartments into smaller ones, which is not usually permitted by law.

The municipality is considering other incentives, Shichor adds.

"We aren't concerned about betterment tax or compensation. When people feel they've been hurt, we encourage them to make claims. But if a person considers suing, he should first consider what incentives he is due," she says. "The purpose of the [preservation] plan isn't to make profit: it's to preserve."

Yahal, however, says betterment tax is indeed a sore point: The city claims preservation improves the property because now it's become "branded," and thus it charges a levy. If anything he suspects the city of formulating the preservation scheme in order to charge betterment taxes, and he claims the city is making millions of shekels on it.

Ofer Toister, a lawyer representing residents demanding compensation from the city, also feels betterment tax is a problematic issue. "Having a building earmarked for preservation spells trouble," he says.

It's one thing if the building is marked for strict preservation and has a single owner. But structures with a dozen owners who can't agree on details - forget it. And yet the city has the nerve to charge betterment tax just because it's marked the property for preservation - before any renovations have actually been done, Toister explains.

What it boils down to, Toister continues, is that people are being fined for living in a building with special architectural or historical qualities. Nor does he believe that most buildings earmarked for so-called ordinary preservation will actually ever be fixed up, and if their owners don't sue for compensation by the deadline, they'll be out a lot of money, he warns.

The issue of disputed betterment taxes often reaches the desks of arbitrators specializing in property appraisal, after assessors representing City Hall and property owners fail to agree. Some arbitration rulings go one way, others go the other. The disputes rage on.

Yahal claims the city of Tel Aviv makes owners of properties marked for preservation sign an agreement to waive compensation claims, in exchange for exemption from betterment tax. He claims the agreement proves his point that the preservation plan hurts property value - in contrast to the city's claim that it enhances it.

If a property owner misses the deadline to demand compensation (at the end of August ), the only recourse is to demand special permission from the minister of interior to file a claim, Yahal says. But he adds the chance of the minister granting an extension to file is very small.

Property owners should be concerned mainly about Article 3 of the preservation plan, counsels Samuel: "The city engineer may order a property owner to carry out maintenance work on the building destined for preservation, including inter alia work to assure the structural stability of the building; to repair and renovate the facade including all interior components and parts of the building; to fix up internal and external building infrastructures, including replacing pipelines and wiring, sealing and insulation; to exterminate pests; to preserve vegetation; and to conduct routine maintenance activities including painting, plastering, taking care of the yard and more."

In other words, sue by the end of August for compensation or find yourself facing a list of demands from the city involving work required to renovate your historical building from top to bottom, inside and out - which could cost millions of shekels, Samuel warns. The city of Tel Aviv comments that its preservation scheme grants a basket of incentives and rights to property owners.

"Also, branding the property as a preserved landmark is one element that betters it, improves its value. This has been proved in assessments carried out by expert appraisers," the city wrote, adding that it has set up a special fund to assist property owners with preservation.

So far 14 compensation claims have been made; two are now under discussion and two were rejected, the city added