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License to Dance – How can an entrepreneur in Israel open a club or a new leisure place and stay alive?

By Dana Gal-Bar. published on "Business Building " magazine, Globes, December 2005.

How Can an Israeli entrepreneur open a club or a new leisure place in Israel and stay alive? Adv. Dor Heskia simplifies the process.

The club industry, or the “club scene” as called by its members is a rather large industry that involves a lot of money. Starting with renting a place, designing and remodeling it, security services, cameras, catering, and obviously sound systems and DJ’s.
Rough estimations consider hundreds of thousands to visit clubs every weekend and paying the entrance fee of tens of NIS and buy drinks. The result is an industry that involves millions of NIS.
It looks like a simple business: Find the right place, your old army pals to work as promoters, your most loyal friend at the cashier, beautiful ladies to dance around and sell drinks to the thirsty. In reality, things are not that simple and there are laws and regulations you must be aware of. Adv. Dor Heskia of Heskia-Hacmun Law Firm that represents several of the top clubs in Israel will guide us through this matter. But remember, the below does not replace legal counsel.

Is it true that most of the clubs in Israel and the majority of the leisure places in Israel are working without permits? Why is this so?
It is true that usually the clubs in Israel begin their activity without a license and after a while they receive one or are shut down. The businesses license procedure in Israel in general and specifically licensing of clubs and leisure establishments is long and exhausting and consists of many requirements.
In the clubs and leisure industry there are additional and unique requirements that practically leave the club no other alternative than to start its activity without proper licensing. Opening a club only after obtaining proper licenses does not make economic sense and is practicably impossible. The clubs and leisure places in Israel usually begin their activity and follow the license procedures simultaneously.

According to what do you say the result is the club owners are forced to become delinquents. What can be done in order to minimize the risk for legal and business complications? Lets begin with the initial checks that can be made prior to funds spending.
Obviously you should make an early investigation to see if the proposed facility is located in a leisure-designated area. Before renting a place and taking any obligations it is necessary to find out whether the place is located in an area that is designated for 24 hours activity. Each municipality has special maps that describe those areas and it is important to locate places within those areas. After finding the proper location, you should try to obtain the municipality written position affirming the location of the place since in a large scale municipality that has many depatments, such as Tel Aviv, there is a good chance that one department will not know of the activity of the other. 

Is there any meaning to the location in Israel in which you want to open the establishment? Are there any possibilities to municipality support?
Naturally the support of key elements of the municipality, such as the Mayor, City Counsel Members or licensing persons can help. Mostly because of the fact that issuing shutting down orders and initiating administrative procedures are usually subject to the departments discretion most of them are subject to the Mayor’s own discretion.

Are there different approaches between the Municipalities? Are the differences between the approaches of the Mayor and other Municipality departments between the big cities? Where is it most difficult and in where is it relatively easy?
The differences are both in practice and in theory. In Haifa for instance, Mayor Yona Yahav has declared the he is in favor of leisure establishments and that he welcomes clubs. However, in practice there are major licensing difficulties in Haifa, mostly due to the police which states that the clubs are responsible for to the security issues and have to handle criminal factors visiting the clubs.
Usually when a problem occurs, the solution in Haifa is to shut down the club and practically punish the owners of the place. In Jerusalem, Mayor Uri Lupolianski is not very enthusiastic to promote clubs and leisure facilities but the municipal policy eases with the owners and allows them enough space to obtain the proper license and permits.
For example, because of its originality and seniority the Haoman 17 club in Jerusalem enjoys a unique status and the Municipality itself uses its service and recognizes it as a unique cultural institute. In Tel Aviv, Mr. Elhanan Meshi who is the head of business licensing in the municipality is considered pro business and he is using all his powers to allow the clubs to work. The business-licensing department handles thousands of businesses in Tel Aviv and tries to allow them to operate with temporary licenses even if it means struggles with other departments in the Municipality.

Is there such a thing as a “Trial period”? or is operating a club without a permit considered a law violation? Are there any critical permits that must be obtained in order to open a place?
Activating a club or a leisure establishment without a permit is a violation of law but it is common that there is a testing period in which the place is tested by different experts which issue the permits in accordance with their findings. The critical permits are Police, Fire department and a building construction engineer who is independently required to confirm the load tests and provide the the declarations on standard municipality forms. The Police and the Fire department are invited to visit and inspect the place and you should follow their demands. Without those permits there is a high chance that the place will be shut down and the courts will usually agree with the authorities. Following the obtaining of the critical permits additional permits must be obtained such as from the Traffic department and other requirements that the Municipality raises after several inspections such as health care and environment.

How is the Environmental department connected to licensing of clubs? Are they responsible to supervise the cleaning and noise levels?
In this matter the key element is the noise volumes. The absurd is that such permit can be obtained only after the club is active and running. It is recommended to obtain an acoustic expert legal opinion that will confirm that the noise level is in accordance to the nuisance avoidance regulations. Usually the arrangement is that the music is only played within the building itself and the noise cannot be heard from outside the building.

This is not as bad as food establishments in which the environment inspectors can immediately shut down the place.
It is true that food establishments (coffee shops, restaurants, buffet etc.) are bound to additional requirements regarding the kitchen, its size, it’s cleaning and a long list of requirements that the establishment must fulfill. However, regarding environment nuisance food establishment in Tel Aviv for instance are the only type of business allowed to put out chairs and tables on street sidewalks without risking in penalties given to other business which act the same. Many municipalities have special departments for this matter, inspecting the businesses activities.

What about the design and construction regulations in establishing a new place or building renovating? Is it possible to build a place from scratch for a specific purpose or should you ask for aberrant usage permit on an existing building? How does this usually work?
First of all, acting in accordance to the design and construction regulations is required for obtaining the business license. Usually in order to allow the club activity a permit of aberrant usage should be obtained. However, there are buildings with a permit to operate a “Pleasure facility” so there is no need of the long and exhausting process of the aberrant usage which you obviously want to avoid. Anyway it is recommended to receive an authorized answer prior to any activity. “Aberrant Usage” is a process that involves publishing, payment of fees, an improvement levy if required and a permission of the local committee for design and construction.
Its is recommended to file the petition as soon as possible since it is a long procedure that depends on hearings and objections from anyone who might be effected from such permit.

Finally, what recommendations would you give an investor or entrepreneur who is involved in such an adventure in Israel?
I would be sorry to tell him that the Israeli bureaucracy can easily bury such adventures even prior to taking any active steps. However, it is possible. You should prepare enough money to fund the design and establishing periods, to open and maintain the place, pay the monthly rent, municipal taxes and the rest of the bills even prior to inviting the public  and the business cash flow. The place may be ready but will still have to wait for the obtaining of the proper licenses, a period which may be very long. For “Haoman 17: in Tel Aviv it took over 4 years from the locating of the right property and until all the activity licenses were obtained so that you should better begin ahead of time. 

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This article and the information above may not be taken as a legal advice whatorever. The writer disclaims responsibility towards the reader and users of this website.

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