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The US-Israel Legal Review 2019 103
that violates the approved city/local plan; etc.
PERMIT STATUS
A building permit is the authorization granted
by the local planning and building committee to
perform construction or demolition work or change
the use made of the property. The main document
comprising the building permit includes a literal
description of the approved application to which a
drawing is attached.
The perimeter of the property and the location
of external openings (windows and doors) are
stipulated in the building permit. Under Israeli law,
changes to the inside of the property do not require
a permit, but outside boundaries and openings
do. In many cases, especially in older buildings,
differences can be found between the perimeter as
stipulated in the permit and the actual condition of
the property, because of works that were performed
over the years. For example, splitting or combining
apartments in a building requires a permit. The
grant of a permit to split an apartment will depend,
among other things, on restrictions on the number of
units authorized for that building, and may be more
complicated.
In some cases, unauthorized construction
trespasses onto the outside perimeter of the building
or service areas such as heating or storage rooms.
In other cases, unauthorized construction includes
walling-in balconies, creating doors without a
permit, etc. With old construction violations too,
the scope should be examined and the date of
construction ascertained, and it should be checked
whether a permit can be obtained for the violations.
Such examination should include a comparison
of the permit drawings to the as-is condition of the
property and to the plan of the cooperative house as
registered with the Land Registry.
DEBTS
Under Israeli law, rights in the property can be
transferred from the seller to the buyer only after
certain debts with regard to the property have been
settled. As a condition for registration, the parties
must submit certificates proving that there are no
outstanding purchase or betterment taxes, and that
various payments to the local authority have been
made. In Israel, as compared to the U.S., the only funds
held in escrow are those required to ensure that
the seller satisfies all such payments for which he is
responsible and without which the property cannot
be registered in the buyer’s name. Such amounts
are paid out of the last installment, into an escrow
account held by the seller’s lawyer, who is authorized
to use them in order to obtain the necessary
clearance certificates. Alternatively, the counsel for
the buyer can release the money to the seller upon
receipt of such certificates.
RESPECTIVE OBLIGATIONS IN A REAL
ESTATE TRANSACTION
Purchase Tax –
Purchase tax is imposed by law on
the purchaser of any real estate right. The payable
amount is calculated as a fixed percentage of the
property value, except in some cases (e.g., residential
properties) when the percentage is graduated. The
tax is paid in addition to the consideration paid to
the seller, and must be paid within 60 days from
execution of the purchase agreement.
Betterment Tax –
Land betterment tax is due with
respect to capital gains on the sale of real estate in
Israel. The seller is taxable on the betterment (gain)
accruing to him upon the transaction, i.e., on the
difference between the selling price (or, in special
cases, the consideration he is supposed to receive
based on the true market value of the property)
and the price he had paid when he purchased the
property himself (index). Improvements performed
during this interval (less depreciation), are also
deducted from the purchase.
The specific rate applicable to each transaction
must be checked on a case by case basis, because
betterment tax rate varies according to the date of
purchase. If the seller owns no other apartment – he
may be eligible for an exemption. Following several
recent regulatory amendments, in some cases the
buyer can pay the Tax Authorities directly, 7.5% to
15% of the consideration, and obtain a certificate
authorizing him to procure registration of title in his
name.
Payments to the Local Authorities –
In order to
transfer the rights into the name of the buyer, the
seller must satisfy any outstanding debts to the local
authority. Such debts will always include current
city tax (
arnona
) with regard to the property.
City tax is collected from all residents of that
city, and used in order to finance the operations of